The Modern Slavery Act 2015 – Why do employers need to know about it?

Many businesses operating within the UK, and with an understanding of UK employment laws, may consider that terms such as “modern slavery” and “trafficking” are not relevant to their business. But do you know who are the people providing services which your business relies on at various points within your supply chain? Are you confident that those services are being provided by workers under their own free will? The answer will in many cases understandably be no. Supply chains can be long and complex and are often located thousands of miles away. In 2013, the Chartered Institute of Procurement & Supply (“CIPS”) indicated in their ethical guide to procurement that globally there were over 29.3million people in modern slavery (see here).

Organisations such as the CIPS, along with the Walk Free Foundation, have previously highlighted this issue as one which businesses must tackle (see here). However, the Modern Slavery Act 2015 will now require large businesses to raise their game in this respect. The relevant provisions are expected to come into force in October 2015.

What does the Act require businesses to do?

Businesses caught by the Act will be required to publish each financial year one of two statements:

• Option A: The steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any part of its own business; or in any part of its supply chains;
• Option B: That the organisation has taken no steps to ensure that slavery and human trafficking is not taking place in any part of its own business; or in any part of its supply chains.

The Secretary of State can enforce this requirement by bringing civil proceedings in the High Court for an injunction.

It is easy to see that Option B is a lot less onerous than Option A. But how will Option B impact on reputation, commercial contracts, recruitment? These are important issues to consider, particularly given that the statement must be approved by the Board of Directors (or members of a partnership) and posted on the organisation’s website with a link to the statement being incorporated in a prominent place on the organisation’s homepage.

Who is caught?

This disclosure obligation applies to:

• Any commercial organisation supplying goods or services;
• Carrying on business or part of a business in any part of the UK e.g. overseas companies carrying on all or part of their business in the UK are caught as well as UK-based ones; and
• Which has a total turnover of not less than a specified amount. We are currently awaiting what this turnover figure will be (the Government consultation identified various options including £36 million at the lower end (which would tie in with existing Companies Act 2006 definition of a “large” company) and up to £1 billion at the top end). But be aware, the amount when specified is likely to relate to the organisation’s global turnover, not just that of the UK operation.

What do employers need to do?

• For those who may be caught by the statutory disclosure obligations (as indicated above, we are still awaiting clarification of the “turnover” trigger), attention should turn to whether this is an issue which is currently being addressed. If it is, is this adequate? How can the process be improved? If not, what should the organisation be doing? Would the organisation be comfortable making a statement that no steps had been taken to address the potential risk of slavery and human trafficking within their supply chain? Who in the organisation will have responsibility for overseeing this process?
• As appropriate, HR, along with procurement, compliance, CSR and legal departments should scope out their role. Although not a prescriptive list, the Government has indicated the extent and type of information it is expecting to be disclosed under the Act as including:
  • Information about the organisation’s structure, business and supply chains;
  • Its policies in relation to slavery and human trafficking;
  • Its due diligence process in relation to slavery and human trafficking and supply chains;
  • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place;
  • Steps it has taken to assess and manage that risk; and
  • Training about slavery and human trafficking available to its staff.

Whistleblowing policies and hotlines may also play an important role in this respect.

There is obviously a lot for organisations to consider and do. However, with increasing media scrutiny on this issue impacting on reputation and the potential role of trade unions, investor and shareholders placing pressure, organisations must ensure that these issues are now firmly on their agenda. Indeed, whilst the Act is intended to focus on large organisations whom the Government hopes will have sufficient resources and capabilities to investigate their supply chains and potentially exert real influence to eliminate any slavery and trafficking found, this is an issue which all employers must remain alert to.