Understanding Canada’s Modern Slavery Act and Its Impact on your Business

By Socium


If you are uncertain about your status and obligations under this new law, seek legal advice regarding your reporting duties.

Understanding Canada’s Modern Slavery Act

Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff, more commonly referred to as the “Modern Slavery Act” (the “Act“) came into force on January 1, 2024, and requires certain entities and governmental institutions to provide reports to the Minister of Public Safety and Emergency Preparedness (the “Minister”) and, in some cases, to shareholders.

Public Safety Canada released much-anticipated guidance (the “Guidance”) on December 20, 2023, providing detailed instructions on how to comply with the reporting obligations set out in the Act. Subsequently, on March 7, 2024, modifications were made to the Guidance.

Who Must File A Report

The reporting obligations under the Act apply to certain governmental institutions and any entity producing, selling, or distributing goods in Canada or elsewhere, importing into Canada goods produced outside Canada, or controlling an entity engaged in any of these activities (“Reporting Entity“) and includes any corporation, trust, partnership or other unincorporated organization that:

  1. is listed on a stock exchange in Canada;
  2. has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:
    • it has at least $20 million in assets,
    • it has generated at least $40 million in revenue, and
    • it employs an average of at least 250 employees; or
  3. is prescribed by regulations.
    (an “Entity”).

It is sufficient for an organization to be a Reporting Entity and meet the criteria of either item (1) or (2) above in order to be subject to the Act and required to report.

The details in relation to what constitutes a Reporting Entity can be summarized as follows:

  1. “Production of Goods” includes the manufacturing, growing, extracting, and processing of goods. 
  2. “Importing” refers to when an Entity is responsible for accounting for those goods under the Customs Act. The terms “Importing” and “Producing” are not intended to capture services that solely support the production or importation of goods such as marketing, administrative services, financial services, and software services.
  3. “Goods” refers to goods that are the subject of trade and commerce, understood in the ordinary sense of the word. 
  4. “Control” should be applied broadly and in accordance with an applicable accounting standard, although it should not be limited to these standards and may include situations in which an Entity exercises joint control of an operation.

Report Recipients

In addition to providing the report to the Minister, the report must be made available to the public, including by publishing it in a prominent place on the Reporting Entity’s website. Further, a Reporting Entity that is incorporated under the Canada Business Corporations Act or any other Act of Parliament must provide the report to each shareholder, along with its annual financial statements.

Deadlines

Reports must be submitted by May 31, with the first due by May 31, 2024. However, federally incorporated Reporting Entities may have to deliver their reports to shareholders before this date. 

Report Contents

In addition to outlining the steps taken to prevent and reduce the risk that forced labour or child labour was used at any step of the production of goods in Canada or elsewhere by the Reporting Entity or of goods imported into Canada by the Reporting Entity, the report must contain the following supplementary information:

  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 assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

The Guidance offers in-depth information to assist a Reporting Entity in meeting the obligations of the 7 requirements above.  However, the Guidance does not dictate a specific level of detail that must be adhered to. Instead, Reporting Entities are granted the autonomy to exercise discretion in determining the level of detail that is appropriate for their individual reports.  Larger entities or those with a higher risk profile might find it necessary to provide more detailed information, while smaller entities or those with a lower risk profile might opt for less detail.

Questionnaire

The Guidance mandates a questionnaire that must align with the report’s contents, requiring comprehensive details about the Reporting Entity’s supply chain and the actions undertaken to remediate any instances of forced or child labour.  It also includes a set of “check box” queries, enabling a Reporting Issuer to select the options relevant to them. 

The questionnaire is comprehensive and filling it out will likely require a significant amount of time and collaboration.  Given the level of detail required, it’s important to allocate sufficient time and resources to complete the questionnaire accurately.

Conclusion

Businesses should carefully examine the Act and Guidance to understand the specific requirements and implement necessary measures to fulfill them. 

For further information or assistance in understanding your filing obligations, please contact us at info@sociumlaw.com.