Commercial Litigation and Dispute Resolution Blog

Canada is implementing new measures to combat the use of forced and child labour in the global supply chains of Canadian-linked organizations. Bill S-211 is currently awaiting Royal Assent and will likely come into force on January 1, 2024.[1] The Bill enacts the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”), and imposes reporting obligations and financial penalties for non-compliance on particular entities.

The Act is the latest initiative implemented by the government of Canada to combat labour exploitation in global supply chains, in part due to the increased international and domestic attention to this issue throughout the COVID-19 pandemic. Previous measures included:

• a prohibition on the importation of goods produced in whole or in part by forced labour, which came into force on July 1, 2020;
• the introduction of the National Strategy to Combat Human Trafficking to strengthen Canada’s response to human trafficking for the purposes of sexual exploitation or forced labour; and
• similar reporting and transparency obligations in the Canadian extractive sector and in the export, import and transit across Canada of rough diamonds. [2]

While similar forced labour legislation already exists in the United Kingdom, Australia, France and Germany, the Act is the first legislative step taken in Canada to increase supply chain transparency regarding sources of labour.

Who Must Report?

The Act creates reporting obligations for an expansive range of Canadian businesses, and federal government agencies. These requirements apply to:

• any “government institution” producing, purchasing or distributing goods in Canada or elsewhere; and
• any broadly defined Canadian “entity” that produces, sells or distributes goods in Canada or elsewhere, imports goods into Canada or controls an entity engaged in any of these activities.

“Entity” is defined as a corporation, trust, partnership or other unincorporated organization that is either a) listed on a stock exchange in Canada or b) does business, has a place of business or assets in Canada, and that meets at least two of the following conditions for at least one of its two most recent financial years:

1. it has at least $20 million in assets;
2. it has generated at least $40 million in revenue;
3. it employs an average of at least 250 employees.

Additional entities may be subject to reporting obligations as prescribed by regulations.

What Must the Report Contain?

Any entity who meets the conditions above must submit a report to the Minister of Public Safety and Emergency Preparedness detailing the steps taken during the previous financial year to prevent and reduce the risk of that forced labour or child labour is being used at any step of the supply chain.

Once the Act comes into force, reports will need to be submitted annually on or before May 31. In addition to the steps taken to prevent and reduce the risk that forced labour or child labour is being used, each annual report must also include details of the following:

• the entity’s structure, activities and supply chains;
• the entity’s policies and due diligence processes in relation to forced labour and child labour;
• the parts of the entity’s business and supply chains that carry a risk of forced labour or child labour being used, and the steps it has taken to assess and manage those particular risks;
• any measures taken to remediate any forced labour or child labour;
• any measures taken to remediate the loss of income to vulnerable families that resulted from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;
• the training provided to employees on forced labour and child labour; and
• how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

In addition to submission to the Minister, the information contained in the report must be made available to the public, and must be published in a prominent place on the entity’s website.

Penalties for Failing to Report

Entities who fail to provide an annual report that meets all requirements listed in the Act, or who knowingly make a false or misleading statement may be found guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000.

Officers, directors or agents of the entity involved in the commission of the offence may also be liable to a fine up to $250,000, regardless of whether the entity is charged or prosecuted.

Conclusion

While reports would only become owing as early as May 31, 2024, preparing these reports will require the collection and assessment of corporate information and materials and may necessitate changes to internal policies, processes and procedures. Relevant entities ought to review these reporting requirements and begin tracking efforts to prevent and reduce the risk of forced labour in advance of the Act coming into force.

Should you have any questions or would like assistance in meeting these reporting obligations, please contact Laura Bevan and Rachel Wollenberg.

_{[1] https://www.parl.ca/LegisInfo/en/bill/44-1/s-211}

_{[2] https://www.canada.ca/en/employment-social-development/programs/international-affairs/reports/what-we-heard-forced-labour-global-supply-chain.html}