Attorney General proposes to eliminate 'bare minimum' modern slavery reporting

In response to a Labor Government review of Australia’s Modern Slavery Act, organisations could see increased obligations under proposed amendments.

Background on the Modern Slavery Act Review (2023)

On 1 January 2019, a push to eradicate modern slavery saw the introduction of laws requiring organisations operating within Australia with a consolidated annual revenue of over $100 million to report modern slavery risks in their domestic and global operations and supply chains. Since the commencement of the Modern Slavery Act 2018 (Cth) (Anti-Slavery Law), a review of modern slavery statements indicates many reporting entities have adopted a minimum approach to compliance, rendering associated modern slavery statements incompatible with the current legislation.

In redressing the issue, the Labor Government has developed the Tackling Modern Slavery package, which includes the establishment of an Anti-Slavery Commissioner and the allocation of funds to victim survivors.

The government also released a report on 25 May 2023 making 30 recommendations to strengthen the effectiveness of the Anti-Slavery Law. Significant recommendations include:

• a reduced reporting threshold, from $100 million to $50 million;
• new modern slavery management and reporting requirements, such as mandated due diligence systems; and
• financial penalties for non-compliance, such as failing to report without a reasonable excuse.

These compelling indicators are likely to see changes to the reporting regime that will capture more businesses, sharpen reporting requirements, strengthen enforcement mechanisms, and introduce financial penalties. While not yet established, it would be reasonable to expect that the new Anti-Slavery Commissioner will be empowered to take an active role in enforcement and compliance of the new regime.

Steps for organisations

In assessing the impact of the proposed changes, organisations should consider the following.

• Assessing applicability: While your organisation may not be considered a reporting entity under the existing revenue threshold of $100 million, that may change under the proposed lower threshold of $50 million. If the changes are enacted, it is critical to understand your obligations and take early steps to ensure compliance.
• Reporting entities: If your organisation is already a reporting entity ensure your statements are compliant with the mandatory requirements under the current law, submitted on time, and ideally prepared in accordance with government best practice guidance. Also consider bolstering your modern slavery risk management system and whether your current due diligence and supplier onboarding process is sufficient.

Recap: modern slavery in Australia

You might think slavery has been relegated to history, however, there are forms of slavery persist today. Slavery involves exploitative practices including:

• human trafficking
• debt bondage
• child forced labour
• deceptive recruiting for labour or services and other slavery like practices

In 2021, it was estimated that there were 41,000 people living in modern slavery in Australia.

Requirements under the Anti-Slavery Law

The introduction of the Anti-Slavery Law was designed to eradicate the presence of modern slavery within business operations and supply chains. The Anti-Slavery Law requires reporting entities to produce a modern slavery statement to the Minister for Home Affairs every financial year. These statements, regardless of if they are compliant or not, are then published onto the public registry. Under current requirements, reporting obligations only apply to entities with annual revenues of at least $100 million, which could change under proposed amendments to the regime.

Non-compliance under the Anti-Slavery Law does not contain any financial penalties but instead gives the Minister power to request a modern slavery statement, or alternatively, to publicly identify entities who do not comply with reporting obligations. To date, the Minister has not "named and shamed" any company for non-compliance. However, interested third-party stakeholders, such as the Australian Council of Superannuation Investors, have publicly scrutinised companies for the inadequacy of their submissions to promote accountability and better compliance under the Anti-Slavery Law.

Why the change?

Criticism of the current Federal law

The current threshold of $100 million has been widely criticised as it is double the $50 million threshold contained in the Anti-Slavery Law's predecessor, the Modern Slavery Act 2018 (NSW) (NSW Law) and does not include the civil penalty provisions in the NSW Law, which contains penalties of up to 10,000 penalty units ($1.1 million) for failing to prepare, or to correctly prepare, a modern slavery statement, to enforce strict and adequate compliance.

The NSW Law also provides for an independent Anti-Slavery Commissioner, charged with the role of advocating and promoting action to combat modern slavery. To contrast, the Anti-Slavery Law relies on the deterrence of reputational damage resulting from public scrutinisation to ensure compliance.

Labor's commitment to tackle modern slavery

To fulfil the Labor Government's pledge to combat modern slavery, the Federal Budget 2023-24 has allocated $8 million towards the establishment of an Anti-Slavery Commissioner. This role aims to enforce compliance with the Anti-Slavery Law, monitor supply chains, and protect vulnerable workers from exploitation within Australia and abroad. The funding will be distributed over a four-year period, with $2 million allocated per year.

The government has also announced a funding boost of $23.4 million for the Support of Trafficked People Program. This program will provide essential resources and support to victim survivors and reflects the government's commitment to ending modern slavery.

Reporting regime not effective in combating modern slavery

In April 2023, the Australian Council of Superannuation Investors (ACSI) published "Compliance without ambition: Taking stock of ASX200 reporting under Australia's Modern Slavery Act", to assess the quality of ASX200 companies' statements. "Compliance without ambition" reflects the general theme of the ACSI report, being that few entities are developing the robust responses needed to address the reality of modern slavery. According to research:

• 77% of reporting entities failed to address all mandatory reporting criteria in their statements
• 52% failed to identify obvious modern-day slavery risks in the first reporting cycle
• 8% of ASX 200 company statements reported identifying a modern slavery incident

The ACSI report found that reporting entities have "incrementally improved their disclosure of modern slavery risks" but that there were clear signs of stagnation. ACSI CEO, Louise Davidson, stated that an 8% identification rate does not reflect the current landscape and that this "raises concerns that companies are failing to find instances of slavery in their supply chains".

Recommendations to government to beef up reporting regime

Part of the Anti-Slavery Law required the Australian Government to conduct a statutory review of the Law's operation and compliance.

On 25 May 2023, Professor John McMillan AO, with the support of the Attorney-General's Department, published a report detailing 30 recommendations to strengthen the operation of the Anti-Slavery Law.

The recommendations seek to target three key areas of concern:

1. the variable standard of reporting between entities
2. the inability to enforce reporting obligations
3. the overwhelming number of incompatible statements submitted to the registry

Recommendations include:

• lowering the reporting threshold from $100 million to $50 million
• introducing penalties for non-compliance with statutory reporting requirements
• additional mandatory reporting requirements, including to report on any specific modern slavery incidents arising in the financial year, to have a due diligence system in place, whether a grievance and complaint mechanism is available to employees and others, and any consultation that has been undertaken in the financial year on modern slavery risk management
• strengthening the administration of the Act through proposed legislative amendments and expanded administrative guidance
• proposed functions for the federal Anti-Slavery Commissioner, such as issuing guidelines on special issues relating to reporting

The government will now consider the review and consult with stakeholders to develop its response to such recommendations.

Indications from the Labor Government and the recent report on the Anti-Slavery Law are that it is only a matter of time before the modern slavery regime is beefed up.

For tailored advice regarding your organisation's modern slavery reporting obligations contact a member of the Lander & Rogers Workplace Relations and Safety legal team.