The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) came into force on January 1, 2024, implementing enhanced reporting requirements for certain companies and government entities to combat forced labour and child labour. Entities subject to the Act must prepare annual reports detailing efforts they have taken to reduce supply chain risk and prevent forced labour and child labour. The first annual reports are due May 31, 2024 and must be filed with the federal government and made publicly available.
The stated purpose of the Act is to implement Canada’s international commitment to contribute to the fight against forced labour and child labour through the imposition of reporting obligations on entities producing goods in Canada or elsewhere or in importing goods produced outside Canada.
The Act implements an updated modern anti-slavery regime informed by legislative developments in the United Kingdom, Australia and France, and aligns with a North American approach to combat forced labour and child labour as set out in the Canada-United States-Mexico Agreement (CUSMA) of 2020.
The Act came into force on January 1, 2024 and is subject to a comprehensive review by Parliament five years from then.
The Act broadly applies to any entity that produces, sells or distributes goods in Canada or elsewhere, any entity that imports into Canada goods produced outside Canada, and any entity that controls (directly or indirectly) another entity engaged in such production, sale, distribution, or importation.
The Act defines an “entity” as a corporation, trust, partnership or other unincorporated organization that:
- is listed on a Canadian stock exchange;
- has a place of business in Canada, does business in Canada or has assets in Canada and meets at least two of the following conditions for at least one of its two most recent financial years (based on its consolidated financial statements):
- the entity has at least $20 million in assets,
- the entity has generated at least $40 million in revenue, and
- the entity employs at least 250 employees; or
- is prescribed by regulations which may be released by the Minister of Public Safety and Emergency Preparedness (the “Minister”) at some point in the future.
The Act contains separate reporting requirements for government institutions, including any Canadian federal government department, ministry of state, Crown corporations, wholly-owned subsidiaries of Crown corporations or certain other government bodies.
Entities subject to the Act must prepare annual reports that, as applicable, are published prominently on their website and filed with the Minister no later than May 31 of each calendar year (commencing in 2024). A group of related corporate entities with separate reporting obligations may file a single joint annual report on behalf of all related entities.
In particular, reporting entities are required to prepare a written report and publish it on their website. The annual report must set out information relating to steps the reporting entity has taken during its previous fiscal year to prevent and reduce the risk that forced labour or child labour is used at any point in the production of goods in Canada or elsewhere or goods distributed in Canada. The following details must be included in respect of each reporting entity:
- the entity’s structure, activities and supply chains;
- a summary description of its policies and its due diligence processes implemented to identify and respond to risks and adverse impacts of forced labour and child labour in its supply chain;
- the parts of its 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 of those affected by the entity’s efforts to eliminate the use of forced labour or child labour in its activities and supply chains;
- the training provided to employees regarding forced labour and child labour; and
- how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.
There is no prescribed level of detail required. Entities should use discretion in determining the appropriate level of detail proportionate to their size and risk profile.
In addition, each entity must complete and file with the Minister an online questionnaire that includes a series of open and closed-ended questions that address each of the requirements under the Act.
Board Approval: An annual report must be approved by an entity’s Board of Directors (or other governing body). In the case of a group of related entities that files a single joint annual report, the annual report must be approved by either each entity’s governing body or the governing body of the parent entity that controls each subsidiary entity included in the annual report.
Public Access: An entity must publish its annual report on its website before May 31 of each year.
Federal Corporations: Any reporting entity that is incorporated under the Canada Business Corporations Act or any other federal legislation must provide such entity’s annual report to each shareholder along with the entity’s annual financial statements, which may have the effect of accelerating the filing deadline to the extent annual financial statements are provided to shareholders in advance of the May 31 deadline.
Reporting entities that fail to comply with the Act are guilty of a summary offence and a fine of not more that $250,000, as is any person or individual that makes any false or misleading statements in connection with an annual report. The Act establishes personal liability for any director, officer or agent of a reporting entity who directs, authorizes, assents to, acquiesces in or participates in the commission of any offence under the Act.
Companies should determine if they are required by the Act to file an annual report and, if so, consult with counsel regarding the preparation and content of the required disclosure. Those who are required to file an annual report should also ensure they have internal policies in place to assist with information collection and that their annual report is submitted before the May 31 deadline.For further information on the Act, please contact any member of our Capital Markets Group.
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