Canada's recent legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the "Act") requires any affected business in Canada to report, by May 31, 2024, the specific details and steps taken in its previous financial year to help prevent and reduce forced labour and child labour.
Enacted by the Canadian federal government on January 1, 2024, the Act was created as a step towards eradicating exploitative labour practices from Canadian supply chains. The Act sets out comprehensive mandatory reporting obligations aimed at Canadian businesses, compelling them to actively combat the scourge of forced labour and child labour.
Who is Affected?
The Act casts a wide net, encompassing entities ranging from corporations, trusts, partnerships, or other unincorporated organizations meeting specific criteria. In addition to companies listed on a Canadian stock exchange, the Act applies to organizations having a presence, conducting business, or possessing assets in Canada, provided that they meet specified thresholds. In particular, they must meet at least two of the following criteria for at least one of their two most recent financial years in order to be considered an entity for reporting purposes:
- $20 million or more in assets
- $40 million or more in revenue
- An average of 250 or more employees
Additionally, the Act extends to government entities engaged in the production, distribution, or importation of goods in Canada, as well as those controlling such entities.
Reporting Requirements
Entities subject to the Act must furnish annual reports to the Minister of Public Safety on or before May 31st of each year, outlining their endeavors to curb forced labour and child labour across their operations and supply chains. The deadline for the first such report is May 31st, 2024.
An annual report must include the following information:
- Organizational Structures: A detailed overview of the entity's structure, including subsidiaries, affiliates, and supply chain relationships.
- Policies and Due Diligence Processes: A description of the policies and processes in place to identify, prevent, and address forced labour and child labour within the organization and its supply chains.
- Risk Assessments: Identification of specific parts of the business and supply chains that present risks of forced labour or child labour, along with measures taken to assess and manage these risks.
- Remediation Measures: Details of any remedial actions taken to address instances of forced labour or child labour, including efforts to remedy the loss of income to affected families.
- Employee Training: Description of training programs provided to employees regarding forced labour and child labour issues.
- Effectiveness Assessments: Explanation of how the entity evaluates the effectiveness of its measures to ensure forced labour and child labour are not present in its business and supply chains.
Entities have the option to submit joint reports covering their own actions and those of any entities they control, such as subsidiaries or entities within the same corporate group. Joint reports must clearly identify the legal name of each entity covered. These reports should only be submitted if the information provided applies generally to all entities covered, with specific details where possible. Approval for single-entity reports must come from the entity's governing body (defined as the body or group of members of the entity with primary responsibility for the governance of the entity), while joint reports require approval from the governing body of each included entity or from the controlling entity's governing body.
After attesting the report, entities must complete an online questionnaire addressing the Act's requirements. Moreover, reports must be published prominently on the entity's website and will also be made publicly available by Public Safety Canada through a searchable online catalog on its website.
Preparation and Compliance
Entities falling within the Act's purview must proactively prepare for the filing of their annual reports. This entails establishing robust internal reporting mechanisms and conducting comprehensive assessments of their supply chains to identify and mitigate potential risks. Furthermore, proactive measures such as policy development, contractual stipulations, regular audits, and thorough due diligence on suppliers are recommended to ensure ongoing compliance and risk mitigation.
Penalties for Non-Compliance
Non-compliance with the Act carries significant penalties, with fines potentially reaching up to $250,000. Moreover, the Act imposes personal liability on directors, officers, or agents involved in any offenses, underscoring the imperative of thorough due diligence and adherence to regulatory requirements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.