Time to introduce a ‘duty to prevent modern slavery’?

Key take outs

  • A report tracking the evolution of reporting under the Modern Slavery Act 2018 (Cth) (MSA) concludes that compliance with existing reporting requirements is overall poor and more importantly, that the MSA has not been effective in spurring (the vast majority of) companies to act to address modern slavery.
  • To address these issues, the Australian Human Rights Legal Center (AHRLC) has put forward five recommendations to the Review into the MSA which is currently on foot, aimed at ‘reorienting’ the legislation to focus on driving meaningful action on the issue, rather than just reporting.
  • Among other things, the AHRLC recommends the introduction into the MSA of a new ‘duty to prevent’ modern slavery.

Overview

A statutory review of The Modern Slavery Act 2018 (Cth) (MSA) is currently underway with the final report due by 31 March 2023. Announcing the review, the government made clear that it considers there is ‘significant work to do to improve compliance’ with MSA requirements including a need to introduce penalties, which the government has committed to do.

Ahead of the release of the review’s final report, the Australian Human Rights Legal Center (AHRLC) has released its second report tracking the evolution of MSA reporting/actions to address the issue and also released its ‘draft submission’ to the review which sets out five recommendations to strengthen existing requirements. We briefly outline the key points below.

What the report found

The headline message is that the MSA has not triggered the intended ‘race to the top’ on the issue either in terms of the quality of reporting, or in terms of accelerating action. Rather, the report found that MSA reporting remains patchy. Moreover, the report found scans evidence of companies taking effective action in the areas most likely to improve conditions for workers.

For example, the report found that:

  • Reporting remains poor, with many companies appearing to treat it as a ‘tick the box’ exercise:
    • 66% of companies did not address all of the mandatory reporting requirements under the MSA (down from 77% last year).
    • 43% of companies do not identify ‘obvious’ modern slavery risks in their supply chains despite extensive public reporting on the issues. For example, only 50% of food companies identified sourcing horticultural produce in Australia as a high risk for modern slavery practices.
  • Most companies are not fulfilling the promises/commitments made in the first round of modern slavery statements reviewed with 56% not actioning their commitments/promises in the second round of statements.
  • Very few companies are taking effective action:
    • 33% of companies could demonstrate some form of effective action to address modern slavery risks improve working conditions in their supply chains or tackle root causes.
    • Just 17% of companies committed to providing remedy if they cause/contribute to modern slavery and only 7% disclose commitments to provide compensation for harm suffered.

To address these shortcomings, the report puts forward four recommendations (consistent with Australia’s obligations under the 2014 Protocol to the ILO’s Forced Labor Protocol, ratified by Australia in March 2022) to strengthen the MSA and drive action including: the introduction of a specific ‘duty to prevent modern slavery’, the introduction of penalties for non-compliance and the establishment of an independent Anti-Slavery Commissioner to oversee and enforce MSA compliance. These recommendations are fleshed out in the draft submission to the review, outlined briefly below.

Draft submission: Recommendations for reform

As flagged, following the release of the report, the AHRLC released its draft submission to the review setting out five recommendations that build on those put forward in the report.

Importantly, the recommendations go beyond measures to strengthen compliance with reporting requirements as the group considers that ‘even if properly enforced’ disclosure is ‘unlikely to result in the transformative changes to corporate practices needed to help eliminate modern slavery’.

Instead, the recommendations aim to ‘reorient’ the MSA to ‘require action by companies’.

Five recommendations to ‘reorient’ the MSA toward triggering action to tackle modern slavery (not just report on it)

1. New ‘duty to prevent modern slavery’

  • The AHRLC recommends that the MSA be amended to introduce a ‘duty to prevent’ modern slavery. This would require reporting entities to undertake human rights due diligence to identify, prevent and address modern slavery risks in their operations and supply chains.
  • It’s proposed that if modern slavery occurred as a result of a company’s failure to undertake due diligence, workers would have a direct civil cause of action to pursue companies for compensation. It’s proposed that companies would have a defense against legal liability if they could demonstrate that they had undertaken all reasonable steps to implement appropriate due diligence.
  • It’s proposed that (12 months after the introduction of the new duty) failure to undertake due diligence would attract penalties and other administrative consequences, including being listed on the MSA Register as a non-compliant entity and being prohibited from public tenders.
  • It’s proposed that the requirement should apply to all entities who meet the current reporting threshold under the MSA of $100 million.
  • At Annexure A of the submission sets out the AHRLC’s proposed amendments to the MSA to implement the proposed duty

2. Penalties for non-compliance with reporting obligations

  • The AHRLC proposes that financial penalties and other administrative penalties should be introduced for non-compliance with reporting obligations.
  • It’s suggested that companies that fail to report, or repeatedly submit incomplete reports that do not address mandatory reporting criteria or provide false/misleading information should ‘face consequences including financial penalties, being listed on the MSA Register as a non-compliant entity, and being prohibited from public tenders’.
  • The AHRLC further suggests that public procurement should be used as an ‘incentive to reward effective action on modern slavery and human rights by companies’

3. Independent Anti-Slavery Commissioner

To ensure oversight and enforcement of the MSA, the AHRLC suggests the appointment of an appropriately resourced, independent Anti-Slavery Commissioner. The draft submission suggests that the new Commissioner should have power to:

  • monitor and enforce MSA compliance (backed by the necessary investigative and enforcement powers)
  • handle complaints
  • prepare guidance on high risk sectors
  • review the effectiveness of the MSA

4.Further three-year review

  • The AHRLC recommends that the Customs Act 1901 (Cth) be amended to include a ban on goods produced with modern slavery.
  • In putting forward the recommendation, the AHRLC acknowledges that this is outside the scope of the current review, but considers nevertheless, that the measure would ‘greatly enhance the effectiveness of the MSA and further encourage businesses to take action to address modern slavery risks in their overseas supply chain’.
[Source: Human Rights Law Centre media releases 17/11/2022; 22/11/2022; Full text report: Broken Promises: Two years of corporate reporting under Australia’s Modern Slavery Act; Draft Submission]

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