Modern slavery legislation introduced in Senate: Canadian companies to report on prevention of forced and child labour

Bill S-216: An Act to enact the Modern Slavery Act and to amend the Customs Tariff (Bill), was recently introduced in the Canadian Senate and aims to implement Canada’s international commitments to contribute to the fight against modern slavery, with a focus on forced labour and child labour. The introduction of this legislation aligns with a broader trend of ESG focus on, and international liability for, human rights abuses. While the Bill has been introduced by an independent Senator, and may not ultimately be adopted as Canadian law, it is consistent with human rights reporting requirements in a number of OECD countries.

What you need to know

• If enacted, the Bill will apply to a wide range of entities that produce or sell goods in Canada or who import goods into Canada.
• The Bill will require annual reporting on the steps taken during that year to reduce and prevent the risk that forced labour or child labour is used at any step of the production of goods.
• The maximum penalty for failing to comply with the annual reporting requirement is $250,000. Directors and officers can also be held personally liable under the Bill.
• The Bill is intended to implement into domestic law Canada’s international commitments to fight against modern slavery, including forced labour and child labour.
• The Bill, in its current form, does not introduce mandatory human rights due diligence, which has been the case in some European countries.
• This is Canada’s third attempt to introduce modern slavery legislation—prior bills tabled in 2018 and 2020 were not enacted.

Background

A 2017 report by the International Labor Organization found that 40 million people were victims of modern slavery. Of the 40 million people, 71% were women and girls and 25% were children¹. Bill 2-S16 is designed to combat both child labour and forced labour.

Child labour is defined in the Bill as labour or service provided or offered to be provided, in Canada, by persons under the age of 18 years under circumstances that are either contrary to applicable laws in Canada or, if provided or offered to be provided outside Canada, would be contrary to the laws applicable in Canada, if it had taken place in Canada, and includes the sale and trafficking of children, procuring children for illegal activities and recruiting children for armed conflict.

Forced labour is defined as labour or services provided or offered to be provided by a person under circumstances that could reasonably be expected to cause the person to believe that their safety or the safety of a person known to them would be threatened if they failed to provide or offer to provide the labour or service, and includes “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily”.

The introduction of Bill S-216 marks the third time modern slavery legislation has been introduced in Canadian Parliament. A Private Member’s Bill (Bill C-423) was previously introduced in the House of Commons by Liberal MP John McKay in December 2018, but did not make it past the first reading. An identical Bill S-211 was later introduced by Senator Miville-Dechêne, but died on the Order Paper when Parliament was prorogued in August 2020.

Reporting obligations

Bill S-216 is drafted to apply to a wide range of “entities”, defined as corporations, trusts, partnerships or unincorporated organizations that: i) produce or sells goods in Canada; ii) import goods to Canada; or iii) control an entity that does either of the foregoing; and a) are listed on a Canadian stock exchange; b) have a place of business in Canada or do business in Canada, and satisfy two of the three criteria in one of the last two years of having more than $20 million in assets, generating more than $40 million in revenue, and employing at least 250 people; or c) are prescribed by the regulations.

The Bill requires a report to the Minister of Public Safety and Emergency Preparedness (Minister), no later than 180 days after the end of each financial year, that sets out the steps the entity has taken during that year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods made in Canada or imported from elsewhere.

The report must also include information respecting:

• the entity’s structure;
• the goods that it produces in Canada or elsewhere, or that it imports into Canada;
• its policies in relation to forced labour and child labour;
• its activities that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
• any measures taken to remediate any forced labour or child labour; and
• the training provided to employees on forced labour and child labour.

Entities must also make the report available to the public, including by publishing it in a prominent place on its website.

Penalties

Every person or entity that fails to comply with the annual reporting requirements is guilty of an offence punishable on summary conviction and liable to a maximum fine of $250,000. The Minister also has the power to require the entity to take any measures considered to be necessary to ensure compliance with the reporting requirements. A maximum fine of $250,000 is also the penalty for failure to comply with an Order of the Minister, obstructing or hindering a person exercising powers under the Act, failing to assist an enforcement authority, or knowingly providing false or misleading information in connection.

Directors and officers may also face liability. Under the Bill, any officer, director or agent 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.

International context

If Bill S-216 becomes law, Canada will join peer countries and subnational jurisdictions that have already passed legislation aimed at combatting modern slavery, including the United Kingdom, Australia, France, the Netherlands and California. Bill S-216 is similar to modern slavery legislation in the United Kingdom, Australia and California, focusing on reporting requirements. Several European countries have gone further, to require human rights due diligence for certain companies, such as under the Netherlands’ Child Labour Due Diligence Act 2019, and France’s Duty of Vigilance Law 2017. Human rights due diligence legislation is also being contemplated in Germany and Switzerland, and the European Union is set to introduce legislation that would make human rights due diligence mandatory across the European Union in 2021.

Impact

The introduction of Bill S-216 reinforces the growing trend of corporate accountability for international human rights abuses and represents another source of liability for overseas operations of Canadian companies if it becomes law. The Bill follows a series of recent developments in Canada in this area, including:

• the Supreme Court of Canada decision, Nevsun Resources Ltd. v. Araya, in which the Court held that businesses can be held liable in Canada for acts that take place as part of their foreign operations²;
• the appointment of a Canadian Ombudsperson for Responsible Enterprise, who receives and reviews claims of alleged human rights abuses arising from the operations of Canadian companies abroad in the mining, oil and gas, and garment sectors; and
• Global Affairs Canada renewing and expanding its Responsible Business Conduct strategy for Canadian companies abroad.

This underscores the importance of companies carrying out effective ESG diligence. The fast-paced developments in this area also indicate that the methods of carrying out ESG diligence are not standardized and will continue to evolve and improve.

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¹ International Labor Organization, Global Estimates of Modern Slavery, online: https://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_575479.pdf

² Nevsun Resources Ltd. v. Araya, 2020 SCC 5.