Business Law Blog

In an effort to advance the fight against modern slavery, new legislation imposing reporting obligations on a wide range of private-sector entities and certain government institutions will come into force on January 1, 2024.

The new act, entitled An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (the “Act”), enshrines Canada’s commitment, as a party to the fundamental conventions of the International Labour Organization on fundamental labour rights, to contribute to the fight against modern slavery, which includes forced labour and child labour. To achieve that goal, the Act imposes reporting obligations on private-sector entities and certain government institutions to disclose the measures taken to prevent and reduce the risk that forced labour or child labour is used in their supply chains. The Act provides for an inspection regime applicable to the relevant entities and gives the Minister of Public Safety and Emergency Preparedness (the “Minister”) power to require an entity to provide certain information.

To Which Entities Does The Act Apply?

The Act will require any entity that produces, sells, distributes, or imports goods into Canada itself, or controls an entity that does so, to file reports concerning the risk and mitigation of forced labour or child labour in their supply chain if the entity meets the following thresholds:

1. it is listed on a stock exchange in Canada; or
2. it does business in Canada (or has assets or a place of business in Canada) and meets at least two of the following three threshold requirements, based on its consolidated financial statements, in at least one of its past two financial years:

                        i.   at least $20 million in assets;

                       ii.   at least $40 million in revenue; and

                      iii.   an average of at least 250 employees.

The Act will also apply to certain government institutions and any additional entity prescribed by regulation.

What Are The Reporting Requirements?

Every entity or government institution subject to the Act must report to the Minister on the steps taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used in any step of the production or importation of goods by the entity, or the production of goods produced, purchased or distributed by the government institution, respectively. Reports must also include the following supplementary information in relation to the entity:

1. its structure, activities and supply chains;
2. its policies and its due diligence processes in relation to forced labour and child labour;
3. the parts of its 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 that risk;
4. any measures taken to remediate any forced labour or child labour;
5. any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;
6. the training provided to employees on forced labour and child labour; and
7. how the entity or governmental institution assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

All annual reports will be posted on an online registry maintained by the Minister. Entities and governmental institutions must also make their reports available to the public, including by publishing it in a prominent place on their website. In addition, federally incorporated companies must provide the report to their shareholders along with their annual financial statements.

The first annual reports due under the Act must be submitted by May 31, 2024.

What are the Consequences for Non-Compliance?

The Minister has broad enforcement powers under the Act, including investigatory powers, and may require an entity to take any measures that the Minister considers necessary to ensure compliance with the Act.

Every person or entity that fails to comply, knowingly makes any false or misleading statements, or provides false or misleading information, is guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000. Further, any director or officer who directed, authorized, assented to, acquiesced in or participated in the commission of an offence under the Act will also be personally liable. That said, the Act does not create any new civil remedies.

Conclusion

The new disclosure requirements (and the penalties for non-compliance) are significant, particularly given that they extend to companies beyond the universe of reporting issuers. Businesses should consider whether the Act applies to them and, if so, how to best begin preparing disclosure. Reporting issuers should consider how best to integrate these new reporting requirements with existing disclosure in order to avoid inconsistencies.

If you have any questions about the application of the Act, please contact any member of our Corporate Finance and Securities, Social Impact and Business Sustainability or Corporate Law groups.