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The Modern Slavery Act 2018 became fully operational on 1 January 2019 for businesses with annual turnover greater than AUD$100m. However, the Act does not appear to directly address nor improve the modern slavery reality in the current pandemic. The Act is bringing transparency, accountability, and a potential to better current business practices, but the Act is too weak to eradicate modern slavery.

The biggest contributor to modern slavery’s persistence is its hidden nature. The reporting obligation increase transparency, availability of information and accountability. These changes create a stronger platform for businesses, non-governmental organisations and activists to improve corporate practices, both for modern slavery and human rights.

The Act which received much criticism on its effectiveness and shortcomings has had a renewed focus and highlighting of concerns during the COVID-19 pandemic, which has increased the existence and risk of modern slavery on a global level.

Modern Slavery Act

The Act requires businesses within the threshold to submit annual modern slavery statements within 6 months of the end of the financial year that include:

  • the risks of modern slavery in their operations and supply chains.
  • the steps taken to identify and address the risks, including due diligence and remediation processes.
  • how they evaluate the effectiveness of their processes.
  • their consultation process with any reporting entities they own or control.
  • any other relevant information.

The submitted reports are made publicly available on the Modern Slavery Register. Estimated number of businesses with a reporting obligation under this Act is 3000.
Currently there are no financial penalties in place for non-compliance. However, non-compliance carries risks to businesses’ reputations and potential losses in commercial opportunities.

Criticism of the Act

The AUD$100m annual revenue threshold not only fails to account for the existence of modern slavery within businesses below the threshold, but it burdens small businesses with an estimated annual cost of AUD$21,900 to meet reporting obligations.

Further, due to the lack of financial penalties as well as an independent state-based regulatory body, most of the regulation is expected to be done by non-state actors with limited time and resources to fulfil this role effectively. This is inadequate ‘scrutiny’ and provides for the continuation of modern slavery.

When instances of modern slavery are identified the Act does not impose obligations to deal with these instances ethically. Business operations and supply chains are required to be transparent about the existence and risks of modern slavery. However, the businesses are left to address these requirements in a manner that suits their business.

This flexibility can take many forms and risks businesses not opting for ethical options that effectively address modern slavery. For example, if modern slavery practices are identified in a supply chain, rather than working with the supplier to address the issues, they can choose to remove that supplier from their supply chain.

While this allows the business to avoid scrutiny under the Act, it does not address the issue of modern slavery within that industry supply chain and may worsen the situation by indirectly affecting the workers’ livelihoods. There is also a differential between large and small businesses capacity and capability to address modern slavery across industry supply chains. Adding to this is the lack of financial penalties for any non-compliance which impacts the effectiveness of the Act.

The Act and COVID-19

It is widely accepted that COVID-19 has increased the risk of modern slavery globally. Irrespective of the fact that the pandemic increased awareness of employee wellbeing, especially health, hygiene and flexible work, and concomitantly the awareness of modern slavery, it also served to highlight the concerning aspects of the Act.

The 2020 statements by businesses indicate the pandemic not only increased the risk and existence of modern slavery within their operations and supply chains, it also decreased their ability to comply with obligations under the Act and to affectively monitor and address modern slavery. As Australian businesses deal mainly with production, processing, and provision of essential items such as food, medication, and medical equipment compliance and eradication measures are very limited.

The most common pandemic-induced issues reported were the postponement of mitigating actions such as risk assessments, trainings or relevant events, and monitoring methods such as audits. These issues, as wells as the alterations to the usual supply chains, decreased capacity to make statements and to enforce the measures put in place to address modern slavery risk.

Border Force, the Government entity charged with supporting implementation of the Act, provided extended reporting deadlines and encouraged businesses to explain how their capacity to address modern slavery risks were impacted during the period. This provided opportunity for businesses to purposefully avoid addressing modern slavery e.g., modern slavery trainings and events to raise awareness were cancelled or postponed during the pandemic with limited transition to online events.

What does it mean?

The disconnect between reports on modern slavery and the due diligence to mitigate the risks were non-existent, allowing business to avoid disclosing its existence or taking preventative actions. Add to these the non-state entities actively working to minimise modern slavery have no regulatory powers nor can they effectively scrutinise businesses during a pandemic, rendering the Act cosmetic in nature.

While the Modern Slavery Act has significantly improved transparency and awareness of modern slavery in businesses, the global pandemic has again revealed the points of criticism and concern regarding the Act. As a democracy we are left, anticipating the 2021 review of the Act, as an opportunity for equality and human rights regulation.

If you would like further advice, please contact Digital Age Lawyers on 02 8858 3211.


About the Author

Bengisu Mersinli is an Intern solicitor under the supervision of Katherine Hawes, Principal Solicitor, Digital Age Lawyers.