Author: Andrew Pollock
After a journey of more than four years, disrupted by COVID and two national elections, Canada has enacted legislation to combat modern slavery in supply chains.
Bill S-211, an Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (the Act), passed third reading on May 3, 2023, and upon receiving royal assent will be in force on January 1, 2024. The first reports under the Act are due by no later than May 31, 2024.
The purpose of the Act is to implement Canada’s international commitment to combat forced labour and child labour by imposing reporting obligations on (i) government institutions producing, purchasing or distributing goods in Canada or elsewhere; and (ii) certain business entities producing goods in Canada or elsewhere or importing goods produced outside Canada.
Entities and government institutions
The terms “entity” and “government institution” are both defined in the Act.
An “entity” is a corporation, trust, partnership or other unincorporated organization that:
is listed on stock exchange in Canada; or
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 at least one of its two most recent financial years:
has at least $20 million in assets;
has generated at least $40 million in revenue; or
employs an average of at least 250 employees.
The term “government institution” (which has the same meaning as in the federal Access to Information Act) means (i) any department or ministry of state of the Government of Canada; (ii) any body or office listed in Schedule 1 to the Access to Information Act; and (iii) Crown corporations and their wholly owned subsidiaries.
Content of reports and delivery obligations
The Act requires that on or before May 31 of each year, government institutions and entities report to the Minister of Public Safety and Emergency Preparedness on the steps taken during the previous financial year to prevent and reduce the risk that forced labour or child labour is used (i) in the case of government institutions, at any step of the production of goods produced, purchased or distributed by the government institution; and (ii) in the case of entities, at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.
The report must also include information about the government institution’s or entity’s:
structure, activities and supply chains;
policies and due diligence processes in relation to forced and child labour;
activities and supply chains that carry a risk of forced or child labour being used and the steps it has taken to assess and manage that risk;
measures taken to remediate forced or child labour;
measures taken to remediate the loss of income incurred by the most vulnerable families that results from any measure taken to eliminate the use of forced or child labour from its activities and supply chains;
training provided to employees on forced and child labour; and
process for assessing its effectiveness in ensuring that forced and child labour are not being used in its activities and supply chains.
The minister must maintain an electronic registry of all submitted reports, and the registry must be made available to the public on the Department of Public Safety and Emergency Preparedness website. The minister also has the discretion to impose specifications on the form and manner in which reports are to be provided.
Corporate governance and public disclosure
For entities, the report must be approved by its governing body. In the case of a corporation, we would expect this to be the board of directors in most instances. Both entities and government institutions must make their reports available to the public, including by publishing them in a prominent place on their websites.
A corporation incorporated under the Canada Business Corporations Act is also required to deliver its report to each shareholder, along with its annual financial statements.
The Act gives significant investigative powers to persons designated by the minister and the minister has broad power to require an entity to take any measures that the minister considers necessary to ensure compliance.
Every person or entity that fails to comply with the Act (including by failing to prepare a report or make a report publicly available, by failing to assist in an investigation, by obstructing an investigation or by failing to comply with a corrective order), is guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000. Every person or entity that knowingly makes any false or misleading information or knowingly provides false or misleading information to the minister or one of the minister’s designates is also guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000.
In addition, if a person or entity commits an offence under the Act, any director, officer or agent or mandatory of the person or entity who directed, authorized, assented to, acquiesced in or participated in its commission is also guilty of the offence and liable on conviction to the punishment provided for the offence, whether or not the person or entity has been prosecuted or convicted.
Customs Tariff amendment
The Act also amends the Customs Tariff by including child labour in the prohibition against importing goods into Canada that are mined, manufactured or produced wholly or in part by forced labour, and by importing the definitions of the terms “forced labour” and “child labour” from the Act into the Customs Tariff prohibition.
Although entities with material supply chain risk may already be engaged in diligence and reporting exercises, the Act is likely to capture many entities that have not previously considered potential modern slavery issues. With reports under the Act due in just over one year, such entities need to turn their minds to compliance.