Evaluating Canada’s Modern Slavery Legislation

Jonelle Humphrey*

Summary

There has been a wave of post 2010 modern slavery disclosure legislation being enacted by countries in which Multinational Corporations (MNCs) are incorporated. These laws aim to increase the accountability of MNCs for labour violations occurring in their transnational supply chains. Canada has proposed disclosure legislation, namely Bill S-211, modelled after the United Kingdom’s 2015 Modern Slavery Act. Bill S-211 can be described as transparency legislation which requires companies to disclose the steps they have taken to reduce or prevent the use of slave labour in their supply chains. This is essentially mandated Corporate Social Responsibility (CSR) reporting, which has been criticised for not sufficiently linking transparency with accountability due to its lack of stringency and enforcement mechanisms. This brief uses a typology formulated to test the design, stringency and enforceability of Canada’s proposed Bill. The brief concludes that although the Bill lacks stringency it can be viewed as a stepping stone to more coercive legislation in the future.

Introduction

Research has revealed that big brands and retailers rely on supply chains in which workers in the Global South are exploited (ILRF, 2019). Since the 1990’s, there has been pressure for these lead firms, which are mostly Multinational Corporations (MNCs) in the Global North, to take responsibility for how their suppliers, who are predominantly located in the Global South, treat their workers (Phillips, LeBaron & Wallin, 2018). MNCs have sought to improve labour standards in supply chains by means of corporate codes of conduct and auditing regimes which fall under the broad governance mechanism of Corporate Social Responsibility (CSR). However, despite these CSR initiatives, reports of labour violations in supply chains persist. This led to the realisation that “home states”, that is, the countries in which MNCs are incorporated, could do more to strengthen the corporate accountability of MNCs for the egregious labour practices which recur in “host states”, that is, the countries through which MNCs operate either directly or through their subsidiaries or suppliers (LeBaron & Rühmkorf, 2017; Rühmkorf, 2018).

Since 2010, a wave of home state modern slavery legislation with extraterritorial effect has been enacted in many Western countries (Mares, 2018). This legislation seeks to increase the obligations of MNCs in relation to supply chain governance through the mechanism of disclosure (Phillips, LeBaron & Wallin, 2018). Companies are required to publicly disclose information pertaining to activities in their supply chain, specifically labour standards. Examples of disclosure legislation include the California Transparency in Supply Chains Act 2010, the United Kingdom (U.K.) Modern Slavery Act 2015, the French Corporate Duty of Vigilance Law 2017 and the Australian Modern Slavery Act 2018. Canada has also proposed disclosure legislation, having jointly agreed with the U.K., United States, Australia and New Zealand to encourage businesses to address modern slavery in supply chains (U.S. Department of State, 2018). Bill C-423, cited as the Modern Slavery Act, was introduced into parliament in December 2018 by the liberal government after Canada’s Standing Committee on Foreign Affairs and International Development recommended legislation similar to the California and U.K. Acts (Canada House of Commons, 2018). The Bill did not make it past its first reading and eventually Bill S-211, which almost exactly mirrors its predecessor, was introduced in February 2020.

Although disclosure laws vary in design, they all require companies to report on their CSR activities. This mode of governance has been coined “CSR as mandated by the government” and represents a shift away from the traditional voluntary CSR model (Phillips, LeBaron & Wallin, 2018). The legislation relies on the economic leverage of MNCs to weigh positively on labour standards throughout the supply chain (Phillips, LeBaron & Wallin, 2018). The aim is for the disclosure to guide consumer purchasing thereby enabling greater accountability. Policymakers and industry actors have hailed this legislation a game-changer in the fight against modern slavery but this is debatable (Mares, 2018). Disclosure laws can be divided into two groups, weaker transparency legislation and more stringent due diligence legislation. Companies subject to due diligence legislation such as the French Vigilance Law must identify and address actual or potential human rights and environmental abuses in their supply chain activities to reduce or prevent their negative impact (Nolan, 2018). In contrast, transparency legislation such as the California and U.K. Acts simply require companies to comply with the requirement of reporting. It does not mandate businesses to undertake steps to address modern slavery in their supply chains. Companies regulated by the U.K. Act can report that “no such steps” were taken and still be in compliance with the Act (LeBaron & Rühmkorf, 2017, p. 21). Transparency laws have therefore not engendered a serious corporate effort to combat their target human rights violations (Nolan, 2018).

Some researchers have argued that transparency CSR was used in the U.K. as a strategy to deflect more stringent due diligence legislation modelled after the U.K. Bribery Act 2010 LeBaron & Rühmkorf, 2019). However, transparency legislation can also be viewed as strategic choice. The basic tenets of contract and corporate law ensures that MNCs have limited liability for production related incidents in host countries. MNCs are separate legal entities from their suppliers and consequently there is no vicarious liability of MNCs for crimes or torts committed by their suppliers (LeBaron & Rühmkorf, 2019). Attempting to regulate lead firms by means of coercive laws for their indirect involvement in supply chain labour violations causes friction with these legal doctrines and triggers political sensitivities about national sovereignty (Mares, 2018). Transparency legislation avoids challenges from these legal principles because they do not hold the lead firm liable for harm caused in affiliate operations (Mares, 2018). Thus, instead of transparency laws being viewed as a weak substitute for more stringent legislation, they can be seen as successfully manoeuvring the legal barriers traditionally associated with transnational supply chains and prompting MNCs not to avoid their involvement in the situation.

Canada’s proposed legislation falls into this latter transparency group. It is therefore imperative to determine whether this legislation will encourage “cosmetic compliance” or meaningfully steer corporate conduct in the area of labour standards in global supply chains (Nolan, 2018). This brief aims to investigate Canada’s modern slavery legislation using a typology formulated to analyse the law’s design, stringency and enforceability.

Typology

The typology used in this brief isolates and interrogates the most significant areas and legal concepts that arise from Canada’s proposed modern slavery legislation. The purpose of this is to fully grasp how the provisions of this legislation will be operationalized. The categories of the typology are: a. the type of legislation; b. the material scope; c. the personal scope; d. the definition of value chain; e. the statutory duty under the legislation; f. reporting requirements; g. whether the legislation mandates a separate registry; h. auditing requirements; i. the statutory repercussion for breach of duty; j. impact on other forms of liability.

a.Type of Legislation

Bill S-211 (The Bill) can be described as ad hoc disclosure legislation. It is ad hoc meaning that it is not embedded in any other existing reporting mechanism such a consumer protection or financial reporting act (Salminen & Rajavuori, 2019). The Bill took the form of transparency legislation similar to that of the U.K.

b.Material Scope

The Bill was drafted to enact Canada’s Modern Slavery Act and to amend the Customs Tariff. The Bill does not specifically define modern slavery, although it identifies forced labour and child labour as the forms of modern slavery it seeks to combat. Child labour is defined in the Bill as any labour or service provided or offered by persons under 18 years contrary to the laws applicable in Canada. Forced labour is defined as labour or service provided or offered by a person under circumstances that could reasonably be expected to cause the person to believe that their safety or the safety of a person known to them would be threatened if they failed to provide or offer the labour or service. This definition differs from the International Labour Organisation’s (ILO) which defines forced labour as “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily” (ILO Convention concerning Forced or Compulsory Labour, Art. 2).

Whereas the ILO’s definition of forced labour is very wide with the phrase “menace of penalty” including but not limited to physical violence, non-payment of wages, deprivation of food and shelter and exclusion from future employment, the Bill’s definition is restricted to the victim apprehending a threat to their safety. The more limited definition in Canada may reflect the constitutional division of power, whereby the federal government has jurisdiction over “true” crimes, and the provinces have jurisdiction over labour regulation. It remains to be seen whether this limited definition will be an issue if the Bill is enacted. Section 19 of the Bill also amends the Customs Tariff which allows the Governor in Council to exclude any goods manufactured or produced by forced or child labour from entering Canada. This is significant because other transparency legislation including the California, U.K, French and Australian Acts do not impose an import ban. However, if enacted, the Governor’s regulations regarding the process of operationalizing the import ban will be crucial in ensuring its effectiveness.

c.Personal Scope

The personal scope determines the actors from which legislation requires action (Salminen & Rajavuori, 2019). The legislation’s purpose, as stated in section 3, is to impose reporting obligations on entities involved in the production of goods in Canada or elsewhere or in the importation of goods produced outside Canada. Section 5 states that the legislation also applies to any entity that controls, directly or indirectly, any entity engaged in such activity. Entity is defined as corporations, trusts or unincorporated organisations listed on a stock exchange in Canada, having a place of business in Canada or does business in Canada. This also includes any corporation with assets in Canada which meets any two of the following criteria: (i) it has at least $20 million in assets, (ii) it has generated at least $40 million in revenue or (iii) it employs an average of at least 250 employees.

Clearly the legislation is targeting lead firms as large, brand owning corporations at the top of supply chains which decide how various aspects of their production will be organised (Salminen & Rajavuori, 2019). They decide whether production is outsourced or not and to whom so even if they do not directly employ slave labour the disclosure regime targets them as being responsible for policing the practices within their supply chains (Prokopets, 2014). It should be noted that smaller businesses which may also have supply chain labour violations but do not meet the required thresholds are not captured. However, it appears that the goal was to target major brands which the legislation does effectively.

Evaluating Canada’s Modern Slavery Legislation

Jonelle Humphrey*

Summary

Introduction

Typology

a.Type of Legislation

b.Material Scope

c.Personal Scope

d.Definition of Value Chain

ABOUT GFLC
Governing Forced Labour in Chains

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Homeworkers in urban India: The need for a humanizing approach to labour regulation

Evaluating Canada’s Modern Slavery Legislation

Jonelle Humphrey*

Summary

Introduction

Typology

a.Type of Legislation

b.Material Scope

c.Personal Scope

d.Definition of Value Chain

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ABOUT GFLC Governing Forced Labour in Chains

CONTACT GFLC

ABOUT GFLC
Governing Forced Labour in Chains