Businesses watch out for changes to Modern Slavery Act obligations

The second interim report on the Modern Slavery Act review makes a number of important recommendations about businesses' obligations under the Act and the potential consequences for non-compliance.

The review, commissioned by the government in July last year and referred to in last November's Law at Work, is looking at the operation and effectiveness of, and potential improvements to, the Act and its drive to eliminate modern slavery and human trafficking from business in the UK.

The Act requires organisations carrying on business in the UK with global revenue of £36 million or more to produce an annual transparency statement. There is a suite of guidance about what the statement should include, but no mandatory legal requirements.

The Act has been criticised for its lack of teeth, with non-compliance currently not punishable by any fine or sanction. The only recourse for the government in the event of non-compliance is to seek an injunction requiring the non-compliant organisation to rectify the breach (ie publish a statement).

In our experience, many organisations see the Act as a box-ticking exercise. The underlying motivation of the Act and its desire to combat the exploitation of individuals working anywhere in a business' supply chain is laudable, but companies already struggling under the weight of regulation have often done little more than pay lip service to the Act.

The newly published report seeks to address this and makes strong recommendations for the introduction of mandatory information to be included in statements, and legal penalties for non-compliance (including director disqualification). It also recommends greater clarity as to which organisations are required to produce a statement (although if you would like to know, you can use our free assessment tool) and a requirement for companies to refer to statements in their annual reports.

It remains to be seen whether these recommendations are implemented, but businesses should prepare for this to be an area of particular scrutiny. It is advisable for companies to review the way compliance is managed and use the annual reporting obligation to ensure their statement covers all areas referred to in the guidance.

With Brexit still dominating Parliamentary time and resources, change may not be imminent, but the consequences of Brexit itself may provide even greater motivation for a government seeking to ensure that the UK is a world leader in this important area. Businesses should await the outcome of the final report due at the end of March with interest.