Review of Australia's Modern Slavery Act: organisations warned of tougher modern slavery laws to come

We would like to acknowledge the contributions of Milan Sharma and May Merewether in the preparation of this article.

On 25 May 2023, the Federal Government released the highly anticipated report (the Report) of the three-year statutory review of the Modern Slavery Act 2018 (Cth) (Modern Slavery Act).

Led by Professor John McMillan AO, the Report calls for reform to strengthen and sharpen the Act’s reporting obligations and compliance, re-emphasising the need for increased business and government awareness of the modern slavery risks embedded in today’s global economy.

The Report makes a total of 30 recommendations which, if adopted, will have a significant impact on the obligations of a wide range of organisations in regard to identifying, reporting, and addressing modern slavery risks within their businesses. In particular, the proposed changes will require more organisations to make modern slavery statements and implement due diligence systems and proposes that penalties will be introduced for non-compliance with the reporting requirements.

Background: a critical analysis of the Modern Slavery Act at the three-year mark

The Modern Slavery Act is a fundamental element in Australia’s response to the global modern slavery challenge, which has become embedded within the international economy and as a result endangering human rights.

Described as a ‘transparency reporting law’, the Modern Slavery Act requires large businesses and other entities in Australia to submit an annual statement to the Federal Government on how they are addressing modern slavery risks in their domestic and global operations and supply chains. The statements are placed on an online public register, the Modern Slavery Statements Register – the first government-run register of its kind internationally. Notably, the Register has had approximately 7,000 entities submit statements; this is well above the initial expectation that 3,000 entities would lodge reports.

As part of its operation, the Modern Slavery Act provides for a statutory review to be conducted three years after its commencement (on 1 January 2019). The 12-month review commenced on 31 March 2022.

Three questions lay at the heart of this review:

1. Can a law such as the Modern Slavery Act be effective in combating modern slavery?
2. Could the Act be more effective if changes were made to how it is framed and administered?
3. Is the law being taken seriously?

The Report: an overview of the findings

The review process uncovered a high level of interest in the modern slavery reporting process, with a large number and variety of individuals and organisations contributing to the Report across a diverse range of issues.

The Report indicates that, overall, there is a strong belief that there is a major business cultural change that is underway and a strengthening commitment to work harder to combat modern slavery. It was also suggested that investors are paying closer attention to the quality of modern slavery reporting by investment targets, indicating the flow-on market effects of the transparent reporting law on consumer support and business reputation.

However, the Report also acknowledges a widely held view that arose in the consultation process that there is no hard evidence that the Modern Slavery Act, in its early years, has yet caused meaningful change for people living in conditions of modern slavery. As modern slavery practices continue to evolve and present new challenges in the interconnected world economy, the Report recognises that Australia’s modern slavery laws are in the early phases of what is likely to be a long journey. The latest estimate is that on any given day in 2021, 49.6 million people lived in situations of modern slavery – nearly one of every 150 people in the world.[1] This figure was an increase of 10 million (20%) on the previous estimate in 2016.

The goal of the statutory review, and future developments to modern slavery law, is therefore one of “continuous improvement”.

Key recommendations: what organisations can expect from new modern slavery laws

With this goal in mind, the Report has set out 30 recommendations to amend the Act to strengthen the modern slavery reporting process. The most significant of these recommendations are outlined below.

Lowered reporting threshold

Currently, an organisation is a ‘reporting entity’ under the Modern Slavery Act if it has an annual consolidated revenue of $100 million or more. Recommendation 4 proposes to reduce the reporting threshold to $50 million. The adoption of this recommendation would significantly increase the number of reporting entities, extending the reporting obligations to an estimated additional 2,393 small and medium-sized businesses that did not meet the higher threshold.

The Report indicates that a lowered threshold would bring Australia into line with developments in similar jurisdictions (specifically, the United Kingdom, New Zealand and Canada) and convey a clearer message that modern slavery is unacceptable at any level of business or society.

Implementation of due diligence system

Another important recommendation concerns the creation of a human rights due diligence obligation (Recommendation 11). Currently, the Modern Slavery Act only imposes an obligation on entities to describe their due diligence system. There is no requirement to conduct due diligence, and ‘due diligence’ is not defined in the Act. The adoption of this recommendation would therefore be a significant step forward in that it would impose a duty on entities to take effective action to identify and assess modern slavery risks, and to track performance of this action.

The Report notes, however, that this duty should not apply to an entity with a consolidated annual revenue of between $50-100 million until two years after the entity has become subject to the reporting requirements of the Modern Slavery Act.

Penalties for non-compliance

The Report also outlines the need for additional enforcement measures to ensure compliance with the reporting obligations. The Modern Slavery Act currently does not contain any offence or civil penalty for non-compliance, reflecting the initial Parliamentary goal that transparency of business through the Modern Slavery Statements Register would provide enough practical and reputational compliance incentive and pressure, at least in these early stages of the law. Despite this, the Report takes the stance that the principle of voluntary compliance is no longer sufficient.

Accordingly, Recommendation 20 proposes that penalties be introduced for failing to report without reasonable excuse, submitting a report that knowingly includes materially false information, failing to comply with a request of the Minister to take remedial action in compliance with the reporting requirements, and failing to put a due diligence system in place. The Report specifies that these penalty offence provisions should not apply to an entity with a consolidated annual revenue of between $50-100 million until two years after the entity has become subject to the reporting requirements under the Modern Slavery Act.

It is incongruous, according to the Report, that the Modern Slavery Act imposes a reporting duty regarding a matter of fundamental human rights importance but contains no robust procedure to ensure that this duty is performed. Despite this, the review does not support the introduction, at least at this stage, of penalties that rest on subjective judgement as to whether a modern slavery statement is adequate or effective. Rather, Recommendation 20 only proposes the implementation of penalties for breaches of objective standards.

Where to from here?

While the idea of self-reporting and due diligence has been well taken to, the Australian Government has also committed to the establishment of an Anti-Slavery Commissioner, to help society and government compliance with the Modern Slavery Act. The Commissioner’s role is modelled off two existing commissioner offices in the United Kingdom and NSW. As per the legislative provisions, the Commissioner will have the following generic functions:

• To advocate for and promote awareness of the objects of the Act (in this instance, combating modern slavery).
• To provide information, advice education, training, and assistance in relation to the Act.
• To monitor the operation and effectiveness of relevant government laws and programs, and report to government.
• To co-operate and work jointly with others in achieving the objects of the Act.
• To collate data, conduct research and hold inquiries.
• To convene any advisory committee or other consultative forum that is established by the Act.

Ultimately, the Commissioner’s functions will hopefully assist in the overall due diligence required from reporting entities.

Key takeaways

Although the Government has not yet indicated which, if any, of the Report’s recommendations will be adopted, it is reasonable to expect that substantial reform of the Modern Slavery Act is forthcoming. The Report demonstrates Australia’s continuous support for eradicating modern slavery and how consultations and submissions from the public and private sector are helping execute change within our society. It’s important that organisations of all sizes are conscious of these upcoming changes to modern slavery law in Australia and the more significant obligations and penalties that these changes may bring.

You can access the Report here.

[1] 2022 report by Walk Free, an international non-aligned human rights group, prepared in collaboration with the International Labour Organization and the International Organization for Migration.