The impact of Australia's new modern slavery legislation

The legislation is still developing. However, the laws now in place in New South Wales go further than equivalent UK corporate transparency law by introducing financial penalties in respect of modern slavery statements, including for persons, which includes companies and individuals, involved in reporting.

Companies with links to Australia should consider the reporting obligations, and those tasked with drafting the reports should consider the information to be published carefully.

New South Wales passed the Modern Slavery Act 2018 (NSW) in late June 2018, at the same time as the Modern Slavery Bill ('Cth Bill') was introduced before the Parliament of Australia. Similar to equivalent UK legislation, the NSW Act introduces a requirement for certain commercial organisations to prepare annual modern slavery statements. The NSW Act goes further however in introducing financial penalties for organisations that fail to publish a statement when required to, or for companies and/or individuals who knowingly provide materially false or misleading information in connection with statements.

Neither piece of legislation fully addresses the recommendations contained in the Joint Standing Committee on Foreign Affairs, Defence and Trade's December 2017 report into establishing a Modern Slavery Act in Australia. As a result, the regulatory landscape is likely to develop further.

Businesses that will be required to report under the NSW Act or that may be caught in the future by the Cth Bill should now be reviewing their internal policies and supply chain contracts in preparation for the new regimes. Companies that will not technically be required to report under either law should also reflect on their internal procedures as corporate customers are likely to impose contractual obligations on supply chains to take anti-slavery steps. Companies may also elect to produce a transparency statement voluntarily to be a good corporate citizen.

Given the new legislation, businesses should consider:

• updating internal policies, including whistleblowing policies, so that employees are encouraged to report any risks of modern slavery they encounter or suspect;
• updating supply chain contracts to require anti-slavery steps to be put in place, mandatory reporting of modern slavery risks within a designated time frame and to secure relevant audit rights;
• training the board and senior management team and ensure they are aware of the various reporting requirements. Implementing general training for all staff should also be considered;
• issuing suppliers, or high risk suppliers, with audit forms requiring them to self-assess the risks in their business and supply chains; and
• appointing a designated person to monitor compliance and report back to the board. This person could also be responsible for recommending ways to address modern slavery risks if discovered in the company's supply chain.

Regardless of legislative requirements, identifying and addressing areas of concern in a company's supply chain will help to develop an ethical and sustainable business. Companies which act now will be in a better position to eradicate risks prior to potentially have to provide mandatory public statements at a later date. In addition, putting policies and procedures to ensure statements can be readily produced may assist with 'future proofing' the business against further legislative reform.

What is in the new legislation?

The NSW Act

The NSW Act received assent on 27 June 2018 but does not yet have a commencement date. Once in force, the NSW Act will introduce:

• appointment of an anti-slavery commissioner, whose role will include promoting action against modern slavery and providing assistance to victims of modern slavery;
• appointment of a joint committee of members of parliament called the 'Modern Slavery Committee';
• a requirement for commercial organisations with employees in NSW that have an annual turnover of A$50 million (€31.6m) or above and that supply goods and services to prepare annual modern slavery statements;
• corresponding penalties for failures to produce transparency statements or companies/persons who knowingly provide materially false or misleading information in connection with statements. As at the date of writing, penalties could be imposed to a maximum of $1,100,000 or 2 years imprisonment if the offence was pursued under the Crimes Act 1900 (NSW). The requirements for these statements will be set out in corresponding regulations, which have not yet been introduced; and
• a requirement on the commissioner to keep an electronic public register of mandatory annual statements and any statements made voluntarily.

The Cth Bill

The Cth Bill was introduced into parliament on 28 June 2018 and, if enacted, will apply across Australia and to the external Australian territories. Similar to the NSW Act, the Cth Bill requires reporting entities to publish annual public reports on actions taken by them to "address modern slavery risks in their operations and supply chains".

'Reporting entity' is defined broadly, and includes:

• the Commonwealth or a corporate Commonwealth entity;
• a company with revenue of at least A$100m;
• any entity with revenue of at least A$100m during the reporting period if that entity is an Australian entity at any time during the reporting period or carries on business in Australia during the reporting period; and
• any entity that voluntarily complies with the Cth Bill.

The Cth Bill also sets out mandatory content for the modern slavery statements. These must include:

• identification of the reporting entity and a description of its structure, operations and supply chains;
• description of the risks of modern slavery in the reporting entity's supply chain and operations, including in any entities that the reporting entity owns or controls;
• description of actions taken by the reporting entity, and any entities that the reporting entity owns or controls, to address modern slavery risks (including remediation processes and due diligence) and how effectiveness of these actions is assessed;
• the description of the consultation process between the reporting entity and any entity that the reporting entity owns or controls; and
• provision of any other relevant information.

Statements must be approved by a 'principal governing body' or the reporting entity, such as the board of directors; signed by a responsible member of the entity, such as someone authorised to sign the statement on behalf of the company; and given to the minister within six months after the reporting entity's end of financial year. Statements must also contain details of approval by the reporting body's principal governing body.

Similar to the NSW Act, the Cth Bill requires that a publicly available and free of charge register be kept of the modern slavery statements. The Cth Bill specifically states that this register must be made available on the internet, but the NSW Act is silent on this.

How far has the legislation gone?

The 2017 report made 49 recommendations under eight larger topics: introducing a Modern Slavery Act for Australia; defining and measuring modern slavery; an independent Anti-Slavery Commissioner; transparency in supply chains; support for victims; criminal justice responses; orphanage trafficking; and labour exploitation and Australia's visa framework.

Both the NSW Act and the Cth Bill address some of these recommendations.

The biggest concern raised by both the NSW Act and the Cth Bill is their failure to adequately address the need for criminal sanctions for acts of slavery or human trafficking. The NSW Act does impose some sanctions in respect of corporate transparency, however both the NSW Act and the Cth Bill do not contain sanctions for acts of slavery in the manner of the equivalent UK legislation, the 2015 Modern Slavery Act ('UK Act'). The approach to punishing companies taken by both the NSW Act and the Cth Bill is predominantly based on 'naming and shaming', by having offenders' names kept on a public register. The UK Act, in contrast, includes a number of penalties and sentencing options, including life imprisonment for an indictable offence for human trafficking or slavery and enabling the court to order convicted individuals and companies to pay compensation to a victim of modern slavery.

In addition, neither the NSW Act nor the Cth Bill contain provisions regarding victim protection or redress for survivors of modern slavery. Leading barristers, academics and anti-slavery groups, with the backing of several Labor and Liberal MPs, have put forward a proposal under which slavery survivors would be able to seek compensation of up to A$100,000. The NSW Act and the Cth Bill also do not address orphanage trafficking or Australia's visa framework and the criminal justice response.

The 2017 report recommended the introduction of an independent slavery commissioner to assist with enforcing reporting requirements. The NSW Act provides for the appointment of a commissioner, who will not be subject to the control of the NSW premier or any other minister. This commissioner will be tasked with advocating against modern slavery, making recommendations, and providing advice and information on actions to prevent, investigate and prosecute modern slavery offences. However, the Cth Bill does not provide for the appointment of any sort of commissioner, independent or otherwise.

Melanie Harwood and HollyAnn Walters-Quan are infrastructure law experts and Neil Carslaw is a regulatory law expert at Pinsent Masons, the law firm behind Out-Law.com.