Modern Slavery Act: in force, in action and in context

Posted: 04/08/2016

The UK’s Modern Slavery Act 2015 not only sets out stronger criminal sanctions against those who profit from this form of gross human rights exploitation, but has provided society with the opportunity to scrutinise and hold businesses more accountable for what they are doing to counter modern slavery. The Act requires both UK and foreign companies and other commercial organisations (including partnerships and LLPs) that carry out any business involving goods and/or services in the UK and have a global annual turnover of £36 million or more to prepare and publish a slavery and human trafficking statement for each financial year “as soon as reasonably practicable after the end of each financial year”. Businesses with a year-end of 31 March 2016 were the first required to publish a statement under the Transparency in Supply Chains clause.

The Act in action

As the Act is not prescriptive concerning what information must be contained in the statement, we have seen businesses that wish to comply with their new obligations consider a variety of human rights issues. For some this has been the first time they have done so.  

Some have started to seriously consider mapping their supply chains by identifying their suppliers and contractors and the locations in which they operate, and identifying those areas of their business and supply chains where the risk of modern slavery is perceived to be greatest. Mapping such risks is a complex exercise. For instance, suppliers abroad may well be communicating in their second or third language. Cultural and national rule of law differences also need to be considered.  

In addition, the importance of due diligence has come to the fore. In part, this has led to a greater recognition that some suppliers may well be going to great lengths to hide the fact that they are in some way involved in using, say, forced or child labour. Audits and compliance-driven approaches are being scrutinised as some feel they are unlikely to identify or uncover hidden cases of slavery or human trafficking. 

As a minimum, the Act has led to consideration of existing business practices and whether these may influence and create a modern slavery risk if not managed carefully – for example, where they require products to be sourced at the lowest cost and/or shipped in the fastest time. It is increasingly being recognised that consumer confidence in a business brand is at risk if it is associated with poor working conditions (including health and safety), poor wages, and excessive working hours. We have seen that these considerations have been, at least in part, driven by new public procurement requirements regardless of the turnover of the business wishing to respond to a tender invitation. 

The Act in context

But the introduction of the Act is not the end of the story; in fact it is very much just the end of the beginning.

Trade unions 

Firstly, those businesses that have published their statements now appreciate that they are not just appearing on their own corporate website but they are being collated and analysed by civil society, especially trade unions. The commonly held view of the trade unions is those that have thus far reported “could do better”. Their concern is a lack of detailed analysis of their impacts on workers and actual risks of modern slavery that exist; however, there is an appreciation that this is a journey for business and that it was unrealistic for many to be in any position to make detailed disclosures.

Many businesses are at an early stage in thinking about how to undertake risk assessments on modern slavery or indeed on other wider human rights issues. Nevertheless, business concerns about “name and shame” risks are real. With voluntary disclosure comes closer scrutiny and business can anticipate trade unions pushing them to make their statements more meaningful and transparent. First, expect trade unions to offer to help businesses in identifying their risk and gather this intelligence. Expect a development in ‘collaborative due diligence’ due to the aforementioned problems with current social auditing practices. Second, bland and/or safe statements may be accepted in the early years but as awareness of the Act’s requirements bed in, the trade unions, in particular, will seek greater disclosure, especially as there are increasing trade union and NGO networks collaborating upon these business and human rights and supply chain issues.

Regulatory oversight

Secondly, on Friday 13 May 2016 the Government’s new Immigration Act became law. It followed the Government’s response to its consultation on labour market enforcement, entitled ‘Tackling Exploitation in the Labour Market’. In the foreword to the response, Home Secretary Theresa May, wrote: "I am confident that our measures will build on the work we have begun through the Modern Slavery Act. It is only by working together, taking responsibility and fighting criminality that we can stop the misery of exploitation and enable everyone in society to work without fear."

With the new Immigration Act came a new director of Labour Market Enforcement. This new director will be responsible for bringing together three of the UK’s main labour inspection authorities: HM Revenue and Customs national minimum wage enforcement teams, the Employment Agency Standards Inspectorate and the new Gangmasters and Labour Abuse Authority. The Act also proposes significant changes to the way the current Gangmasters Licensing Authority (GLA) operates. The new Gangmasters and Labour Abuse Authority will work not just on food and food processing but will expand its mandate to different labour sectors according to risk – as dictated by the new director. What is clear is the ability of the new Authority to address modern slavery offences will be an important component of the broader fight against labour exploitation. The Government has been clear that it expects the Authority to take action when it uncovers cases of possible modern slavery.

As a result, the GLA is now embarking upon a change agenda that takes it away from its current structure to a labour market wide inspectorate with extra police style powers by 1 October 2016. It will be interesting to see what the Authority’s budget for 2016/17 will be as this will be an important acid test of the Government’s commitment.

Labour market legislation

In addition, we will see a new offence of aggravated breach of labour market legislation. The labour market enforcement bodies will have the power to require a business, where there is reasonable belief that a labour market offence has been committed, to enter into an undertaking to take steps to prevent further offending. The enforcement bodies will be able to apply to a court for an enforcement order where a business had refused to give or failed to comply with an undertaking. In addition, courts sentencing for labour market offences will be able to make orders of their own volition. Breach of the order would be a criminal offence. Of note is the penalty associated with committing this criminal offence: it will attract a maximum custodial penalty of two years. Those senior level directors or similar signing off statements to comply with the Act will be well advised to be cogniscent of this new offence.

A new era?

The direction of travel is clear. The Government wants to make it easier for law enforcement to be able to deal with employers who subject their workers to more serious forms of exploitation by deliberately committing breaches of labour law and failing to take remedial action. Whilst existing legislation provides enforcement bodies with powers to impose civil penalties for minor breaches and whilst criminal penalties for more serious offences also exist, such as repeated and deliberate underpayment of national minimum wage or modern slavery offences, this exploitative pattern of behaviour falls within a gap. The new offence is designed to fill the gap so a criminal court can impose tougher penalties on offenders.

Time will tell however if this does in fact happen: some feel the new offence will both prevent victims of human trafficking from coming forward and in some cases could promote exploitation. From interviews with victims of exploitation, there is evidence that the main priority for those without immigration status is to secure the right to remain in the UK to be able to send back the money they promised their families left behind in developing countries. The concern is this new offence will make people so fearful of having money taken from them, being imprisoned and removed from the UK, that they will be less likely to take the gamble required to alert authorities to exploitation. For their part, human traffickers may use the existence of the new offence as yet another way of controlling people in situations of severe exploitation. It follows that we should expect calls for impact assessments in years to come.

Finally, the new director and the three labour market enforcement bodies will have powers to routinely share data and intelligence. The plan is to provide central co-ordination for information and data to help the director to identify trends and patterns in areas of the UK economy where workers are at risk of human rights exploitation, and thus enable the director to develop the annual labour market enforcement strategy. The example given is that it is likely that rogue businesses that are prepared to breach some labour market legislation might be breaching other parts of the law. Therefore, the intention is to create proportionate information sharing gateways between HMRC’s other functions, the National Crime Agency, UK police forces, the Independent Anti-Slavery Commissioner, the Health and Safety Executive, Local Authorities, and Home Office’s Immigration Enforcement to bring more focus to such businesses. It follows that the importance of knowing your supply chain and its attitude to the Act will become even more business critical.

This article was published in Procurement & Outsourcing Journal in July 2016.

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