Canada’s latest legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”), mandates that affected businesses in Canada must annually report, starting on 31 May 2024, the specific actions and measures taken during the previous financial year to prevent and reduce forced labour and child labour.
Enacted by the Canadian federal government on 1 January 2024, the Act aims to eradicate exploitative labour practices from Canadian supply chains. It establishes comprehensive mandatory reporting obligations for Canadian businesses, compelling them to actively combat forced labour and child labour.
Who is Affected?
The Act applies to a broad range of entities, including corporations, trusts, partnerships, and other unincorporated organizations that meet specific criteria. It encompasses companies listed on the Canadian stock exchange and organizations with a presence in Canada that conduct business or hold assets, provided they meet certain thresholds. Specifically, entities must meet at least two of the following criteria in at least one of their two most recent financial years to be subject to reporting:
CAD 20 million or more in assets
CAD 40 million or more in revenue
An average of 250 or more employees
The Act also extends to government entities involved 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 submit annual reports to the Minister of Public Safety by 31 May each year, detailing their efforts to eliminate forced labour and child labour in their operations and supply chains. The first report is due by 31 May 2024.
An annual report must include:
Organisational structures: A detailed overview of the entity’s structure, including subsidiaries, affiliates, and supply chain relationships.
Policies and due diligence processes: Descriptions of policies and processes 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 at risk for forced labour or child labour, along with measures to assess and manage these risks.
Remediation measures: Details of actions taken to address instances of forced labour or child labour, including efforts to mitigate income loss for affected families.
Employee training: Descriptions 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 may submit joint reports covering their own actions and those of any controlled entities, such as subsidiaries or entities within the same corporate group. Joint reports must clearly identify the legal name of each entity covered and 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 by the governing body of each included entity or by 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 catalogue 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 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.
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 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 CAD 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.
