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Bill S – 211 introduced in March 2023 and passed on May 11, 2023, as Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act is a new legislation that aims to address the issues of forced labour and child labour in Canadian supply chains. It marks an important milestone in Canada’s commitment to fighting modern slavery within the global supply chains. This legislation aims to increase awareness, transparency, and corporate responsibility in Canadian supply chains through improved regulations and reporting.
The law applies to government institution producing, purchasing, or distributing goods in Canada or elsewhere and private entities (which includes corporations, trusts, partnerships or other unincorporated organizations) producing, selling or distributing goods in Canada or elsewhere; or importing into Canada goods produced outside Canada; or controlling an entity engaged in any of these activities. It imposes new requirements to disclose information about the corporation’s effort to prevent and reduce the risk of forced labour and child labour in their supply chains. The law also amends the Customs Tariff to expand the prohibition on the importation of goods mined, manufactured, or produced, in whole or in part by forced labour, to also include child labour.
The legislation employs an expanded definition of “child labour” and “forced labour” that casts a wider definition on activities that qualify as child labour and forced labour. Under the Act, child labour is defined to mean labour or services provided or offered to be provided by persons under the age of 18 years and that are provided or offered to be provided in Canada under circumstances that are contrary to the laws applicable in Canada, particularly where labour is offered or provided under circumstances that are mentally, physically, socially, or morally dangerous to them; or that interferes with schooling or the opportunity to attend school. Forced labour is also defined as labour or service provided or offered to be provided by a person under circumstances that could reasonably be expected to cause the person to believe their safety, or the safety of a person known to them would be threatened if they failed to provide the labour.
Managing Compliance Obligations
The legislation imposes an annual reporting obligation on government institutions and private sector entities. An annual report must be submitted to the Minister of Public Safety (“the Minister”) by May 31 of each year with the report outlining the steps taken during the previous financial year to prevent and reduce the risk of forced labor and child labor in their operations or supply chains. The report must include corporate structure, activities, and supply chains; its policies and due diligence processes in relation to forced labour and child labour; the parts of its activities and supply chains that carry a risk of forced labour or child labour and steps taken to assess and manage that risk; and any measures taken to remediate any forced labour or child labour, among others.
The legislation provides that private sector entities can file a consolidated report and the report must be approved, by its governing body or in the case of a joint or consolidated report by the governing body of each entity included in the report or by the governing body of the entity, if any, that controls each entity included in the report. Note that the legislation requires that federally incorporated entities under the Canada Business Corporations Act or any other Act of Parliament must provide the report or revised report to each shareholder, along with its annual financial statement. Additionally, private sector entities to be affected by this legislation must either be listed on a stock exchange in Canada or have a place of business in Canada, do business in Canada or have assets in Canada and meet two of the following three criteria for at least one of its two most recent financial years:
- $20 million or more in assets
- $40 million or more in revenue, and
- 250 or more employees
The reports cover corporate structure, supply chains, policies, and risk assessment strategies. The report will be made available to the public through an electronic registry on Public Safety Canada’s website and prominently displayed on the reporting entity’s own website. A summary of the aggregated information will be presented in an annual report to Parliament by the Minister.
In reducing the risk of forced labour and child labour in their supply chains, corporations must carry out due diligence on their suppliers and subcontractors, identify the training they provide to their employees and business partners, and the remedial actions they take in case of any incidents or allegations of forced labour or child labour. Corporations are expected to comply with the act and to take proactive steps to prevent forced labor or child labor in their production processes or supply chains. Proactively undertaking risk assessment and management strategies for parts of the business susceptible to labor exploitation will be critical for business leadership as reporting obligation comes due. It is important that private sector entities appreciate the broader definitions of “child labor” and “forced labor” used in the legislation and ensure that there is a consistent and comprehensive assessment of risk to identify vulnerable areas within supply chain operations.
Penalties For Non-compliance
There are penalties for entities and their directors who violate the Act including a fine of up to $250,000 for each violation of the Act, as well as the suspension or revocation of their import privileges for goods that are mined, manufactured, or produced, in whole or in part by forced labour or child labour. The penalties can apply to the entity itself or to its directors, officers, and other individuals representing or controlling the entity. Section 20 of the Act provides that “if a person or an entity commits an offence under this Part, any director, officer or agent or mandatary of the person or entity who directed, authorized, assented to, acquiesced in or participated in its commission is a party to and guilty of the offence and liable on conviction to the punishment provided for the offence, whether or not the person or entity has been prosecuted or convicted”.
The Act also empowers the Minister to designate persons to administer and enforce the act and to conduct inspections, audits, and investigations. The designated persons may without a warrant, enter any place other than a dwelling house, where they have reasonable grounds to believe that there is any document or information relating to the enforcement of the act and may examine, copy, or seize any such document or information. For the purpose of investigating noncompliance, if the place of production or investigation is a dwelling-house, the designated person may enter it without the occupant’s consent only under the authority of a warrant issued under the Act.
Conclusion
There is no doubt that this legislation will affect giant corporations across many sectors such as agriculture where there is the heavy reliance on temporary foreign workers in Canadian agriculture, some of whom are at risk of forced labour. There will also be big impact to giant corporation in the mobile device industry as well as EV manufactures whose supplier chain are highly susceptible to child labour and forced labour issues. It would be interesting to review the compliance response of these corporations as soon as the first report is due. Also, the publication of the names of violators and the nature of the violation on the website of the Minister will be a huge source of reputational damage to non-complying entities. This will be a major issue in the view scope of major corporations as the impact of this may have far reaching consequences than the fine listed in the legislation.
In summary, the Fighting Against Forced Labour and Child Labour in Supply Chains Act represents Canada’s resolve to eradicate forced labor and child labor and a crucial step toward ensuring ethical business practices and safeguarding human rights within Canadian supply chains. It reinforces Canada’s commitment to ethical trade practices and aligns with international efforts against exploitative labor practices. Given the intentional definition of the impacted entities, it is safe to say that the legislation will impact not only Canadian entities. The legislation not only mandates reporting but also underscores the urgent need for collective action to eliminate labor exploitation. As entities prepare for the Act’s implementation, they play a critical role in shaping responsible and ethical business practices within their supply chains.
Arcstone Law Corporation can assist companies in carrying out a comprehensive review of their policies and practices to see if they are compliant with this Act and recommend effective and compliant changes. We are also available to help business initiate a compliance audit in this regard to test readiness for compliance. You can contact us by email admin@arcstonelaw.com or book a consultation on our website. All legal services are rendered through Arcstone, a law corporation.
