Is Your Enterprise Prepared to Report on Forced & Child Labour? Deadline is May 31!

Background

On January 1, 2024, the Government of Canada enacted the Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211), also known as “The Modern Slavery Act”. The aim of the Act is to require certain entities to report on the measures they take to combat slavery and other forms of forced labour in its supply chains. The law also prohibits the importation of goods produced using forced labour or by children.

Specifically, the Act:

• establishes reporting obligations on certain government institutions and private-sector entities; and
• creates an inspection regime applicable to certain entities

Designated institutions and entities will be required to file their first annual report (described below) by May 31, 2024. However, certain entities may be required to submit their reports earlier. Such as, if the entity is required to deliver its annual financial statements to shareholders before May 31, 2024. Failure to comply with the reporting obligations under the Act can result in fines, reputational damage, and liability for directors and officers.

Is your Enterprise a “Reporting Entity” under the Act?

The Act creates a two-part test to determine if an organization is required to submit a report. First, the organization must be an “Entity”. The Act defines an “Entity” as an organization that’s either listed on a stock exchange in Canada or has a place of business in Canada, assets in Canada, or does business in Canada and meets at least two of the following criteria in one of the past two fiscal years:

• $20 million or more in assets
• $40 million or more in revenue; or
• 250 employees or more (on average).

Second, the organization must also be a “Reporting Entity”. A corporation or a trust, partnership or other unincorporated organization that meets the definition of “Entity”, is required to submit a report if they are also:

• Producing, selling or distributing goods in Canada or elsewhere;
• Importing into Canada goods produced outside Canada; or
• Controlling an entity engaged in any activity described in paragraph (a) or (b).

If you qualify under the first and second step, then you are required to submit a report by May 31.

The updated Guidelines released by the Government of Canada on March 7, 2024, provide welcome clarification respecting whether and how to assess parents and subsidiaries for the purposes of determining reporting obligations:

• Subsidiaries are to determine whether they are an “Entity” under this test entirely independently of their parent based on their own financial statements. If they don’t meet the Entity test, they have no reporting obligation.

• Parents are to determine whether they are an “Entity” based on their consolidated financial statements, including their subsidiaries.

Fulfilling “Reporting Entity” Obligations Under the Act

Reporting Entities need to:

• Review internally and gather applicable information requirements to complete the report;
• Have the report approved by the Reporting Entity’s governing body and attested;
• Complete the online questionnaire;
• Upload the report to the Public Safety Canada website; and
• Post the report on the Reporting Entity’s website.

Questionnaire and Report

1. Completing the Questionnaire.

You can review the Questionnaire’s questions here. It is relatively short and once completed, can be used as a template or guide to develop your report. It consists of both mandatory and optional questions. Some mandatory questions merely collect information to identify the Reporting Entity; others collect information necessary to gauge its compliance with the Act. You can, however, expand on your answers to mandatory closed-ended questions in your answers to the optional questions.

2. Completing the Report

Context. Reports must include information addressing each of the requirements in Sections 11(1) and 11(3) of the Act, including:

• the steps taken to prevent and reduce the risk of forced or child labour in the entity’s production of goods or in the productions of goods imported into Canada by the entity;
• the entity’s structure, activities and supply chains;
• the entity’s policies and due diligence processes relating to forced and child labour;
• the parts of the entity’s business and supply chains that carry a risk of forced or child labour;
• measures taken to remediate forced or child labour and loss of income to the most vulnerable families resulting from measures taken to eliminate forced or child labour;
• training provided to employees; and
• how the entity assesses its effectiveness in ensuring that forced and child labour are not used in its businesses and supply chains.

Submission. You can submit your report here. Entities have the option to submit two copies of their report – one in each official language – but this is not required. However, government institutions must upload their report in both official languages. This must be done in PDF format before you submit the Questionnaire, not exceed 100MB in size, and be no longer than 10 pages in length (20 if submitting the report in both languages).

Publish. The report must be published on a “prominent place” on your website. Therefore, do not include commercially sensitive, personal or confidential information in your report. If you do not have a website, you can direct the public to Public Safety Canada’s website catalogue where it will be publicly available.

Delivery to Shareholders. The Act 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, with its annual financial statements.