Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act came into force on January 1, 2024. Here’s what you need to know.
Why an Act to fight against forced and child labour?
The Act codifies Canada’s international commitment to contribute to the fight against forced and child labour. The goals of the Act are to increase industry awareness of the problem and to enhance transparency of practices used to minimize the use of forced and child labour in supply chains.
Who does the Act apply to?
The Act applies to federal government institutions and to certain non-governmental entities as defined in the Act.
For the Act to apply to a non-governmental entity, it must be:
- listed on a stock exchange in Canada, or
- have a place of business, be doing business or have assets in Canada and meet at least 2 of the following conditions in the past 2 fiscal years:
- at least $20 million in assets,
- at least $40 million in revenue, and
- employing, on average, at least 250 employees.
The Act purports to bind the provinces; however, it does not explicitly apply to provincial government institutions. If in doubt as to whether the Act applies to your organization, we recommend you seek advice from legal counsel.
Annual reporting obligations for government institutions and entities
Starting in 2024, government institutions and entities must, before May 31 of each year, file an annual report with the Minister on the steps taken during the previous financial year to prevent and reduce the risk that forced or child labour is used. Specifically, the report must contain the following information about the organization:
- organization’s structure, activities and supply chains;
- (government institutions only) its policies and due diligence processes in relation to forced labour and child labour;
- the parts of its activities 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 organization assesses its effectiveness in ensuring that forced labour and child labour are not being used in its activities and supply chains.
Non-government organizations’ reports must be approved by their governing body, contain a statement that the report was approved as required by the Act and signed by at least one board member.
Public Safety Canada has set up a website where annual reports must be filed with the Minister.
After filing the report with the Minister, the annual report must be made available to the public and published in a prominent place on the organization’s website.
Consequences of non-compliance with reporting requirements
The Act provides the federal government with broad powers to audit an organization’s systems and practices and to issue warrants. If a government institution or entity does not comply with the Act, it may be guilty of an offence punishable on summary conviction and liable to a maximum fine of $250,000.
Benefits of adopting supply chain integrity measures
While the Act doesn’t require organizations to take steps to prevent the use of forced and child labour in supply chains, we suggest it is in every organization’s best interest to do so, whether subject to the Act or not. Proactively tackling this problem communicates to the public that the organization takes ethics seriously and goes a long way towards building public trust.
If your organization is looking to enhance its commitment to minimizing the use of forced and child labour, we suggest you include a provision in your purchase terms that requires suppliers to guarantee there is no use of forced or child labour at any point in the production of goods supplied by the supplier.
Organizations may consider taking this a step further by adopting a formal supplier code of ethics that expands on expectations of supplier integrity. Expanded expectations may relate to an expectation of supplier honesty, fairness and compliance with laws, for example. Compliance with the code can be added as an obligation in each purchase contract and the code published on the organization’s website.
Whether taking a minimalist or maximalist approach, imposing integrity obligations on suppliers is always a good idea. It is both a positive step towards building public trust and, when extended to forced and child labour, also minimizes the risk of abuse of vulnerable sectors.
*** Disclaimer ***
This article is not legal advice. The intent is to inform readers about the implications of Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act. As with any legislation, there are particularities in the text and interpretation questions that cannot be captured in a simple article.
To better understand the requirements of the Act and update your purchase terms, we recommend you consult legal counsel.