Modern Slavery – Why it matters and what you must do

November 11, 2015

Any business that is either incorporated in the UK or supplies goods (e.g. merchandise, sports equipment, hospitality packages) or services (e.g. event management, banking, investment or trustee services) in the UK across any sector now has an additional compliance hurdle to clear in each financial year that ends after 31 March 2016. The changes apply to any business with global group turnover over £36million after tax each year, measured regardless of the size of the organisation’s UK operations.

Where has this come from?

From 29 October 2015, section 54 of the Modern Slavery Act became law. This is part of the government’s wider commitment to tackling slavery and human trafficking in the wake of the continuing migrant exodus from the Middle East and North Africa, and a number of disturbing cases of slavery, captivity and human trafficking in Britain in recent years.

What types of activities are caught?

The new rules are not just aimed at organised criminal gangs bundling migrants into overcrowded boats across the Mediterranean, or punishing prison guards or care home workers for forcing inmates or patients to work for free. Slavery is defined to catch any form of exploitative behaviour which deprives a victim of his or her freedom. This includes coercing or deceiving someone to provide services of any kind.

Businesses must understand that this is not as simple as just eradicating slavery and human trafficking within its four walls – the rules stretch further and the intention is to enforce a new culture of corporate accountability by requiring companies to properly examine their supply chains  (in much the same way as UK anti-bribery laws).

What must you do?

Whilst businesses are not required to guarantee that their entire supply chain is slavery free, any affected organisation is now required to publish a statement in each financial year which sets out the steps it has taken (or that it has taken no such steps, as the case may be) during the previous year to ensure that all of its business dealings are slavery free. This statement must be approved and signed at senior levels within the business (e.g. by the board or a partner) to ensure those with the power to make changes can do so (promptly if necessary). Once approved, the statement must be published on the organisation’s website, with a prominent link to the statement on the homepage.

There are, as yet, no mandatory requirements for what this statement must contain. However, on interpretation of the new law it appears that organisations may need to implement:

  1. Internal policies specifying the organisation’s approach to dealing with, and eradicating, the issue.
  2. Due diligence processes on its customers, suppliers, agents or partners (wherever in the world they are located).
  3. Staff training and conduct codes applicable to all staff and all those in which it deals.

The statement needs to be sufficiently detailed to show that the organisation has taken this issue seriously through positive steps against slavery and human trafficking in all of its business dealings.

What are the threats?

The UK Government has given businesses the flexibility to deal with this issue in the manner in which it chooses. The biggest threat for failing to do so is damage to reputation and brand, and loss of goodwill. Non-compliance may prompt an investigation, which may give rise to civil liability and an injunction requiring the organisation in breach to either amend its policies or cease its business operations until it has complied. Failure to then comply puts the business in breach of a court order, which opens the doors to the possibility of an unlimited fine.

How can you comply?

Businesses are required to be active to this issue, not passive. Therefore, in addition to the above, a further sensible approach would be for businesses to amend their terms of business and contracts regulating their dealings and to tackle this issue in a similar way to dealing with issues of bribery and corruption. By requiring suppliers to comply with the company’s policies relevant to this issue, and to notify the company as soon as it discovers any non-compliance, would enable the company to act fast. Adding in favourable termination provisions to allow the company to sever ties quickly would allow businesses to detach themselves from any wrongdoing. Finally, requiring suppliers to provide indemnities for any losses (such as loss of reputation or goodwill) the business incurs if the supplier fails to comply with its anti-slavery policies would build in added protection.

If you require more information about the contents of this note, or on the documents and policies that you may be required to implement as a result of these changes, please feel free to get in touch with your usual contact at Kerman & Co. who will be happy to explain the implications to you, or direct you to someone who is able to assist.

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