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Navigating New Anti-Slavery Supply Chain Legislation: Ensuring Compliance and Mitigating Liability
Author: justin-monahan posted in: Civil LitigationThe recently enacted Fighting Against Forced Labour and Child Labour in Supply Chains Act, effective from January 1, 2024, represents a significant shift in the regulatory landscape for corporate entities operating in Canada. This legislation not only imposes rigorous reporting obligations on companies but also introduces potential personal liability for directors and officers. With substantial fines for non-compliance, it is crucial for affected entities to understand their responsibilities under this law. At KMSC Law, our regulatory compliance lawyers stand ready to provide privileged advice to your organization regarding the navigation of these new requirements and to ensure that both the entity and its leadership are protected from corporate and personal liabilities.
Affected Entities and Financial Thresholds
The Act applies broadly to corporations, trusts, partnerships, and other unincorporated organizations, excluding individuals, that have a presence in Canada or are listed on a Canadian stock exchange. This includes entities with business operations, assets, or other significant activities in Canada.
Your organization falls under the Act if it meets at least two of the following financial conditions in one of its two most recent financial years:
- $20 million CAD in assets
- $40 million CAD in revenue
- Employ at least 250 people
These thresholds consider consolidated financial statements, including subsidiaries but excluding parent companies and non-subsidiary affiliates. If your entity meets these criteria, it is imperative to adhere to the reporting obligations outlined in the Act.
Reporting Obligations and Report Content
Each year, entities subject to the Act must submit a detailed written report and complete a questionnaire issued by Public Safety Canada. This report must cover the previous financial year and outline the steps taken to prevent and mitigate the risk of forced and child labour within the entity’s supply chains, including where they purchase equipment, automotive vehicles, or any other items material to their business operations.
The report must include:
- The entity’s structure, activities, and supply chains;
- Policies and procedures related to forced and child labour;
- Due diligence processes and risk management strategies;
- Details of remediation efforts and training provided to employees; and
- Assessments of the effectiveness of these measures.
Entities incorporated under federal statutes must also provide this report to shareholders alongside their annual financial statements.
Submission Standards
Reports must be filed through Public Safety Canada’s submission portal in PDF format every year. Entities have the option to revise their reports within one year of the deadline, provided they undergo a reapproval and republishing process. Though Public Safety Canada has asked that reports be submitted prior to the annual deadline of May 31 each year, the government has indicated that late submissions will be accepted for at least 2024.
In addition to internal submission standards, organizations are also mandated by the government to demonstrate public accountability. This is achieved by requiring organizations to make their reports publicly accessible through publication on their respective websites. The primary aim of this requirement is to showcase the organization’s dedication to being a proactive contributor to the eradication of forced labor and child labor within their supply chains.
Consequences of Failure to Report
Non-compliance with the Act can result in severe penalties, including fines of up to $250,000. Directors, officers, and other responsible individuals may be held personally liable for offences under this legislation. This provision underscores the importance of diligent compliance and the potential personal risks for those in leadership positions.
KMSC Law is well-equipped to assist your organization
Given the complexity and the high stakes of the new anti-slavery supply chain legislation, it is essential for affected entities to ensure full compliance to avoid significant penalties and personal liability for directors and officers. The regulatory compliance lawyers at KMSC Law are well-equipped to assist your organization in preparing a comprehensive and compliant report annually. Much like KMSC assists in preparing annual returns for corporations, we can also prepare annual supply chain reports in compliance with new statutory obligations. Contact us today for a closed-door discussion on how to safeguard your entity and its leadership from the repercussions of non-compliance with this critical legislation, both this year and the next.
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