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By Allen Campbell, JD, MBA

This is another blog post in our series on Value Chain Sustainability.

Canada has enacted a law intended to eliminate two forms of modern slavery in companies’ operations and supply chains: forced labor and child labor.

The Fighting Against Forced Labor and Child Labor in Supply Chains Act was enacted on May 3, 2023, and becomes effective in January 2024. It requires in-scope companies and all government organizations in Canada to provide annual reports on how they manage forced labor/child labor risks – in their own operations and their product supply chains.

In-scope companies are defined as:

  • Companies listed on a Canadian stock exchange.
  • Companies with a place of business in Canada, that do business in Canada, or that have assets in Canada, and that meet two of the following three criteria:
    • at least Cdn $20 million in assets;
    • at least Cdn $40 million in revenues;
    • at least 250 employees.
  • Companies prescribed by regulations (none of which has yet been issued).

In addition, the Act applies to any company (i) producing, selling or distributing goods in Canada or elsewhere; (ii) importing into Canada goods produced outside Canada; or (iii) controlling an entity engaged in any activity described in (i) or (ii).

Reporting obligations:

The first reports are due by May 31, 2024, for an entity’s financial year ending in or after May 2023. Thus, if a company’s financial year ended in June 2023, it must submit a report by May 31, 2024, for FYE 2023.

In-scope companies must report the following:

  • The steps that the company has taken during its previous fiscal year to prevent and reduce the risk that forced labor or child labor is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada by the entity.
  • Its structure, activities and supply chains.
  • Its policies and due diligence processes in relation to forced labor/child labor.
  • The parts of its business and supply chains that carry a risk of forced labor/child labor being used and the steps it has taken to assess and manage that risk.
  • Any measures taken to remediate any forced labor/child labor.
  • The training provided to employees on forced labor/child labor.
  • How the entity assesses its effectiveness in ensuring that forced labor/child labor are not being used in its business and supply chains.

Interestingly, an in-scope company must also report 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 labor or child labor in its activities and supply chains. This provision is a new legal concept in modern slavery laws.

The reports must be approved by an entities’ board and signed off by one or more directors or officers.

Companies must submit their reports to the Minister of Public Safety. They must also make their reports publicly available – most likely on their websites.

The law has teeth.

The Act defines offenses in connection with non-compliance:

  • An offense publishable on summary conviction and liable to a fine of not more than Cdn $250,000 for failure to complete the report, post the report online or submit it to the Minister, or obstructing or hindering an investigation into the obligations under the Act.
  • Knowingly making any false or misleading statement or knowingly providing false or misleading information to the Minister can be subject to an offense punishable by summary conviction and liable to a fine of not more than Cdn $250,000.
  • Directors and officers have liabilities under the Act. Any director or officer who directed, authorized, assented to, acquiesced in or participated in an offense is a party to and guilty of an offense under the Act and is liable on conviction to the punishment, whether or not the person or entity that committed the offense has been prosecuted or convicted.

Why it matters:

  • This law is akin to similar laws in Australia and the UK. Taken together, they are leading a global moral movement against forced labor/child labor and, more generally, against risks to the environment and to human rights.
  • Directors and officers are exposed to criminal liability under this law.
  • The law applies to public and private companies.
  • Companies outside of Canada that are in the supply chain of an in-scope Canadian company are indirectly affected. They will face pressure to ensure that their participation in the supply chain is untainted. This will come as a surprise to such non-Canadian business.
  • Because the law applies to non-Canadian companies listed on Canadian stock exchanges, it will place its crosshairs on many companies that did not expect it. Junior oil and gas companies and companies in related industries are often listed in Canadian exchanges. All such will be well-advised to pay attention to this law immediately.