June 21, 2023
On January 1, 2024 the federal Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211) will take effect. Positioning Canada as an early nation to ban the importation of goods made with child labour, the Act serves as a transparency tool to aid the fight against modern slavery and lines up with the growing trend of voluntary ESG (Environment, Social and Governance) reporting and the steady march to mandatory public ESG disclosure in Canada. Effective January 1, 2024, entities subject to the Act (which includes both Canadian and non-Canadian owned or controlled entities) will be required to file their first annual report by May 31, 2024.
If you have obligations under the Act, it’s crucial that your senior leadership and governing body act now to understand the requirements of the Act and to identify and manage your risk exposure. Working openly and pro-actively with your current and prospective suppliers will help resolve issues and change working practices to best position you to comply with the Act.
1. What conduct does the Act address?
The Act’s purpose is to eradicate forced labour and child labour from Canadian supply chains. The Act marks another legislative attempt by Parliament to help combat modern forms of slavery. It also augments existing legislation by amending the Customs Tariff to also prohibit the importation of goods mined, manufactured or produced wholly or in part with “child labour”, as well as the already prohibited “forced labour” and “prison labour”. The Act codifies in Canadian law key definitions of these terms:
“Child”. Importantly, for the purposes of the Act a “child” is anyone under the age of 18.
“Child Labour”. In addition to labour or services offered or provided by a child in Canada under illegal circumstances, “child labour” means labour or services offered or provided by a child that:
“Forced labour”. Labour is “forced labour” if it’s offered or provided by a person who could reasonably be expected to believe that their failure to provide or offer it would threaten their safety or the safety of someone they know. It could also be forced or compulsory labour under the ILO Forced Labour Convention, 1930 (No. 29), which encompasses “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily.”
2. What organizations have obligations under the Act?
The Act applies to all Canadian federal institutions and departments, Crown corporations and their wholly owned subsidiaries, and to any private sector “entity” (or one it controls) that either:
Similar to the Extractive Sector Transparency Act, the Act defines an “entity” as an organization that meets one of these two threshold criteria:
Public Listing. Listed on a stock exchange in Canada.
Business Structure. Does business, has assets, or has a place of business in Canada, has an average of at least 250 employees and, based on its consolidated financial statements, it meets at least two of the following conditions in at least one of the two most recent fiscal years:
Notably, even entities that are neither owned nor controlled by a Canadian or a Canadian entity can be caught by this threshold definition and have reporting obligations under the Act.
3. What are the reporting requirements?
The Act’s public disclosure effectively institutes mandatory ESG reporting obligations for the entities and conduct it encompasses. This is a step toward the federal government’s implementation of its human rights obligations pursuant to key standards, such as those under the ILO and the United Nations’ 2023 Agenda for Sustainable Development. It’s also in line with the recognition in Canadian jurisprudence of the accountability of multinational actors in the context of forced labour as recognized in the Supreme Court of Canada’s 2020 decision in Nevsun Resources Ltd v. Araya.
Frequency. Starting in 2024, entities subject to the Act must report annually to the Minister of Public Safety and Emergency Preparedness before May 31 of each year. A controlling entity can choose to file either a separate report for each affiliate or a joint report on behalf of all its Canadian affiliates.
Public. Each report will appear publicly on an electronic registry managed by the Department of Public Safety and Emergency Preparedness – and you must also post it in a prominent place on your corporate website.
Shareholders. If your entity is incorporated under the Canada Business Corporations Act, you must also take positive steps to provide the report to your shareholders when you disclose your annual financial statements.
Report Contents. In each report you must outline the steps your entity has taken during its previous financial year to prevent and reduce the risk of forced or child labour within its supply chain. Additionally, you must report all the following information as part of the Supply Chain Risk Report:
Report Approval. The entity’s governing body (for example, the board of directors) must approve the report and one or more members of that body must sign it.
4. What are the non-compliance penalties?
In addition to exposure to the expanding risk of ESG-related civil and statutory litigation, the Act holds entities accountable for their reporting obligations through statutory non-compliance measures, including serious consequences and penalties for both your entity, and its directors and officers, personally.
Entity Liability. Entities that fail to comply, or knowingly mislead or file a false report, are exposed to summary conviction and a fine up to $250,000.
Personal Liability. Additionally, directors or officers who “directed, authorized, assented to, acquiesced in or participated in” the offence, are exposed to personal liability regardless of whether they or the entity has been prosecuted or convicted of a summary offence.
Separate Penalties. Each instance of failure to comply with a requirement of the Act (filing the report, having it approved by your Board, having it signed by the director, and sending each report to your shareholders) can result in a separate penalty.
In furtherance of ensuring entities comply with their obligations, the Act also gives the Minister of Public Safety and Emergency Preparedness new enforcement powers, including powers to search, inspect and seize documents and evidence.
5. What should I do?
The Act doesn’t mandate specific actions for entities to take to address forced or child labour in their supply chains, though more guidance about minimum due diligence and other requirements could come. In the meantime, if you’re subject to the Act, implement pro-active measures now to help mitigate potential compliance and reporting risks:
Prepare Your Board of Directors. Your governing body, which in most cases will be your Board, must sign each annual Supply Chain Risk Report – this effectively elevates the issue of child and forced labour in supply chains to the highest level. In signing off on the report, directors will be required to exercise their fiduciary duty and act in the best interest of your entity. This, plus their management oversight role, means it’s crucial the Board both understand and address the risks this issue poses. Make sure they’re ready for it. For example, consider establishing a new Board committee or adding Act compliance to the mandate of an existing committee. Implement mandatory training covering human rights and child and forced labour in supply chains, the implications and risks, and how to respond.
Create a Conscious Culture. Take steps to create a culture of awareness of the issue of child and forced labour in supply chains throughout your entity from the senior ranks right on down. Train your employees and get them involved. For example, create an internal committee or cross-functional group with a focus on the issue and on Act compliance.
Conduct a Risk Assessment. Implement assessments to audit your risk exposure and that of your current and prospective supply chains by routinely identifying relevant supply chain issues and assessing policy effectiveness in addressing them. Consider mandating that your suppliers implement a similar risk assessment process.
Please contact your McInnes Cooper lawyer or any member of our ESG Team @ McInnes Cooper to discuss compliance with your ESG reporting obligations under the Fighting Against Forced Labour and Child Labour in Supply Chains Act.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
© McInnes Cooper, 2023. All rights reserved. McInnes Cooper owns the copyright in this document. You may reproduce and distribute this document in its entirety as long as you do not alter the form or the content and you give McInnes Cooper credit for it. You must obtain McInnes Cooper’s consent for any other form of reproduction or distribution. Email us at [email protected] to request our consent.
Jun 9, 2023
You arrive at the legendary Madison Square Garden to catch the Mariah Carey concert. It’s the big event of the trip – the reason you came to…
Feb 1, 2023
On January 26, 2023, the Office of the Privacy Commissioner of Canada (OPC) released a report of findings requiring companies using targeted…
Jan 27, 2023
We updated this publication on July 7, 2023. Bill 24 An Act to Amend the Business Corporations Act effected significant amendments to…
Jan 26, 2023
In November 2022, the Ontario Court of Appeal definitively decided an organization whose information systems are breached by a malicious third…
Jan 16, 2023
2022 is in the rearview mirror, but the past year left lasting implications for employers. Here’s a retrospective on five of the key 2022…
Dec 6, 2022
On September 22, 2022, the N.L. Supreme Court confirmed the Nunatsiavut Assembly is a legislative body that holds all privileges, immunities,…
Dec 1, 2022
The COVID-19 pandemic drove remote work to unprecedented heights. Employee calls for greater flexibility, and cost savings for employers, have…
Feb 23, 2022
On April 1, 2022, changes to the Newfoundland and Labrador Corporations Act proposed in Bill 24 An Act to Amend the Corporations Act will take…
Feb 8, 2022
We updated this publication on December 15, 2022. On May 17, 2022, the P.E.I. Non-disclosure Agreements Act took effect, significantly…
Dec 16, 2021
We updated this publication on December 21, 2022. The name of the game is to have a plan to mitigate the risk that a data breach will happen…
Jul 21, 2021
Many now agree: it’s imperative that workplaces be both diverse and inclusive. Perhaps the most often-quoted (and definitely most succinct)…
Sep 29, 2020
We updated this publication on December 22, 2022. It’s a forgone conclusion that diversity in thought and in leadership makes good business…
Mar 17, 2020
Business corporations laws and stock exchange policies mandate that issuers hold annual general meetings (AGM) and set requirements for when and…
Jan 22, 2020
All issuers must comply with both periodic and ongoing securities law corporate governance (and other) disclosure requirements. This can,…
Aug 8, 2019
This publication has been updated as at January 12, 2022. Canadian provinces are looking to immigration as a solution to labour market…
Jun 26, 2019
Information disclosure is a key theme that emerges from Canada’s new cannabis regulatory regime: the government wants lots of information from…
May 21, 2019
We updated this publication on February 17, 2023. As of June 13, 2019, private companies incorporated under the Canada Business Corporations…
Jul 18, 2018
This publication has been updated as at January 26, 2023. Prince Edward Island corporations were formerly governed by the P.E.I. Companies…
Jun 12, 2018
This publication has been updated as at July 8, 2022. Changes to the Canada Business Corporations Act (CBCA) over the past several years have…
Apr 17, 2018
This publication has been updated as at January 12, 2023. There’s no shortage of media coverage about a doctor shortage in Canada and the…
Dec 22, 2017
Blockchain technology has already been a transformative force in a number of sectors. Its most prominent use to date has been as the…
Nov 17, 2017
It’s official: as of October 31, 2017, “facilitation payments” contravene Canada’s Corruption of Foreign Public Officials Act (CFPOA).…
Nov 2, 2017
On October 19, 2017, the Toronto Stock Exchange (TSX) announced it had adopted amendments to its Company Manual. Originally proposed in Spring…
Aug 16, 2017
In the not-so-distant past, Canadian enforcement of its anti-corruption and anti-bribery legal regime has been relatively laid-back. But the…
Jul 28, 2017
We udpated this publication on June 10, 2022. The rapid rise in ESG (Environment, Social and Governance) principles has increased focus on…
Jul 17, 2017
A corporation does not always sail in calm or safe waters. Cash shortages, unattainable or unmet goals, Board disagreements over the best course…
Mar 30, 2017
Social media platforms, like Instagram, Twitter, LinkedIn, YouTube, Facebook and GooglePlus, arguably have more followers and are more closely…
Feb 24, 2017
This publication has been updated as at January 12, 2023. Many organization (66%) store the personal information of customers. employees,…
Aug 15, 2016
The standards expected of market participants are steadily increasing in response to demand to address white collar crime – including…
Mar 9, 2016
On January 11, 2016, the Ontario Superior Court of Justice sentenced a front-line supervisor to imprisonment for 3½ years for four counts of…
Jun 25, 2015
We updated this publication on May 9, 2023. Most people know a company itself has occupational health and safety (OHS) obligations and risks…
Mar 31, 2015
This publication has been updated as at June 24, 2021. Women make up close to half of the employed workforce: in 2019, Canadian women 15…
Dec 10, 2014
“Corporate Social Responsibility” (CSR) as a concept has been floating around in business-speak for years – but stakeholders in the mining…
Oct 14, 2014
CASL’s anti-spam sections came into force on July 1, 2014. Every organization that CASL affects should now be complying with it – and their…
Sep 16, 2014
This publication has been updated as at August 25, 2022. Many believe that only public companies or large, established companies with many…
Subscribe to McInnes Cooper to stay current with our leading insights on legal updates, trends, news, events, and services.