David Roath | 11th August 2016

The Modern Slavery Act 2015 – The impact on suppliers

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David Roath | 11th August 2016

The Modern Slavery Act 2015 – The impact on suppliers


The Government has made two sets of regulations relating to the Modern Slavery Act 2015 (MSA).

It is estimated that there are 21 million people around the world trapped in some form of forced labour, or modern slavery as it is commonly referred to. It is also estimated that annual profits from forced labour are around $150bn. In a bid to combat, or at least reduce, these figures, last year (2015) the UK Government enacted the Modern Slavery Act 2015 (‘the Act‘) which is the first piece of legislation which attempts to prevent modern slavery and punish those found guilty of carrying out offences under the Act.

The Modern Slavery Act 2015

  1. The Modern Slavery Act 2015 (Transparency in Supply Chains) Regulations 2015. Section 54 of the MSA requires commercial organisations to prepare a slavery and human trafficking statement for each financial year in which their total turnover is above the prescribed amount. These Regulations came into force on 29 October 2015 and set the amount at £36 million in terms of total turnover. They also provide that total turnover will be determined by taking into account the global turnover of the organisation and its subsidiary undertakings. The total turnover includes the amount derived from the provision of goods and services falling within the ordinary activities of that organisation and its subsidiary undertakings, after deducting trade discounts, value added tax and other taxes.
  2. The Modern Slavery Act 2015 (Commencement No. 3 and Transitional Provision) Regulations 2015. which bring section 54 of the MSA into force on 29 October 2015. There is a transitional provision which provides that the requirement only applies in respect of financial years ending on or after 31 March 2016.

Section 54 – Supply Chains

The Act contains specific provisions in relation to transparency within supply chains and from October 2015 certain businesses supplying goods or services in the UK now have to comply with the requirements of section 54.

Under section 54 of the Act any commercial organisation with a total annual turnover of £36m or more (which includes the turnover of any relevant subsidiaries) supplying goods or services in the UK (whether or not the organisation is incorporated or established in the UK) will be required to publish an annual “slavery and human trafficking statement” on their website. The statement should set out the steps that the organisation has taken that year to ensure that slavery and human trafficking is not present in any part of its business or its supply chain. If the organisation has taken no steps, then that is what the statement should say, which would be compliant with the Act.

There are no financial or criminal penalties for failing to comply with section 54, although the Government does have the power to apply to the High Court for an injunction to require the organisation to comply. The Government hopes that the negative publicity and damage to reputation will be enough to compel organisations to willingly publish the statement.

Who does the Modern Slavery Act 2015 affect?

On the face of it the Act would only seem to affect large organisations. In order to publish the statement, however, organisations will need to carry out due diligence on those within their supply chain to establish that slavery and human trafficking is not taking place at any stage in the chain, and those suppliers will in turn need to do the same. It has, and will increasingly so, become more common for supply contracts to contain provisions requiring the supplier to confirm that they comply with the Act and/or any anti-slavery policies of the organisation, and to confirm that those in the chain below them are also compliant. In order to comply with the contract the supplier will need to carry out investigations of its own supply chain, and may wish to consider including similar provisions in supply agreements with its suppliers. This is despite a supplier being below the £36m threshold.

Such contractual obligations could prove onerous for suppliers, however, they may find they have little choice but to be proactive if they wish to maintain their relationships with larger organisations. Such suppliers would be well advised to start carrying out their own investigations into their suppliers, and before signing any agreements with larger organisations which contain anti-slavery clauses to ensure that they are and can remain compliant with the provisions for the duration of the contract.

For further advice please contact a member of the Employment team.