Government reforms (1): Modern slavery disclosure obligations

Who does it affect?

Does your organisation:

• have a worldwide turnover in excess of £36 million per year;
• supply goods or services; and
• carry on business, in whole or in part, in the United Kingdom?

Yes? Then you will likely need to comply with the UK’s Modern Slavery Act 2015 (MSA) disclosure obligations and you should read on…

What is it?

The MSA is aimed at combating crimes of slavery and human trafficking and recognises that UK businesses have a role to play in tackling these crimes. It consolidates various existing criminal offences relating to human trafficking and slavery and introduces greater accountability on business for the condition of their supply chain.

A criminal offence is committed under the MSA if a person holds another person in slavery or servitude or requires another person to perform forced or compulsory labour. The MSA also covers the offence of human trafficking and prohibits the arrangement or facilitation of the travel of another person with a view to that person being exploited.

The MSA increases the maximum sentence for offenders to life imprisonment, introduces new civil orders to help enforcement and creates the post of Anti-Slavery Commissioner.

However, of most importance for the majority of businesses are the new disclosure requirements.

What are the disclosure requirements?

The MSA requires commercial organisations with a global turnover above £36 million to publish an annual slavery and human trafficking statement for each financial year.

What do we need to disclose in the statement?

The statement must disclose what steps the organisation has taken to ensure that human trafficking is not taking place in any of its supply chains or its own business; or state that it has taken no such steps. This aims to ensure that businesses engaged in thinking about modern slavery and human trafficking and are transparent about what they are doing to tackle it.

Presumably the Government hopes that the fear of reputational damage from

choosing to give a negative statement (i.e. “We have taken no such steps”), and the consequential impact on commercial success will compel organisations to take a pro-active response to the issue.

If a positive statement is made, the MSA states that each organisation’s disclosure may include information about:

• the organisation’s structure, business and supply chains;
• its policies in relation to slavery and human trafficking;
• the due diligence processes it undertakes in respect of slavery and human

trafficking in its business and supply chains;

• the parts of its business that are most vulnerable to modern slavery and the steps that have been taken to reduce the risk;
• the training offered by the organisation on slavery and human trafficking; and
• an indication of how effective the steps taken have been, measured against such performance indicators as are appropriate.

The Government has published guidance available here which aims to help organisations with their disclosure obligations. The guidance clarifies that the Government has not been prescriptive about the layout or specific content of the statement and that it is up to organisations how they present information in the statement and how much detail they provide. However, organisations must include in the statement all the steps they have taken.

Organisations will be required to identify and mitigate risks that are particular to their industry, activities and structure. In addition, subsidiaries will be required to make these disclosure statements, if they are also qualifying entities under the MSA. However, they can replicate or modify their parent company’s statements as appropriate.

When do we need to publish the statement?

On an annual basis and as soon as reasonably practicable after the end of each financial year – Government guidance suggests within six months.

Organisations with a financial year ending on or after 31 March 2016 will have to comply with the duty in respect of that financial year (i.e. 2015/16). Organisations whose next year end falls before 30 March 2016 will not be required to publish a statement until the end of the following financial year i.e. 2016/17.

What else do we need to do?

The MSA requires that the statement be approved by the board of directors of a limited company or by all members of an LLP. Depending on the type of organisation the disclosure statement should then be signed by a company director, the designated member of an LLP, a general partner of a limited partnership or by a partner in respect of any other kind of partnership.

Once approved, an organisation must make the statement available on its website and include a link to the statement in a prominent place on the homepage of that website. In the absence of a website, an organisation must provide a copy of the statement to anyone who makes a written application, within 30 days of receiving the request.

What happens if we do not publish a statement?

The Government may force the production of the statement by obtaining an injunction. Equally important will be the damage to the organisation’s reputation and brand by any failure to publish.

What should we be doing now?

Organisations who qualify should consider their obligations under the MSA as soon as possible.

Sensible steps for those preparing statements may include:

• appointing a senior manager in the business to take responsibility for compliance;
• ensuring that the organisation has appropriate whistleblowing procedures in place for raising issues of slavery and human trafficking;
• conducting relevant risk assessments;
• initiating training programmes for relevant staff and suppliers;
• conducting an audit of supply chains so that risks can be identified and mitigated;
• identifying specific high-risk geographies: third-party sources (such as the Global Slavery Index) can be used to support any particular selection and to avoid any implied criticism of a particular government or culture;
• introducing new review mechanisms, processes, policies and procedures and reviewing the adequacy of those already in place; and
• reviewing standard terms with suppliers to secure appropriate commitments from suppliers to uphold acceptable labour standards.

Further information and assistance

If you would like support with either the preparation of your MSA statement or reviewing/amending your staff policies in light of this new requirement, please contact our Senior Solicitor, Anne-Marie Boyle.