Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
The purpose of Canada’s proposed Bill S-211, Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (Bill S-211) is, in part, to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act, i.e., the Modern Slavery Act (MSA). Canada’s desire to enact this legislation reflects its commitment to participate in the international fight against forced labour and child labour. If passed, the MSA would require certain government institutions and private-sector entities to report annually on measures they have taken to prevent and reduce the risk that they or their supply chains are using forced labour or child labour.
As of the date of publication, Bill S-211 had passed through the Senate, and on June 1, 2022, second reading in the House of Commons was completed. Currently, the Act is under consideration by the House of Commons Standing Committee on Foreign Affairs and International Development.
The MSA has not been enacted at this time; however, it will come into force on January 1 of the year following the year in which it receives Royal Assent. Accordingly, if Royal Assent is received in 2022, the MSA would be enacted on January 1, 2023. Should this occur, the first annual reports of the government institutions and private-sector entities to which the statute applies would be due on May 31, 2023.
The description of the MSA below is based on the version passed by the Senate after third reading on April 28, 2022. It is important to note that the final version enacted may differ from this version.
Several terms used in the MSA are defined in the statute. Some of these definitions are provided in this Insight’s footnotes.
Annual Reporting Obligations for Entities Producing, Selling or Distributing Goods in Canada or Elsewhere; Importing Into Canada Goods Produced Outside Canada; or Controlling an Entity Engaged in Any of the Aforementioned Activities
In addition to imposing an annual reporting obligation on government institutions that produce, purchase or distribute goods in Canada or elsewhere, the MSA imposes an annual reporting obligation on or before May 31 of each year, on an “entity.”1
An “entity” will have a reporting obligation only if it produces,2 sells or distributes goods in Canada or elsewhere; imports into Canada goods produced outside Canada; or controls3 an entity engaged in any of the aforementioned activities.
An entity that meets the size and activity requirements outlined in the MSA’s definition of “entity” (see footnote 1) is required, on or before May 31 of each year, to report to the Minister of Public Safety and Emergency Preparedness (Minister) on the steps it has taken during their previous financial year to prevent and reduce the risk that “forced labour”4 or “child labour”5 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.
The entity may provide its own report or be party to a joint report in respect of more than one entity. The report, which may be revised and must be made available to the public, including by publishing it in a prominent place on the entity’s website, must include the following information in respect of each entity subject to the report:
- its structure, activities and supply chains;
- its policies and its due diligence processes in relation to forced labour and child labour;
- 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 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;
- the training provided to employees on 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.
A report in respect of a single entity must be approved by its governing body,6 and a joint report must be approved either by the governing body of each entity included in the report, or by the governing body of the entity, if any, that controls each entity included in the report. Approval of the report must be evidenced by a statement that sets out whether it was approved, and the signature of one or more members of the governing body of each entity that approved the report.
If the entity is incorporated under the Canada Business Corporations Act or any other Act of Parliament, its report or revised report must be provided to each shareholder, together with its annual financial statements.
Searches to verify compliance with reporting obligations
To verify compliance with reporting obligations, the statute permits a person designated by the Minister to enter any place to conduct a search where they have reasonable grounds to believe there is something that applies to reporting obligations or a document relating to reporting obligations. Upon conducting a search, the designated person may:
- examine anything in the place, including any document;
- use any means of communication in the place, or cause it to be used;
- use any computer system in the place or cause it to be used—to examine data contained in or available to it, or reproduce the data—or cause it to be reproduced—in the form of a printout or other intelligible output and remove any printout or output for examination or copying;
- prepare a document based on the data, or cause one to be prepared;
- use any copying equipment in the place, or cause it to be used;
- take photographs or make recordings or sketches of anything in the place;
- direct any person to put any equipment in the place into operation or to cease operating it;
- prohibit or limit access to all or part of the place or to anything in the place; and
- remove anything from the place for the purpose of examination.
The designated person may be accompanied by any person whom they believe is necessary to help them exercise their powers or perform these duties or functions. The owner or person in charge of the place and every person in it must give all assistance reasonably required to enable the designated person to exercise their powers or perform their duties or functions, and provide any documents, information or access to any data that is reasonably required for that purpose.
If the place to be searched is a dwelling-house, however, the designated person may enter it without the occupant’s consent only with a warrant issued on ex parte application by a justice of the peace, subject to any conditions specified in the warrant. A justice of the peace may issue the warrant if they are satisfied (by information on oath) that:
- the dwelling-house is a place in which they have reasonable grounds to believe there is something that applies to reporting obligations or there is a document relating to reporting obligations;
- entry to the dwelling-house is necessary for a purpose related to verifying compliance with reporting obligations; and
- entry was refused by the occupant or there are reasonable grounds to believe that entry will be refused by or that consent to entry cannot be obtained from the occupant.
A person is prohibited from obstructing or hindering the exercise of these powers or the performance of these duties or functions.
If, on the basis of information obtained through a search, it is the Minister’s opinion that an entity is not in compliance with its reporting obligations or its obligation to make its annual report available to the public, the Minister may order the entity to take any measures necessary to ensure compliance.
Offences and Punishment
Every person or entity is guilty of an offence punishable on summary conviction and liable to a fine of not more than $250,000 that fails to comply with their annual reporting obligations; fails to make their annual report or revised report available to the public; fails to give assistance reasonably required to enable a designated person to conduct a search to verify compliance; fails to comply with the Minister’s order requiring the entity to take necessary corrective measures to file an annual report; contravenes the prohibition against obstructing or hindering a search; or knowingly makes any false or misleading statement or knowingly provides false or misleading information to the Minister or a person designated to administer and enforce an entity’s reporting obligations.
These penalties can apply as well to corporate directors, officers, agents and mandataries who directed, authorized, assented to, acquiesced in, or participated in the person or entity’s commission of these offences.
Electronic Registry Accessible to Public
The Minister is required to maintain an electronic registry containing a copy of every report or revised report provided to the Minister. The registry must be made available to the public on the Department of Public Safety and Emergency Preparedness website.
Minister’s Annual Report to Parliament
The Minister must table in each House of Parliament, on or before September 30 of each year (or, if a House is not sitting then, on any of the next 30 days on which that House is sitting), a report containing:
- a general summary of the activities of government institutions and entities that provided a report under the Act for their previous financial year that carry a risk of forced labour or child labour being used;
- the steps government institutions and entities have taken to assess and manage that risk;
- if applicable, measures taken by government institutions and entities to remediate any forced labour or child labour;
- a copy of any Minister’s order to take necessary measures to ensure compliance with annual reporting obligations and the obligation to make annual reports publicly available.
- the particulars of any charge laid against a person or entity for offences under the Act.
The Minister must publish the report in a prominent place on the Department of Public Safety and Emergency Preparedness website within 30 days after it is tabled in both Houses of Parliament.
Bottom Line for Employers
Although it is unclear at this time whether the MSA will receive Royal Assent in 2022, if it is received this year, entities that meet the statute’s size and activity requirements, will be required, on or before May 31, 2023, to report to the Minister on the steps it has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour was used at any step of its production of goods in Canada or elsewhere, or of goods that it imported into Canada. The scope of the information that must be included in the report is significant. Accordingly, entities that will be required to report are encouraged to become familiar with the MSA, while recognizing that it may undergo revisions before its likely enactment.
1 The MSA defines an “entity” as a corporation or a trust, partnership, or other unincorporated organization that is listed on a Canadian stock exchange; or 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; or is prescribed by regulations. Notably, the criteria outlined above suggests that non-Canadian entities that “do business” in Canada and meet the size and activity requirements may be subject to Canada’s MSA.
2 The MSA defines “production of goods” as including “the manufacturing, growing, extracting and processing of goods.”
3 The MSA provides that an entity is controlled by another entity if it is directly or indirectly controlled by that other entity in any manner and, furthermore, that an entity that controls another entity is deemed to control any entity that is controlled or deemed to be controlled by the other entity.
4 The MSA defines “forced labour” as labour or service provided or offered to be provided by a person under circumstances that could reasonably be expected to cause the person to believe their safety or the safety of a person known to them would be threatened if they failed to do so; or that constitutes forced or compulsory labour as defined in article 2 of the Forced Labour Convention, 1930, adopted in Geneva on June 28, 1930.
5 The MSA defines “child labour” as labour or services provided or offered to be provided by persons under the age of 18 years and that are contrary to Canada’s laws; are mentally, physically, socially or morally dangerous to them; interfere with their schooling by depriving them of the opportunity to attend school, obliging them to leave school prematurely or requiring them to attempt to combine school attendance with excessively long and heavy work; or constitute the worst forms of child labour as defined in article 3 of the Worst Forms of Child Labour Convention, 1999, adopted at Geneva on June 17, 1999.
6 The MSA defines a “governing body” as “the body or group of members of the entity with primary responsibility for the governance of the entity.”