It was reported earlier this year that the House of Lords Committee on the Modern Slavery Act 2015 called for written evidence for its inquiry into the impact and effectiveness of the Act.
Back in January 2024, the House of Lords Select Committee on the Act were appointed and will report back by 30 November 2024. In this report, it will consider the impact of the Act and how effective it has been with achieving its aims. Furthermore, the report will consider how the Act’s provisions have been implemented, how it has been impacted by political development and whether improvements are required.
In light of this, this article provides an overview of what the Act is and weighs-up how effective it has been since coming into force.
What does the law say about modern slavery?
The Modern Slavery Act 2015 is aimed at combating the crimes of slavery and human trafficking. Section 54 of the Modern Slavery Act acknowledges that “commercial organisations” have a role to play in achieving this aim, by preparing a yearly slavery and human trafficking statement which states:
- that such crimes do not occur within their own organisations or supply chains; and
- what steps they are taking to ensure that remains the case.
Who does section 54 apply to?
Under the Modern Slavery Act, a "commercial organisation" is defined as any partnership or body corporate that:
- supplies goods or services; and
- carries on all or part of its business in the UK; and
- has an annual turnover of at least £36 million.
How is turnover calculated?
For the Modern Slavery Act, turnover is calculated as the amount derived from the provision of goods and services falling within the ordinary activities of a commercial organisation after deduction of:
- trade discounts;
- VAT; and
- any other taxes;
- Turnover will also include the turnover of any subsidiaries of a commercial organisation, regardless of where they are based or carry on their business.
How can a commercial organisation ensure that its supply chain also complies with the Modern Slavery Act?
It is one thing for a commercial organisation to get its own affairs in order in respect of modern slavery, but how does it ensure that the members of its supply chains are also compliant, particularly when those businesses have a turnover of less than £36 million and are therefore under no direct obligation to comply with the Modern Slavery Act?
The solution is often to impose a contractual obligation on each supplier to:
- comply with the Modern Slavery Act; and
- indemnify the customer for any losses it incurs as a result of the supplier failing to comply with such obligation.
Some contracts will also include a right for the customer to audit the supplier for compliance with the Modern Slavery Act as well interpret a breach of a supplier’s modern slavery obligations as an automatic material breach of the contract, thus entitling the customer to terminate. This provides a strong financial incentive for the supplier to comply with the Modern Slavery Act.
Further, the supplier will not want to be held liable by the customer for breaches committed by any of its subcontractors or suppliers. It is therefore likely that the supplier will seek to pass the same obligations down the supply chain into its subcontracts. This effectively creates a chain of modern slavery obligations throughout the supply chain.
What should be included in the slavery and human trafficking statement?
The statement must include information about what steps a commercial organisation has taken during the financial year to ensure slavery and human trafficking is not taking place in any of its supply chains, and any part of its business. If a commercial organisation has not taken any steps, the statement must make this clear.
To assist commercial organisations with the types of information that should be included in a statement, section 54(4) of the Modern Slavery Act recommends that it may include information about:
- a commercial organisation's:
- structure, business and supply chains;
- policies in relation to slavery and human trafficking;
- due diligence processes in relation to slavery and human trafficking in its business and supply chains; and
- effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate.
- the parts of a commercial organisation's business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
- the training about slavery and human trafficking available to a commercial organisation's staff.
How are parent and subsidiary undertakings dealt with?
As noted above, foreign parent companies and/or subsidiaries that meet the requirements of the Modern Slavery Act will have to comply with its provisions, and the turnover of any subsidiaries must be taken into account when assessing whether a business's turnover exceeds the £36 million threshold. So, what happens if section 54 applies to both a subsidiary and its parent company? The answer is that both commercial organisations have to make their own slavery and human trafficking statement.
Furthermore, a parent company's statement must include the steps taken in relation to all of its subsidiaries if, depending on the particular facts, the subsidiaries' activities form part of the parent company's supply chain or business. This means there will need to be some level of communication between the parent company and subsidiaries to ensure consistency in the statements being made.
However, where a parent company and its subsidiaries are required to make a statement, the parent company may produce one statement that its subsidiaries can use. The statement would need to cover the steps taken in the relevant financial year by the parent company and each subsidiary using the statement.
What are the deadlines for compliance?
A slavery and human trafficking statement must be produced for every financial year ending on or after 31 March 2016.
The Home Office expects businesses to make their statement as soon as reasonably practicable after the end of the financial year and, in any event, within six months of such date.
Are there any formalities to be aware of?
The slavery and human trafficking statement must be approved by the board of directors and signed by a director.
If a commercial organisation has a website, then the statement must be published on the website, and there must be a link to the statement in a prominent place on the homepage.
If a commercial organisation does not have a website, it must provide a copy of the statement to anyone who makes a written request for one within 30 days of receiving the request.
What are the consequences of non-compliance?
The Secretary of State may take civil proceedings against a commercial organisation to require it to produce a statement.
Aside from this, the main consequence of not making a statement in accordance with section 54 of the Modern Slavery Act, or reporting that it has not taken any steps to prevent slavery or human trafficking from taking place, is likely to be significant damage to an organisation's reputation and brand.
How effective has the Modern Slavery Act 2015 been?
To evaluate the Act's effectiveness, it's best to compare its achievements with its current challenges.
Regarding Achievements:
- Increased Awareness and Reporting
- The Act has raised awareness about modern slavery, leading to more reporting and victim identification. Since its implementation, the number of potential victims referred to the National Referral Mechanism (NRM) has risen significantly. This suggests better recognition of modern slavery cases by authorities and the public.
- Corporate Responsibility
- Section 54, one of the Act's most praised aspects, requires large companies to publish annual statements on their efforts to prevent modern slavery in their supply chains. This has improved corporate transparency and responsibility, though the quality and impact of these statements vary.
- Stronger Legal Framework
- The Act has strengthened the legal framework against modern slavery, resulting in harsher penalties for perpetrators. Several high-profile prosecutions under the Act demonstrate its effectiveness in bringing traffickers to justice. A notable example is the July 2019 conviction of a Polish gang who enslaved and exploited more than four hundred people.
Regarding Challenges:
- Enforcement and Prosecution Gaps
- Despite the stronger legal framework, the Act's enforcement has faced criticism. Convictions remain low compared to estimated modern slavery cases. This gap stems from the complexities of evidence gathering, the hidden nature of modern slavery, and insufficient law enforcement resources.
- Inconsistent Corporate Compliance
- While section 54 marks significant progress, company compliance has been uneven. Many firms either fail to publish statements or do so with minimal detail, limiting the measure's effectiveness in eradicating supply chain slavery. There are calls for stricter enforcement and more severe consequences for non-compliance.
- Victim Support
- The Act's victim support provisions have been criticized as inadequate. Despite introducing measures like a statutory defence for victims compelled to commit crimes, many argue that support systems fall short. Victims often struggle to access adequate protection and assistance, with some even facing re-traumatization by legal and immigration systems.
Conclusion
Overall, while an impact has certainly been made, as there are now efforts to unveil and fight against modern-day slavery, a mere gesture is not enough. More decisive action is required, and greater support for these initiatives should be advocated.
If you require any assistance in determining whether you must comply with the Modern Slavery Act, the steps to take to produce a comprehensive section 54 statement or how to ensure your supply chain is compliant with the Modern Slavery Act, please feel free to contact us.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
