New Reporting Obligations for Private Sector Entities

Overview

The Fighting Against Forced and Child Labour in Supply Chains Act (the “Act”) came into effect on January 1, 2024. The Act introduces new reporting obligations on certain private-sector entities to report on the measures taken to prevent and reduce the risk that forced labour or child labour is used by them or in their supply chains. Certain entities are now required to submit an annual report to the Minister of Public Safety by May 31 of each year. The first report is due May 31, 2024.

This article does not provide an exhaustive list or detailed description of reporting obligations introduced under the Act. This article provides an overview of the new reporting obligations created by the Act, which may be relevant for organizations with business in Canada:

1. Who needs to report?
2. Report contents
3. Enforcement and Penalties

1.Who needs to report?

The Act creates two sets of criteria that an organization must satisfy. The first set of criteria determines if the Act applies to the organization, while the second set of criteria determines if the organization must submit a report.

First, for the Act to be applicable, an organization needs to satisfy one of the following:

• Listed on a stock exchange in Canada; or
• Has a place of business in Canada, does business in Canada, or has assets in Canada that meets at least two of the following:
  • Has a least CAD$20,000,000 in assets;
  • Has generated at least CAD$40,000,000 in revenue; or
  • Has an average of at least 250 employees.

Second, to be required to submit a report, an organization must meet one of the following criteria:

• (a) Producing, selling or distributing goods in Canada or elsewhere;
• (b) Importing into Canada goods produced outside of Canada; or
• (c) Controlling an entity engaged in any activity described in (a) or (b).

If an organization is not involved in any of the activities described in (a), (b) or (c), it does not need to report.

2. Report contents

The Act outlines the content that must be addressed in the reports, which will be made publicly available on Public Safety Canada’s website. In addition, organizations must publish their reports on their own website, and in certain circumstances, provide these reports to their shareholders.

A report must discuss the following items as they apply to the organization and its supply chains:

• Steps taken to prevent and reduce the risks of forced and child labour;
• Structure, activities and supply chains;
• Policies and due diligence processes in relation to forced and child labour;
• Parts of its business and supply chains that carry a risk of forced or child labour being used and the steps it has taken to assess and manage that risk;
• Measures taken to remediate any forced or child labour;
• Measures taken to remediate the loss of income to vulnerable families that results from any measure taken to eliminate the use of forced or child labour in the organization’s activities and supply chains;
• Training provided to employees on forced and child labour;
• Assessment of the effectiveness of the organization in ensuring that forced and child labour are not used in its business and supply chains;

In addition to its own activities and supply chains, if the organization controls one or more organizations also subject to the Act’s reporting obligations, the report must address the items in the above list as they apply to the controlled organization(s).

3. Enforcement and Penalties

To enforce compliance, the Act provides for:

• Monetary penalties for failing to comply with the requirements of the Act (for example, failing to submit a complete report or knowingly providing false or misleading information) which can carry a maximum fine of $250,000; and
• Significant investigatory powers given to the Minister (and persons the Minister designates) to enter premises (excluding ‘dwelling-houses’) and to examine and record anything in the place, including using any computer systems.

Further, if an organization does not comply with the Act, any director, officer, employee or agent of the organization who directed, participated in or acquiesced to the non-compliance can also be personally penalized with a maximum fine of $250,000.

Summary

The new reporting obligations created by the Act are now in effect and certain organizations must prepare and submit their first report by May 31, 2024. Given the non-compliance penalties now in effect, organizations would be prudent in determining whether they are subject to the Act and adapting to the new requirements to ensure full compliance the new legislation.