Canada’s New Forced Labour Reporting Act

What you need to know

Are you aware of the recent enactment of Bill S-211, the Fighting of Forced Labour and Child Labour in Supply Chains Act (the Act) by the Canadian government?

This Act aims to address concerns regarding corporate social responsibility and ethical standards within supply chains. It is important to note that this act could potentially impact your business if it involves activities such as the production, sale or distribution of goods in Canada or abroad, the importation of goods into Canada, or the control of an entity engaged in these activities.

Given the significance of this legislation, we are reaching out to offer our expertise and support in managing its effects on your operations and supply chain. Our main goal is to assist you in taking the necessary actions to prepare for the upcoming transparency and disclosure requirements.

Outlined below are key details and information to guide you through this process:

Effective Date and Reporting Liability

The Act will officially commence on January 1, 2024, and as part of your obligations, the first report is due by May 31, 2024.

It states that failure to submit a report or providing an inaccurate report can result in criminal liability for both the business and its directors and officers. Failure to comply with the Act or making false or misleading statements may lead to summary conviction, with potential fines of up to $250,000 imposed on organizations or individuals involved.

Entities Covered by the Act

The Act covers the following entities:

1. Produces, sells or distributes goods in Canada or elsewhere
2. Imports goods into Canada
3. Directly or indirectly controls a business that is engaged in either activity described above

An entity includes corporations, partnerships, trusts, or other unincorporated organizations where the business is:

1. Listed on a stock exchange in Canada, or
2. Has a place of business in Canada, does business in Canada or has assets in Canada and that, 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, and
   • employs an average of at least 250 employees.
3. Designated to do so by regulation.

Government institutions, federal departments, and Crown corporations are also subject to the Act. Other entities may become subject to the Act through future regulations.

 

Detailed Reporting Requirements

Under the new Act, Canadian and foreign businesses subject to its provisions are required to file a report on their efforts to prevent and reduce the risk of forced labor and child labor in their supply chains. Entities subject to the Act must make each of these reports public, including on their website. Entities incorporated under the Canada Business Corporations Act or other federal legislation are required to provide the report to shareholders.

The report submitted by a business must include the following information:

1. The steps taken during the previous financial year to prevent and reduce the risk of forced labor or child labor in the production of goods, both in Canada and internationally.
2. Details about the structure, activities, and supply chains of the business.
3. Policies and due diligence processes in relation to forced labor and child labor.
4. Identification of the parts of the business and supply chains that carry a risk of forced labor or child labor, along with the steps taken to assess and manage that risk.
5. Measures taken to remediate any instances of forced labor or child labor.
6. Efforts made to remediate the loss of income to vulnerable families resulting from measures taken to eliminate the use of forced labor or child labor.
7. Information about the training provided to employees on forced labor and child labor.
8. The assessment of the business’s effectiveness in ensuring that forced labor and child labor are not being used in its operations and supply chains.

The report must be signed by members of the governing body of the business and submitted to the Minister of Public Safety and Emergency Preparedness by May 31 each year. The Act also extends the import ban under the Customs Tariff, allowing the Canada Border Services Agency (CBSA) to seize goods produced by forced labor or child labor.

 

Compliance with other Jurisdiction and Reporting Requirements

The Act compares to disclosure and transparency laws implemented in other jurisdictions, such as California, the United Kingdom, and Australia. These laws mandate that businesses prepare a Modern Slavery statement, disclosing the measures taken to assess and address modern slavery in their supply chains. Notably, California has had a similar regulation in place since around 2010, and LIDD is well versed in assisting our clients with complying to these requirements from an operations standpoint.

While the reporting requirements in the Canadian Act are similar to those in other jurisdictions, they are not identical. This means that businesses need to carefully review their current reports to ensure they meet all the specific content requirements outlined in the Canadian Act.

It is important to note that further regulations may be released in the coming months to provide additional clarity on these reporting obligations.

 

Is your company prepared for these new rules?

Compliance with the Act requires a thorough understanding and review of your supply chain, which can be a significant operational burden. It may require investing in systems, processes, and external support to address forced labor and child labor risks. Here is a quick checklist to use as a guide to take proactive steps towards compliance with the Act.

Preparation Checklist

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For more information on how the Act may impact your business and to prepare for these new reporting obligations, contact your LIDD advisor or our team directly by e-mail at [email protected]. Our team is available to provide guidance and help assess the specific implications for your organization.

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Please note that the information shared in this communication is not intended as legal advice, and we do not provide legal counsel. For precise guidance on employment law matters, we recommend consulting with a specialized legal counsel experienced in the relevant jurisdiction.