Businesses face stricter compliance and harsher penalties following review of Modern Slavery Act, as Sarah Ozanne explains.
The Home Office commissioned Frank Field MP, Baroness Elizabeth Butler-Sloss and Maria Miller MP to review the operation and effectiveness of the Modern Slavery Act 2015 (the Act) and to recommend improvements.
The review was broad, with one area of focus being Section 54, which relates to transparency in supply chains. The report identifies several deficiencies with the Act and makes several recommendations in this area. Businesses would be wise to take note.
Section 54 requires commercial organisations with an annual turnover of £36m or more to publish an annual modern slavery statement setting out the steps that they have taken in the last financial year to ensure that modern slavery or human trafficking is not taking place in their business or supply chains – or that no such steps have been taken.
Section 54 is light on detail, and the review highlighted that many businesses ignore it or respond to the requirement as a tick box exercise. While the Act provides for the secretary of state to be able to seek injunctive action against non-compliant companies this has not happened and there are no penalties for non-compliance. The review determined that the lack of clarity, guidance, monitoring and enforcement of modern slavery statements needs to be addressed.
The report makes these recommendations:
- Section 54 requirements should make sure non-compliant companies are not awarded public contracts;
- The government should establish a list of those companies in scope of Section 54. However, individual companies shall remain responsible for determining if they need to produce a modern slavery statement. Non-inclusion in the list will not be an excuse for non-compliance;
- Businesses should not be able to produce a modern slavery statement stating that they have taken no steps to address modern slavery taking place in their business or supply chain. Instead they will need to produce a statement which details the steps taken and contains minimum mandatory information;
- Companies should be required to consider the entirety of their supply chain in relation to the risk of modern slavery and if they do not, to explain why;
- The Companies Act 2006 should be amended to require companies to refer to their modern slavery statement in their annual reports, or Section 54 should impose a similar obligation on non-listed companies;
- Companies should be required to have a designated board member who is personally accountable for the production of the modern slavery statement;
- Failure to report or act in instances of modern slavery should be an offence under the Directors Disqualification Act 1986;
- The government should set up a central repository of statements to allow it to better monitor compliance. Companies should be required to upload their modern slavery statement to the registry. Modern slavery statements should be dated so that progress can be monitored;
- The independent anti-slavery commissioner should monitor compliance annually and oversee the guidance available;
- An enforcement body should be established to impose sanctions against non-compliant companies. Such sanctions could include initial warnings, fines, court summons and directors’ disqualification.
These recommendations are aimed at clarifying which companies are in scope of Section 54, improving the quality of statements, embedding modern slavery reporting into business culture, increasing transparency and increasing monitoring and compliance enforcement.
The reviewers will be establishing an implementation group to ensure that the government puts in place steps to reflect their recommendations. The timeframe for implementation of these recommendations is not yet known but the report encourages government to act quickly and ensure that the UK remains a leader in international efforts to eradicate modern slavery.
Sarah Ozanne is an employment lawyer at CMS