The Modern Slavery Act and company supply chains
The UK Government has undertaken to use the ‘full force of the state’ to combat modern slavery. The legal and moral obligations relating to anti-slavery, and the potential for companies to unintentionally facilitate illegal practices, mean that having the correct contracts and policies in place should be more than a tick-box exercise. A key risk to organisations with suppliers based overseas is monitoring these often complex and sprawling supply chains – we thought it would be useful to revisit some steps that companies can take to implement anti-slavery legislation in their contracts.
Larger companies will be aware that the Modern Slavery Act 2015 requires organisations with an annual turnover of £36 million or more that supply goods or services in the UK to publish an annual statement setting out the steps they are taking to prevent modern slavery in their operations. On 22nd September 2020 the UK government published a response to its ‘Transparency in Supply Chains’ consultation, which proposed a tightening of the reporting regime.
It is of course best practice for smaller organisations that are not caught by the current reporting requirements to comply with the principles of the legislation, particularly where they have lengthy overseas supply chains.
Having a robust set of processes and clauses covering anti-slavery, that go further than simply mandating ‘compliance with all applicable laws and regulations’, is a good way to show compliance with the legislation. We suggest the following:
- Anti-slavery procedures should feature in the supplier due diligence process, with the responses warranted as accurate and complete in the contract. Questions on compliance and past infringements should be raised, even if this does not form part of a formal ‘due diligence questionnaire’.
- The right to subcontract needs to be carefully considered. Where direct approval of each subcontractor is not feasible, it may be appropriate to split the works into ‘tier 1’ and ‘tier 2’ services, with more oversight being directed towards the tier 1 services.
- Consider imposing reporting obligations (particularly in the case of breaches) together with record-keeping and training obligations (all backed up by audit rights).
- Where applicable, the supplier should be obliged to include mandatory flowdown provisions in its subcontracts, covering basic compliance but also the reporting, record-keeping and audits provisions referred to above.
- Consider country-specific clauses where there is a particular risk of slavery or human trafficking (e.g. prohibiting the supplier from sourcing goods or services from a particular region).
- An indemnity gives the clause a ‘sharper edge’, but prevention and mitigation are likely to be as important as the ability to recover financial losses. Framing breaches of anti-slavery provisions as ‘material’ in order to gain a swift termination of the contract, is likely to be appropriate.
The risks of taking a ‘light touch’ approach to compliance in this area are reputational as much as legal, and being proactive will be cost-effective in the long run, as the Government strengthens its approach to compliance.
If you would like to discuss your contracts or contracting processes in relation to anti-slavery legislation, please contact Tom Rook at email@example.com or call Tom on 07971 118042.