Fighting Against Forced Labour & Child Labour in Supply Chains Act

As of May 31^st, 2024, certain private sector entities will be required to submit their first questionnaire and their first annual report under the federal Fighting Against Forced Labour and Child Labour in Supply Chains Act (more commonly referred to as Canada’s Modern Slavery Act) (the “Act”).  The Act, which applies to both government institutions and certain private sector entities, is Canada’s commitment to contribute to the fight against forced labour and child labour through the implementation of reporting obligations.

The Act, which came into effect on January 1^st, 2024, brings with it reporting obligations based on certain prescribed thresholds related to an entities assets, revenue and employees. Failure to comply with the reporting obligations under the Act can result in fines and liability for directors and officers.

Overseen by Public Safety Canada, the Act applies broadly to any entity:

• producing, selling or distributing goods in Canada or elsewhere;
• importing goods into Canada which were produced outside Canada; or
• controlling another entity engaged in such production, sale, distribution, or importation.

*In addition to the above, and as defined by the Act, an entity means a corporation or a trust, partnership or other unincorporated organization that

• is listed on a Canadian stock exchange;
• has a place of business in Canada, does business in Canada or has assets in Canada, and based on its consolidated financial statements, meets at least two of the following conditions for a least one of its two most recent financial years:
  • has at least $20 million in assets;
  • has generated at least $40 million in revenue, and
  • employs an average of least 250 employees; or
• is prescribed by regulations
• Entities that meet the above noted thresholds are required to submit a report pursuant to the Act and must complete the steps of the reporting process ahead of the May 31^st For guidance on preparing a report, Public Safety Canada has provided a process overview which can be found here. Such process for reporting is outlined below:

Annual Reporting Obligations

The primary purpose of the annual report (to be submitted on or before May 31^st of each year), is to detail the steps taken by the entity, during the previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or produced elsewhere and subsequently imported into Canada.

The report must also include the following information in respect of each entity subject to the report:

• its structure, activities and supply chains;
• its policies and due diligence processes in relation to forced labour and child labour;
• 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;
• any measures taken to remediate any forced labour or child labour;
• 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;
• the training provided to employees on forced labour and child labour; and
• how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

Depending on its corporate structure, an entity may choose to submit either a single report, or a joint report covering its own actions and those of any entities that it controls (i.e., its subsidiaries). In either case, the report, which must be submitted by PDF, should be no longer than 10 pages in length, but may be as long as 20 pages if it is provided in both English and French. The report must include a statement evidencing its approval by its governing body (in the case of a single report), or in the case of a joint report, either the governing body of each entity, or by the governing body of the entity, if any, that controls each entity included in the report.

In the case of a joint report, wherever possible, the report should also specify which information applies to which of the entities covered by the report.  A joint report should not be submitted in cases where entities have risk profiles or policies or have taken actions that diverge significantly and in a way that would make it difficult to prepare a report accurately describing all entities.

All entities are required to publish their report in a prominent place on their website. The report must be visible and readily accessible to the public.

The Act also requires entities incorporated under the Canada Business Corporations Act or any other Act of Parliament to provide the report or revised report to each shareholder, along with its annual financial statements.

Once the report is complete and has received approval from the appropriate governing body, an entity must complete the online questionnaire. The full questionnaire, which can be found here, contains both mandatory and optional questions. Generally, the questions in the questionnaire may be used to guide the information included in the report. It is important to note that the information submitted in the two formats must be consistent.

Other Important Considerations

• Entities operating internationally may be required to report similar information in other jurisdictions. If the information submitted in a report produced for other jurisdictions is also relevant to the Canadian Act and its reporting requirements, entities may submit the same information as a part of their report. For the purposes of transparency, entities should indicate in their report whether they also report under legislation in other jurisdictions.
• An entity may provide a revised version of the report at any time within one year of the applicable reporting deadline. Submitting a revised report allows entities to make the necessary changes to their report should it be found to not meet the minimum requirements of the Act. It also allows entities to supplement or update the information provided as it becomes available. A second questionnaire must also be submitted with the revised report and the report must be reapproved by the entity’s governing body.
• Entities are expected to provide honest responses that describe the concrete actions that they have taken to address risks of forced labour and child labour, rather than purely aspirational statements. If entities have an action plan in place that includes goals and steps for the future, they are encouraged to mention it in their report, but the report itself is not intended to serve as a plan or mission statement.
• The Act does not require entities to disclose commercially sensitive information that would expose them to legal risk or compromise the privacy of any persons. Entities are also not required to report on specific cases or allegations of forced labour or child labour. The description of the forced labour and child labour risks identified, and the description of any remediation measures taken need not reference specific instances, persons or groups.

If you would like to discuss the new reporting obligations established under the Act or how we can help you to identify strategies to manage risks within your business operations, please contact a member of our team.

*Notwithstanding that the Act is silent on whether an entity must both be listed on a stock exchange in Canada and have a place of business in Canada, does business in Canada or have assets in Canada, we note that the guidance document provided by the Department of Public Safety Canada provides that an entity is either one or the other, provided the entity also meets the financial and employment thresholds.

Contributions to this article were also provided by Gabriel Laidlaw-Bale, Cox & Palmer Articling Student.