NSW Modern Slavery Act commencement – an unexpected delay

On 19 June 2019 the NSW Government unexpectedly announced that the Modern Slavery Act 2018 (NSW) (NSW Act) would not commence on 1 July 2019 as anticipated. Despite being passed 12 months ago, the Hon. Don Harwin (Special Minister of State, Minister for the Public Service and Employee Relations, Aboriginal Affairs, and the Arts) advised that the “legislation in its current form contains a number of defects requiring urgent attention. The consequence of these defects is such that if left unattended they would render some provisions of the Act inoperable”.

The Minister also advised the House that other provisions of the NSW Act were defective or at risk of a constitutional challenge and so could not commence as presently drafted. The Minister has not opted for a rushed amendment, but has referred the amendment bill and the draft regulation, prepared by the Department of Premier and Cabinet, to the Standing Committee on Social Issues for its inquiry and report.

Background

Modern slavery practices include forced labour and, in particular, child labour and people trafficking. The 2018 Global Slavery Index (Index) lists products that are most exposed to this risk, including cocoa, cotton clothing accessories, carpets, fish, timber, laptops, computers and mobile phones. The Index estimated that on any given day in 2016, there were 15,000 people living in conditions of modern slavery in Australia. Australian industries listed as being most at risk included agriculture, construction, domestic work, meat processing, cleaning, hospitality and food services. Australia sources 73 percent of its laptops, computers and mobile phones from countries that have large electronics manufacturing industries accused of exploiting workers.

NSW Act delayed

The NSW Act was to have applied to all commercial organisations with employees in NSW and a total annual turnover of more than $50 million that supply goods and services for profit or gain. This threshold is significantly lower than the $100 million threshold applicable under the Commonwealth Modern Slavery Act 2018 (Commonwealth Act) and was to impact on a broader range of businesses. Unlike the Commonwealth Act, the NSW Act also contained provisions for fines of more than $1.1 million for non-compliance with reporting obligations.

The NSW Act required regulated entities to submit a statement to the NSW Anti-Slavery Commissioner outlining the steps they have taken to reduce the risk of modern slavery across its operations and supply chains. To achieve this, all impacted organisations would have been required to review all commercial supply chain contracts to ensure antislavery provisions were included.

Commonwealth Act in force

The Commonwealth Act, which was passed after the NSW Act but commenced on 1 January 2019, establishes a national Modern Slavery Reporting Requirement applicable to large Australian businesses. There is a possibility that the NSW Act could be deemed unnecessary, given the existence of the Commonwealth Act, and permanently shelved. But given the lack of jurisdiction of the Commonwealth Act to local government and the NSW Government agencies, this appears unlikely.

Practical implications

Whether or not the NSW Act comes into effect before the first reporting period for the initial Commonwealth reporting period (for many entities this will be 1 January 2020), entities caught by the Commonwealth Act must take steps to identify whether their goods and services are sourced ethically and responsibly. To prepare for the commencement of reporting obligations, organisations caught by the Commonwealth Act should undertake a risk assessment of their supply chains and develop and follow an implementation strategy. Such a strategy should include:

• Training so that managers can identify if the business is one where exposure to modern slavery risks are high risks and, if so, the process for identifying and reviewing relevant contracts.
• Contract reviews of all existing supply contracts for risk and rank accordingly. Identify which of these contracts rely on their own suppliers and if further supply chain due diligence is needed and if the protections are included in the contract wording. Consider if amendments are required and, if so, how can this be achieved, as also how to audit supplier compliance with the requirements of the Commonwealth Act.
• Review procurement process to incorporate into new contracts clauses requiring suppliers to meet the requirements of the Commonwealth Act and permitting audits to provide information so that the reporting entity can meet its requirements.
• Oversight including considering the processes for oversight and monitoring of contracts, suppliers and management and ensure processes are in place for the Board to have adequate oversight.
• Modern slavery statement, which includes information about the structure of the regulated entity, its operations and supply chains together with a risk assessment of modern slavery practices in its business operations and supply chains (including all entities owned or controlled by the regulated entity). These statements will be published on the Modern Slavery Statements Register and available to public scrutiny.
• Compliance program modified to incorporate the updated reporting requirements.

If you would like to know more about how to assess the risk exposure your business has and the compliance procedures needed now to ensure compliance with the first Modern Slavery Statement please contact us.