Canada Introduces Legislation to Combat Modern Slavery in Supply Chains

Canada is considering implementing new laws regarding supply-chain due diligence and other obligations relating to forced labour and child labour. In late 2021, Canadian Senator Julie Miville-Dechêne introduced Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff. It has since passed the Senate, and moved to the House of Commons where it is likely to pass and receive Royal Assent, becoming law. The act, were it to pass, would come into effect on January 1 of the year after it receives Royal Assent, meaning that it would likely take effect on January 1, 2024, if it passes sometime in 2023. This article discusses the act as currently constituted. The bill’s contents are subject to change as it moves through the legislative process.

The aims of this legislation are to introduce into Canada a regime whereby businesses must “report on the measures taken to prevent and reduce the risk that forced labour or child labour is used by them or in their supply chains,” as well as enact an inspection regime. This legislation is in response to the United Nations’ Guiding Principles on Business and Human Rights, where member countries commit to developing and implementing National Action Plans (NAPs). Though novel for Canada, other nations and jurisdictions have introduced similar laws, including Australia (with the Australian state of New South Wales also having its own legislation), France, Germany, the Netherlands, the United Kingdom, and California.

Definitions and Application

For the purposes of the act, an “entity” is “a corporation, trust, partnership or other unincorporated organization that (a) is listed on a stock exchange in Canada; (b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following conditions for at least one of its two most recent financial years:

(i) it has at least $20 million in assets,

(ii) it has generated at least $40 million in revenue, and

(iii) it employs an average of at least 250 employees.”

The act would apply to any entity:

(a) “producing, selling or distributing goods in Canada or elsewhere;

(b) importing into Canada goods produced outside Canada; or

(c) controlling an entity engaged in any activity described in paragraph (a) or (b).”

“Control” would be determined based on whether one entity is controlled by another in any manner, whether directly or indirectly. Additionally, “[a]n entity that controls another entity is deemed to control any entity that is controlled or deemed to be controlled by the other entity.”

Requirements for Compliance

Section 11(1) describes that entities subject to the act would be required to create an annual report by May 31 of each year outlining the steps taken “to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.” Either an individual entity could produce the report, or the report could be part of a joint report if there is more than one entity.

Section 11(3) of the bill details the proposed elements of the report, and includes an entity’s:

• “structure, activities and supply chains”;
• “policies and … due diligence processes in relation to forced labour and child labour”;
• “parts of … business and supply chains 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”;
• “any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains”;
• “training provided to employees on forced labour and child labour”; and
• method of assessment of its effectiveness “in ensuring that forced labour and child labour are not being used in [the entity’s] activities and supply chains.”

The report would be required to receive formal approval by the entity’s (or each entity’s, or controlling entity in the case of a joint report) governing body. An entity would be able to submit a revised report, which would have to be similarly approved. Under the bill, an entity would be required to make the report readily accessible to the public by being published in a prominent place on the entity’s website.

Bill S-211 also would amend Canadian customs tariffs to strengthen prohibitions on the importation of goods “that are mined, manufactured, or produced wholly or in part by forced labour or child labour.”

Enforcement and Penalties

The minister in charge of administering the act (currently, this would be the minister of public safety and emergency preparedness) would be empowered to designate a person (or class of persons) with its enforcement. The designee would be granted extremely broad powers to enter premises and collect information. With the information garnered, the minister would be able to order an entity to take measures seen as necessary to rectify perceived inadequacies in the report, or in making the report publicly available. The designee would require a warrant to enter a private dwelling.

The bill would impose penalties for entities found to be out of compliance. The grounds for penalties would include failing to meet the reporting requirements, not making the report publicly available, not providing the requested assistance to a designated person, or knowingly providing a false or misleading statement in the report. The penalty for breaching these provisions would include an offense punishable on summary conviction, and a fine up to $250,000. A “director, officer or agent or mandatory of the person or entity who directed, authorized, assented to, acquiesced in or participated in its commission” of an offense would also be liable. Proof of commission of an offense by an employee, agent, or mandatary of the entity would be deemed sufficient proof to convict the entity itself—unless the entity were to establish that it exercised due diligence in preventing the offense.

Analysis and Conclusion

This bill represents a new form of mandatory corporate social responsibility as part of a global effort to eliminate the scourge of modern slavery and child labor in global supply chains. Entities that would be covered under the bill may want to thoroughly document suppliers and subcontractors, and consider designating a specific person or persons to formulate the report and monitor compliance.

Interestingly, though the bill would require truthfulness and diligence in creating the required report(s), it does not include a proposed requirement to avoid (or consequences for) having modern slavery or child labor in a supply chain. The bill seems to rely on the moral repulsiveness of modern slavery and/or child labor being found to be present, described in a report, made public, with the ensuing pressure or boycotts from consumers, as inherently corrective. Perhaps instructively, both Australia and the United Kingdom have modern slavery statement registries. These can be seen as part of national “name and shame” campaigns. It could be anticipated that something similar in nature would emerge if S-211 becomes law, and reports eventually become available, with the aim to better inform consumers and investors and deter having modern slavery or child labor in a supply chain.

The Montréal and Toronto offices of Ogletree Deakins will continue to monitor and report on developments with respect to Bill S-211 and will post updates on the firm’s Cross-Border blog as additional information becomes available. Important information for employers is also available via the firm’s webinar and podcast programs.

Hugh A. Christie is the managing partner of the Toronto office of Ogletree Deakins.

Michael Comartin is a partner in the Toronto office of Ogletree Deakins.

John T. Wilkinson is a 2022 graduate of Queen’s University, Faculty of Law, and he is an articling student in the Toronto office of Ogletree Deakins.