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Businesses ignoring slavery act are named and shamed as stiffer sanctions threatened

26 July 2016

According to NGO reports, many businesses may be leaving it until the last minute to make statutory disclosures required by the Modern Slavery Act 2015 (“MSA”). An independent survey by VinciWorks has revealed that only 8 per cent of the FTSE 500 have thus far fulfilled their disclosure duties. It is not clear whether the remaining 92% are delaying disclosure or ignoring their duties completely.

A re-cap – what is the MSA?

As many readers will know, the MSA is a landmark piece of legislation championed by the then Home Secretary Theresa May. It not only toughened criminal penalties for individuals involved in the crimes of slavery and human trafficking but also shared with business the burden of detecting and cracking down on modern slavery.

To that particular end, Section 54 of the MSA imposed a new duty on businesses to publish an annual website declaration setting out the steps they take (if any) to ensure there is no slavery or human trafficking present within their enterprise or supply chain.

The requirement attaches to businesses with a trading presence in the UK whose sales in the previous financial year exceeded £36 million. Statements are required to be published within six months of a corporation’s financial year end. The first enterprises who need to comply are those whose financial year end falls on or after 31 March 2016.

Whilst this obligation is fairly limited, it is a significant catalyst in spurring commercial organisations to recognize the problem and to adopt best practice in actively distancing their entire business from it. Section 54 provides a window into how seriously businesses take corporate ethics.

Another investigation by the Business & Human Rights Resource Centre, conducted in March, found that of 85 public slavery statements identified, only 22 had included all of the six elements recommended by Section 54. Several were, in its view, incapable of being considered compliant with the Act.

A will to enforce?

There are signs that the Government, prosecuting authorities and victims are ready and willing to enforce the Act’s provisions. Already in 2016, the criminal trial of a gangmaster in Leeds culminated in his being sentenced to 21 months in prison for his part in trafficking workers from Hungary. This was followed in June by a civil action by six Lithuanians, former employees of an agricultural business in Kent, who alleged they had been held in inhumane and exploitative working conditions.

The Modern Slavery Act (Transparency in Supply Chains) Bill

There are also signs of a political will to toughen the law still further. The Modern Slavery Act (Transparency in Supply Chains) Bill had its second reading in the House of Lords in July. The Bill proposes to reinforce the provisions of the Modern Slavery Act 2015 (“MSA”), which came into force in March 2015.

If the Bill becomes law, it will provide that:

  • businesses will be required to publish slavery statements in their annual financial reports as well as on their website (currently, statements need only be published on the main UK homepage of the organization concerned)
  • failure to comply with the disclosure obligation could result in bans from tendering from public contracts
  • public bodies will be required to publish their own modern slavery statements (arguably some are already subject to this duty, but the Bill will make this explicit)
  • the UK government will maintain a public list of all those organisations who are legally required to publish (making it even easier for NGOs to highlight non-compliance and to name and shame businesses)

Whilst it is not clear if the Bill will become law at this stage, parliamentary debates have revealed widespread support for the proposals.

Comment – time to comply

Studies have shown a lack of attention by business to the MSA both in terms of making statutory disclosures adequately or at all. This is not only concerning but also highly surprising. In our view, having made considerable fanfare around the Act’s introduction, it is unlikely that the Government will turn a blind eye to a lacklustre response from the private sector.

Much of the MSA has been inspired by the corresponding law in California (the Transparency in Supply Chains Act 2010). Our prediction is that if companies fail to get their house in order the Home Office will also follow the example of the Californian Department of Justice in bringing a series of public enforcement actions against those businesses who have not played their part in ending the business of slavery.

For more information, please contact Paul Henty on +44 (0)20 7427 6506 or paul.henty@crsblaw.com


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