On 22 August 2022, the Federal Government released for public consultation the Issues Paper for the statutory review of the Modern Slavery Act 2018 (Cth) (Act) (Review).  This Issue Paper follows the Terms of Reference for the Review which was published by the Australian Border Force.

The Review commenced on 31 March 2022 and is being led by Professor John McMillan, a Professor at the Australian National University, supported by the Australian Border Force and the Attorney-General’s Department.

The Review will consider the operation of the Act and whether any additional measures are necessary or desirable to improve the operation of the Act or compliance with the Act. The Issues Paper details specific issues that will be considered during the Review, including whether:  

• the reporting periods, reporting deadlines and AU$100 million annual consolidated revenue threshold are appropriate;
• the mandatory reporting criteria which are set out in section 16 of the Act are appropriate; and
• it is desirable or necessary for an independent body, such as an Anti-Slavery Commissioner, to oversee the implementation and/or enforcement of the Act.

Public feedback on the Issues Paper is due by 22 November 2022.

Background to the Act

The Act established a national modern slavery reporting requirement which requires entities carrying on business in Australia with annual consolidated revenue of at least AU$100 million (Reporting Entities) to report on how they are addressing and preventing modern slavery risks in their operations and supply chains.

Reporting Entities comply with the Act by preparing annual modern slavery statements, which are published by the Federal Government on the Modern Slavery Statements Register for transparency. 

We have previously written on how Reporting Entities may comply with the Act (here) and the impact that Covid-19 has had on reporting requirements (here).

Issues Paper

As the Review is an end-to-end review of the Act, there are many issues discussed in the Issues Paper and we discuss only a few specific issues below.

Reporting threshold

The Federal Government has asked for public feedback regarding whether the reporting threshold of AU$100 million consolidated annual revenue is an appropriate threshold to determine which entities are required to submit an annual modern slavery statement. Many have argued that the threshold should be lowered. A figure of AU$50 million is commonly suggested but other thresholds have been suggested too.  We note the original form of the NSW Modern Slavery Act that was passed by Parliament included an AU$50 million threshold, although the private sector reporting requirements under the NSW legislation have subsequently been removed.

Arguments for the AU$100 million threshold are that the work required to prepare an annual modern slavery statement can be considerable, and it is best to focus on businesses that have the capacity to take that work on board. However, others argue that the purpose of the reporting requirement is to drive meaningful change, and therefore the obligation to prepare a modern slavery statement should apply to more entities. Modelling from the Department of Home Affairs on this issue suggests that, in rough terms, there would be a 19% increase in the number of entities required to report under the Act for each AU$10 million reduction of the reporting threshold.

The Issues Paper notes that a criterion other than annual consolidated revenue could be adopted. Options for different criterions are not limited in the Issues Paper, so public feedback could include proposals for a number of new criteria, such as Reporting Entities importing from markets that have a high risk of modern slavery.

In our experience working with different Reporting Entities across a range of different sectors, our observation is that there is not necessarily a direct correlation between the size of an entity and its exposure to modern slavery risks – although, clearly, larger Reporting Entities would, generally speaking, be better equipped to comply with the Act. 

The benefit of using a revenue threshold as the marker for when a business is a Reporting Entity is the relative simplicity in its application.  The Issues Paper does state that adopting an entirely new criterion for the reporting requirement could open a range of definitional problems, which could in turn disrupt the smooth operation of the Act.

Definition of modern slavery

The Federal Government has also asked for public feedback regarding the appropriateness of the ‘modern slavery’ definition under the Act for the purpose of the mandatory reporting criteria.

The current definition of ‘modern slavery’ references the definition of modern slavery in the Criminal Code Act 1995 (Cth), which sets a standard of criminal prosecution, as well as descriptions of human trafficking and child labour in two international conventions. As a result, the definition is relatively technical.

The Issues Paper asks whether more generic phrasing should be used in the Act, however it is noted that such an amendment could potentially raise issues regarding what exactly should be reported by Reporting Entities.

In our experience, Reporting Entities do not rely upon technical definitional arguments to delineate their responsibilities under the Act, or more generally at law.  Engaging in conduct that sits at the boundaries of what may or may not constitute “modern slavery” is inherently high risk.  Reputational damage may still occur even where an entity is sitting on the right-side of that boundary, and the consequences for erring on the wrong-side of that boundary are potentially severe. 

In this sense, a more general, less technical, approach to defining modern slavery may make little difference to how Reporting Entities approach their reporting obligations under the Act, although we note that some of the current categories of modern slavery may not seem immediately obvious if the current references to the Criminal Code provisions are dispensed with.  For example, the current range of modern slavery offences includes offences that fall outside of Division 270 of the Criminal Code which is titled “Slavery and slavery-like offences” – for example, organ trafficking.  The relevance of some of these modern slavery offences to most, or almost all, of Australian businesses is also a question that the Issues Paper seeks commentary on.

Due diligence requirements

Another key issue highlighted in the Issues Paper is whether the Act should set out mandatory due diligence steps for Reporting Entities.

The Act currently requires Reporting Entities to describe the ‘due diligence and remediation processes’ that they use to assess and address modern slavery risks. However, there is no specific due diligence process that is required under the Act. Further, the current guidance that is published by the Australian Border Force on what good practice looks like is relatively sparse. 

The Federal Government is seeking public feedback regarding whether due diligence should be defined under the Act, or whether there are other ways due diligence can be encouraged under the Act.

In our experience, Reporting Entities make decisions regarding due diligence based on the nature of their business and operations, the nature of their suppliers, the industry within which they operate, as well as their own size and resources.  It is difficult to conceive of a one-size-fits-all approach that may be mandated for modern slavery due diligence.  However, more detailed guidance from either the Australian Border Force or the Anti-Slavery Commissioner would generally be welcome, provided that there remained flexibility for Reporting Entities to determine what is most appropriate for their business.    

Civil penalties

The Issues Paper also raises the question of whether the Act should impose civil penalties or sanctions for failure to comply with the reporting requirements. The Issues Paper reveals significant engagement by business and civil society with the Act, with more than 4,000 annual modern slavery statements being published on the Modern Slavery Statements Register. However, there have been compliance issues. The Federal Government undertook an assessment of compliance with the Act which found that 41% of statements published in the first reporting cycle were assessed as likely to be non-compliant due to not adequately addressing all the mandatory reporting criteria. Of the statements published in the second reporting cycle, 28% were assessed as non-compliant.

The Federal Government has sought public feedback regarding whether penalties should be introduced for non-compliance with the Act, and if so:

• what specific conduct (or omission) should be penalised;
• what kind of penalty should apply; and
• what procedure should be followed when applying a penalty.

We note that the Act currently empowers the Minister to “name and shame” Reporting Entities that fail to comply with their reporting obligations under the Act, although the Modern Slavery Register doesn’t appear to currently list any non-compliant Reporting Entities, notwithstanding the high rates of non-compliance mentioned in the Issues Paper. 

Given that the “name and shame” powers do not appear to have yet been utilised, we question whether it is premature to ask whether the current powers are sufficient or not - unless, of course, there is a fundamental defect in the “name and shame” powers which explains why they have not yet been utilised.  We would also question whether the greater resources required to implement a penalty regime under the Act (and the consequent higher likelihood of court action) is the best way of ensuring compliance with the Act.

The role of an Anti-Slavery Commissioner

One other key issue discussed in the Issues Paper is whether an Anti-Slavery Commissioner should play a role in overseeing and enforcing the Act’s modern slavery reporting requirement. The Federal Government has already committed to establishing an independent Anti-Slavery Commissioner, with the intent that it will coordinate work across industry and government in the aim of eliminating modern slavery in Australia and global supply chains. However, whether it will oversee the implementation or enforcement of the Act is still to be determined. 

We note that NSW has an independent Anti-Slavery Commissioner, although it may be too early to gauge any lessons from the NSW experience. 

Next steps

The three-month consultation period for the Review closes on the 22 November 2022. To engage in the consultation process, members of the public can:

• complete an online survey regarding the Issues Paper; or
• draft a written submission in response to the Issues Paper.

Additionally, during the public consultation period, Professor McMillan will be conducting both in person and online consultation sessions regarding the Review.

The Review will be completed within 12 months of the commencement of the Act, which will be in March 2023.

If you would like further information about the Review or any assistance in the preparation of a submission, please contact our team.