Obligations on UK organisations with a turnover of over £36 million
The Modern Slavery Act 2015 (“MSA” or the “Act”) requires organisations with a turnover of more than £36 million to publish a statement on their website which sets out the steps they have taken during the year to ensure that slavery and trafficking is not taking place within their supply chains.
The MSA applies to any organisation which supplies goods or services operating all or part of its business within the UK and takes in account the turnover of all companies within a group structure.
Although the MSA came into force in October 2015, organisations caught by the Act were only expected to publish a statement for the financial year ending on or after 31 March 2016.
According to guidance from the Home Office, statements should be published within 6 months of the end of the financial year. This means that organisations whose financial year ends on 31 March have until the end of September to publish the statement on their website.
There are no penalties for failure to publish the statement but civil action can be taken to enforce compliance, and if found to be in breach, non-compliant companies could find themselves liable for the legal costs involved.
Implications for SMEs (with a turnover less than £36 million)
Organisations with a turnover of less than £36 million may still find the consequences of the MSA affecting their business operations.
The obligation to publish a slavery and human trafficking statement will, in many cases, affect organisations at the end of the supply chain, such as supermarkets and retailers. However, in order for these organisations to show that they are attempting to remove slavery or trafficking from their supply chains, they will need to require their suppliers to comply with the Act. As such, businesses that are part of the chain, (for example, suppliers of goods to supermarkets) may therefore be required to agree provisions in their contract with such organisations such as:
- An obligation to comply with the MSA and/or the other party’s anti-slavery and trafficking policy;
- A warranty that their operations and/or supply chain is slavery-free;
- An obligation to implement due diligence procedures with any sub-contractors to ensure compliance with the MSA.
The contract may also include a right for the other party to terminate in the event of breach of any of these terms, and will, in any event, give rise to a breach of contract claim for damages. Any business that agrees to such contractual provisions will need to ensure that the same provisions are included within their own agreements with their sub-contractors to enable liability to be ‘passed on’ in the event that slavery or trafficking is discovered further down the chain.
The effect of the MSA is therefore relevant in all levels of supply chains; not just those organisations with large turnovers.
New proposed measures: the Modern Slavery (Transparency in Supply Chains) Bill 2016
A Bill is currently working its way through Parliament which will further strengthen the obligations under the MSA. If the Bill receives approval to become law in its current form, it will include:
- Obligations on businesses to publish the anti-slavery statement in their annual financial reports (as well as on their website);
- Bans from tendering public contracts for businesses that have not complied with the MSA;
- Obligations on public bodies to publish an anti-slavery statement; and
- A list of all organisations that are required to publish an anti-slavery statement which will be made available publically (making it easier to ‘name and shame’ non-compliant organisations).
There is some evidence that many organisations that are required to publish a statement on their website by the end of September have still not done so. On the basis of the attention that the Government has given to this issue and the potential for further measures to be required in the future, organisations are advised to take the obligations under the MSA seriously and not to delay publishing the statement on their websites.
For more information about the content and formalities of the statement, please read our previous article on this topic.
If you would like assistance in drafting a slavery and trafficking statement, or advice on the implications of the MSA on your business, please get in touch with a member of our team.