The review, commissioned by the government in July 2018, is considering what more can be done to strengthen the 2015 Modern Slavery Act ('the Act'). The panel, which is chaired by Frank Field MP, has now produced its second interim report, in which it looks at the supply chain transparency requirements in the Act.
Neil Carslaw of Pinsent Masons, the law firm behind Out-Law.com, helps companies to comply with their requirements under the Act and said that the report was "an early step in considering if and how the transparency obligations of the Modern Slavery Act should be amended".
'Modern slavery' is an umbrella term which includes the offences of human trafficking, slavery, servitude and forced or compulsory labour, including sexual or criminal exploitation.
The corporate transparency requirements in the Act apply to organisations with a turnover of £36 million or more ,including that of subsidiaries,; that carry on a business or a part of a business in the UK; and that provide goods or services. Those organisations must report annually on the steps that they have taken during the financial year to ensure that slavery and human trafficking are not taking place in their own business or in their supply chains.
In their report, the reviewers criticised the "ambiguity" of these criteria, particularly the lack of a definition of 'carrying on a business'. It recommended that the government establish an internal list of companies in scope and check with those companies whether they considered they were covered by the legislation, but that responsibility for compliance should remain with the company.
Carslaw, however, said that this recommendation was unlikely to clear up confusion.
"Existing government guidance on interpreting the Act refers to taking a 'common sense approach' when deciding whether a company is obliged to report," he said. "The review's proposal of writing to companies to ask for their assessment of whether they are caught seems unlikely to clear up entirely this grey area. Many complex international corporate groups are spending time assessing which entities meet the three thresholds (in respect of turnover, the provision of goods and services, and carrying on a business or a part of a business in the UK)."
The report also recommends that the contents of companies' reports be made more consistent. The Act currently lists six areas that a company "may" cover in its statement, while a statement that a company has not taken any steps also complies with the legislation. The report recommends amending the wording of the Act so that companies "must" or "shall" cover each of the six listed areas, and be required to explain why if any one of them is not applicable to its business.
Stronger enforcement of the transparency requirements is also recommended. The report suggests a "gradual" enforcement approach, beginning with initial warnings but escalating to fines as a percentage of business turnover, court summons and disqualification of directors. The Independent Anti-Slavery Commissioner should monitor compliance with the legislation and report annually, and the position, which is currently vacant, should be "resourced accordingly".
The report also recommends extending the reporting requirements to the public sector, in line with the reporting regime being introduced in Australia. It notes the UK government's commitment to publish its own modern slavery statement this year as "a step in the right direction". The report also includes a recommendation that non-compliant organisations should be excluded from public procurement processes.
"Modern slavery statements, to date, have taken many formats, and if enacted, the recommendation for a mandatory structure would lead to greater consistency," said Carslaw.
"Fines as a proportion of turnover are mentioned, and there is a proposal to make a named company board member responsible for compliance and make non-publication an offence. The report also contains a recommendation that companies that do not publish a modern slavery statement when obliged to should not be eligible for public contracts. This recommendation would also add bite, and in fact the same recommendation is contained in a private member's bill that has been introduced in the House of Lords."
Large businesses would be watching the findings of the review and future developments in the reporting regime with interest, Carslaw added.
"On the immediate horizon is the result of a government outreach exercise of around October 2018," he said. "At that time, Home Office letters were sent to companies stating that their records indicated that a statement was required from the recipient company, and that non-compliant companies were to be included on a public list in Spring 2019."
"Companies, including group companies, should take steps to publish a modern slavery statement if required in early course. Even if there is no obligation to do so, companies can always voluntarily elect to publish a statement," he said.