Are we caught by it?
The Act requires organisations with a turnover of more than £36 million to publish a statement on their website setting out the steps they have taken during the year to ensure that slavery and trafficking is not taking place within their supply chains or across the organisation. In calculating whether turnover meets the £36 million threshold, the turnover of all companies within a group structure must be taken into account.
Many housing providers will meet the definition of ‘commercial organisations’ set out in the Act (by virtue of supplying services) and so must take action.
What should we have done so far?
Although the Act came into force in October 2015, organisations caught by it 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 affected organisations whose financial year ends on 31 March should by now have published the statement on their website.
There are no penalties for failure to publish the statement but civil action can be taken to enforce compliance. So if found to be in breach, non-compliant companies could find themselves liable for the legal costs involved in taking civil action. The threat of negative publicity associated with such a sensitive topic is also a key factor for many organisations.
How can we cover this in our contracts?
As a minimum, if you are caught by the Act then we suggest your contracts should include the following types of provisions to ensure your suppliers and contractors comply also:
- An obligation to comply with the Act 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 Act.
Contracts may also include a right to terminate in the event of breach of any of these terms, and will give rise to a breach of contract claim for damages. Any of your suppliers and contractors should also be obliged to flow the same provisions down within their own agreements with sub-contractors to enable liability to be ‘passed on.’ This should provide your organisation with some assurance as to what happens in the event that slavery or trafficking is discovered further down the chain.
The effect of the Act is relevant to all levels of supply chains; not just those suppliers and contractors with large turnovers. The interpretation of ‘supply chain’ is also incredibly wide and includes agency workers and any outsourced services.
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 Act. 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 Act;
- Obligations on public bodies to publish an anti-slavery statement; and
- A list of all organisations required to publish an anti-slavery statement will be made available publically (making it easier to ‘name and shame’ non-compliant organisations).
So, what now?
It’s clear that strengthening organisations’ attitudes to preventing slavery and trafficking is a real Government commitment. Further obligations are on their way. In preparing for them, it is crucial to take action, including the following steps:
- You should ensure your organisation has already complied with the deadline for posting a statement within 6 months of the end of the financial year;
- We strongly advise that contractual arrangements across your supply chain are reviewed to ensure they build in adequate protection for you;
- Look at ways to ‘future proof’ against the anticipated additional changes – we are working with a number of clients in preparing and developing best practice.
The aims of the Act are clear and noble. They will hopefully have the added benefit of improving how the UK does business. Organisations caught by the Act can hopefully see the obligations as a useful opportunity to revise and improve procedures and tighten up supply chain visibility.