Bird & Bird Frontline China Employment Law Update June 2019

Executive Summary

1.Make sure whether Section 54 of the MSA is applicable to your business or not
2.Prepare an appropriate annual slavery statement if needed
3.Get your annual slavery statement signed by the right person
4.Publish your properly signed statement at the right place and in the right way
5.Suppliers to multiple UK businesses

What things should you do to comply with the UK Modern Slavery Act 2015

Modern slavery is not a new topic, but there are few Chinese investors who are familiar with it. Modern slavery covers a set of specific legal concepts including forced labour, forced marriage, slavery, and human trafficking. Although these terms are defined in various international agreements, most of countries, including China, have not passed any legislation to specifically address and tackle them.

The UK Modern Slavery Act 2015 ("MSA") came into force in October 2015, at which point it was the first national legislation of its kind in the world; since that point Australia has enacted materially similar legislation in its Modern Slavery Act of 2019. Section 54 of the MSA requires applicable organisations to prepare and publish a transparency statement for each financial year in which it must declare what steps it has taken to prevent slavery and human trafficking in its business and in its supply chain. Any organisation that fails to comply with any requirement relating to Section 54 of MSA may face a High Court injunction filled by the Secretary of State to compel compliance.

If you are doing business in the UK or are a supplier to a UK business, to ensure your business stays on the right track, we suggest you focus on the following basics to comply with all the MSA requirements.

Make sure whether Section 54 of the MSA is applicable to your business or not

According to Section 54 of the MSA, a body corporate (wherever incorporated) or a partnership (wherever formed) who carries on a business or part of a business in the UK and who has a global turnover of £36 million or more (aggregated with the turnover of it subsidiaries, wherever in the world those subsidiaries are based) should prepare and publish a transparency statement for each financial year.

For example, if your business carries on a part of your business in the UK and that business with its subsidiaries globally has a turn over in excess of £36 million it will be necessary to publish a Section 54 Statement.

If your company, headquartered in China and with a worldwide turnover of £50million, operates in manufacturing in high-risk geographies, and sells goods on-line to the world including the UK, your company may be seen to be carrying on part of its business in the UK and should prepare and publish a modern slavery statement covering any actions taken to prevent modern slavery and human trafficking.

If your company is part of a UK company’s supply chain, and this UK company has passed the MSA threshold and is therefore required to comply with the MSA , even though your company is not subject to the MSA and is under no reporting obligation itself, you may be required by your customer , the UK company, to report any situation relating to modern slavery to it and to make commitment that no modern slavery is taking place in your business, so that the UK company could fulfill its obligation relating to its supply chain under Section 54 of the MSA. We are seeing MSA obliged companies issuing compliance questionnaires to their suppliers and, in certain cases where the risk of slavery is considered high, reserving the right to carry our spot inspections of supplier workplaces.

Prepare an appropriate annual slavery statement if needed

A slavery statement should include all the steps the organisation is taking or has taken during the financial year to ensure that slavery is not taking place in its workplace and in its supply chain. Presently, if no such steps are taken, it should also be reflected in the statement. The UK government provides no specific template for reporting but MSA suggests the following for inclusion of the statement:

• the organisation’s structure, its business and its supply chains;
• its policies in relation to slavery and human trafficking;
• its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
• its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
• the training about slavery and human trafficking available to its staff.

Get your annual slavery statement signed by the right person

Requirements vary depending on the nature of the organisation. If the organisation is a body corporate, the statement “must be approved by the board of directors and signed by a director”. If the organisation is a limited liability partnership, the statement “must be approved by the members and signed by a designated member”. If the organisation is a limited partnership under the Limited Partnerships Act 1907, the statement “must be signed by a general Partner”. If the organisation is any other kind of partnership, the statement “must be signed by a partner”.

Publish your properly signed statement at the right place and in the right way

If the organisation has a website, in accordance with the MSA, it must: “(a) publish the slavery statement in a prominent place on that website, and (b) include a link to the statement in a prominent place on that website’s homepage”. If the organisation does not have a website, it must “provide a copy of the statement to anyone who makes a written request for one and must do so before the end of the period of 30 days beginning with the day on which the request is received”.

Suppliers to multiple UK businesses

If you are a supplier to more than one UK business who are likely to have to comply with the MSA you may find yourself being asked to reply to a number of different MSA questionnaires and/or provide slavery declarations. We have regularly assisted companies in these circumstances by developing a slavery related policy for the company that is broadly consistent with the MSA and which can be provided to the requesters as an alternative to completing a questionnaire or formalizing a declaration. That permits you to adopt a single approach and avoid what can be a sizeable administrative burden.

Likely changes to the MSA

The UK Government has commissioned a number of reports since the adoption of the MSA to recommend improvements to the act. Taking those reports together it is very likely that the MSA will be given a set of sanctions for companies who transgress that are very much more meaningful than the current reservation of the right for the Government to bring injunctive proceedings. It is likely there will be a financial penalty regime, the possibility of direct liability of directors and the possibility of being banned from public contracts. The current heads of content, as referred to above and which presently have guidance status, can be expected to be made mandatory elements of the required S54 Transparency Notice. There will also be clarification that “supply chain” is the supply chain from top to bottom not only the top tiers.

The net effect is likely to mean that the MSA will be taken very much more seriously than it has been todate. That will have direct implication not only those companies who have to comply with the MSA but also their suppliers.

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