The UK Modern Slavery Act 2015: Guidance, Compliance Statements, and Practical Steps

The UK's Modern Slavery Act 2015 (the Act) addresses issues of slavery, servitude, forced or compulsory labour, and human trafficking. It consolidates and clarifies existing offences of slavery and human trafficking and provides for two new civil preventative orders which allow for courts to intervene before a crime has occurred. The Act establishes an Anti-slavery Commissioner and provides a number of measures focused on supporting and protecting victims.

The Act appears to have drawn inspiration from California's Transparency in Supply Chains Act 2010, although it is considerably broader in its application, affecting all "organisations" carrying on business in the UK, whereas the California legislation focused on retail sellers and manufacturers.

Section 54 of the Act introduces a new area of compliance for business: organisations must provide annual disclosure of the measures they are taking to tackle slavery and human trafficking. 

This part of the Act was brought into force on 29 October 2015 by the Modern Slavery Act 2015 (Commencement No. 3 and Transitional Provision) Regulations 2015. 

The UK Government also published statutory guidance, giving information and case studies on how to comply with the Act's requirements. The key points of this are summarised below:

Who is required to comply?

Organisations must prepare a slavery and human trafficking statement (Statement) for each financial year of the organisation, if they:

• carry on all or part of a business in the UK;
• supply goods or services; and
• meet the minimum turnover threshold.

The Modern Slavery Act 2015 (Transparency in Supply Chains) Regulations 2015has set the minimum turnover threshold at £36 million. There is no need to publish a Statement if turnover does not meet this threshold, but the statutory guidance strongly recommends that organisations that produce a Statement in one financial year should continue to produce a Statement in future years, even if their turnover falls below the threshold. The threshold is calculated after the deduction of taxes and trade discounts on the supply of the relevant goods and services.  

The reporting obligation has broad international reach. It applies to foreign businesses, not just UK businesses, provided they do business in the UK. The guidance also makes clear that it does not matter if a business is charitable, educational, or public; if the organisation is engaged in commercial activity, it is carrying on business irrespective of its purpose.

In the case of group companies, care needs to be taken to determine which entities are subject to the reporting obligation. Each parent and subsidiary organisation that meets the requirements must produce a Statement, although several entities may adopt the same Statement. However, a parent company will not automatically be covered by the rules simply because it has a UK subsidiary. A common sense approach will be applied to determining if the relevant organisation is doing business in the UK.   

Drafting the Statement

The Statement must state the steps that the organisation has taken during that financial year to ensure that slavery and human trafficking is not taking place in any part of its own organisation and in any of its supply chains. If an organisation has taken no steps to do this, the Statement should say so.

The Act and statutory guidance suggest six areas that organisations may wish to cover in their Statement:

• organisation's structure, business, and supply chains;
• policies in relation to slavery and human trafficking;
• due diligence processes in relation to slavery and human trafficking in business and supply chains;
• parts of the business and supply chains where there may be a risk of slavery and human trafficking, and the steps taken to assess and manage that risk;
• some measure of the organisation's effectiveness in ensuring that slavery and human trafficking is not taking place in its business of supply chains, by reference to some appropriate performance indicators;
• training about slavery and human trafficking made available to employees.

Organisations can choose how to present the information contained in the Statement and how much detail they provide. Statements will be available to the public and, consistent with the aim of demonstrating transparency, they should be as straightforward and succinct as possible.

Publishing the Statement

Before the Statement can be published, it must be approved by an appropriate senior person within the organisation. Appropriate approval will depend on the structure of the organisation:

• Body corporate: approval should be by the board of directors and the Statement should be signed by a director.
• Limited liability partnership: approval should be by its members and the Statement signed by a designated member.
• Limited partnership: the Statement should be signed by a general partner.
• Any other partnership: the Statement should be signed by a partner.

The Statement must be published on the organisation's website, and there must be a link in a prominent place on its homepage. If the organisation does not have a website, it must provide a copy of the Statement to anyone who requests one in writing, within 30 days of receipt of the request.

Timing

Statements should be published as soon as reasonably practicable after the close of the financial year. In practice, the statutory guidance suggests that this should be within six months of the financial year-end. 

Transitional provisions

The implementing regulations provide that Section 54 of the Act only applies to organisations whose financial year-end falls on or after 31 March 2016. Organisations whose current financial year ends before this date do not have to publish a Statement for this financial year. Organisations that are required to comply immediately may include wording in the Statement explaining that it only covers part of the year.

Enforcement

The Act does not contain any enforcement provisions. However, if an organisation fails to produce a Statement for a particular financial year, the Secretary of State has the power to seek an injunction or an order of specific performance, requiring the organisation to comply. An organisation that fails to obey a court order may receive an unlimited fine.

In practice, the commercial implications of non-compliance may be much greater. Increasingly, consumers are looking to engage ethically progressive organisations and the Act is deliberately intended to make suppliers accountable to their consumers. An organisation may suffer reputational damage if it fails to publish a Statement on its website, or if it chooses to publish a Statement stating that it has taken no steps to identify and combat slavery and trafficking within its supply chains. In the future such statements may become a pre-requisite for tenders for some types of work.

Practical steps

• Be clear on whether your organisation is required to publish a Statement. In the case of group companies, check which entities are subject to the reporting requirements. 
• Understand when your Statement must be published having regard to the organisation's financial year-end.
• Consider your organisational structure and identify risk areas (e.g., geographical areas or product sectors where the company does business, or types of activities). Identify which suppliers will be subject to the reporting requirements.
• Prepare and review as necessary a policy setting out how the company will comply with the Act, or revise existing policies.
• Give an appropriately senior person the responsibility for the signature and publication of the Statement. Appoint a compliance officer with responsibility to monitor the policy and to provide advice and support.
• Bearing in mind the potential for liability in some jurisdictions, all statements should be subject to careful legal review and avoid overstating what a company has done.
• Consider what due diligence the organisation will need to carry out to ensure compliance with the policy.
• Integrate with existing compliance policies and functions to ensure coherence and avoid overlap. Ensure that effective whistleblowing mechanisms are in place.
• Implement new anti-slavery and human trafficking provisions into template agreements, standard terms, tender requirements, and supplier Codes of Conduct.
• Educate and train staff about slavery and human trafficking.