Forced and Child Labour Reporting Requirements Coming Soon

• Case
  Littlewood

  Case
  Littlewood

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On December 20, 2023, Public Safety Canada (finally) provided guidance on the new Fighting Against Forced Labour and Child Labour in Supply Chains Act.[1] Organizations caught by the Act must submit annual reports outlining their efforts to address forced and child labour in their supply chains. These organizations should begin creating their reports soon—the first reports will be due in Spring 2024. This post provides an overview of the Act, who needs to submit reports, and some of the details that go into a report.

The Rationale – Forced Labour and Child Labour

The Act is a part of Canada’s international commitment to address forced labour and child labour in Canadian supply chains. The International Labour Organization estimates suggest there are over 27 million victims of forced labour worldwide, many of whom are forced into labour in the private economy.[2] The Act obligates Canadian government institutions and certain organizations doing business in Canada to report on their efforts to “ensure that exploitative practices are addressed and eradicated from their supply chains”.  

Who Has to Report?

Both “entities” and government institutions may have to submit reports. Under Part 1 of the Act, “government institutions” that produce, purchase, or distribute goods must submit reports to the Minister of Public Safety.

Non-governmental organizations have reporting requirements if they (1) meet the definition of “entity” provided in section 2 of the Act, and (2) engage in the activities detailed in section 9 of the Act. “Entity” is broadly defined under the Act to include a corporation, trust, partnership, or other unincorporated organization that is either:

1. listed on a stock exchange in Canada;
2. has a place of business in Canada, does business in Canada, or has assets in Canada and that meets at least two of the following conditions for at least one of its two most recent financial years:
   1. it has at least $20 million in assets,
   2. it generates at least $40 million in revenue, and
   3. it employs an average of at least 250 employees; or
3. is prescribed by the regulations.

The key question for most organizations will be whether it meets the “size” requirements relating to assets, revenue, and employees listed in (b). Public Safety Canada has stated that these size criteria should be based on consolidated financial statements and refer to total, global assets, revenue, and employees—not just those related to business activities in Canada.[3]

If an organization qualifies as an entity, it must submit a report if it:

1. produces, sells, or distributes goods in Canada or elsewhere;
2. imports into Canada goods produced outside Canada; or
3. controls an entity engaged in any activity described in paragraph (a) or (b).

If an entity does not engage in any of these activities, it does not need to report.

Public Safety Canada has recently clarified a few features of these criteria:

• work that merely supports the import of goods, such as marketing or administrative services, is not captured;
• purchasing goods from outside Canada alone does not qualify as importing goods—an entity “imports goods” if it is responsible for accounting for those goods under the Customs Act;
• while there is no minimum value that an entity must produce, sell, distribute or import for the Act to apply, “very minor dealings” do not count.[4]

What do reports need to contain?

Yearly reports are due on or before May 31^st of each year (or earlier for certain federally incorporated entities). All reports will be available online to the public. Entities must also upload their reports to their websites. When submitting their reports, organizations must also complete an online questionnaire. The questions are available online here. Public Safety Canada has stated that answering the questionnaire’s mandatory questions and submitting the attested report is sufficient to meet the Act’s reporting requirements.[5]

Reports must discuss the steps the reporting organization “has taken during its previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the entity or of goods imported into Canada.” Reports must also include information about:

1. the entity’s structure, activities, and supply chains;
2. the entity’s policies and due diligence processes in relation to forced labour and child labour;
3. parts of the entity’s business and supply chains that carry a risk of forced labour or child labour and the steps the entity has taken to assess and manage that risk;
4. measures the entity has taken to remediate any forced or child labour;
5. measures the entity has 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;
6. training the entity has provided to employees on forced labour and child labour; and
7. how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

Detailed guidance from Public Safety Canada on each of these elements is available here.

Failing to submit a report as required brings harsh penalties for the organization and for directors, officers, and agents that participated in failing to submit the report.

Takeaway

If your organization is caught by the Act, you should begin preparing your report soon. The first reports will be due on May 31, 2024, or earlier for certain federally incorporated entities. In addition to completing the questionnaire and compiling the report, organizations need to have the report approved by their governing body (often, their Board of Directors). These things can take time.

[1] https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/index-en.aspx

[2] www.ilo.org/global/topics/forced-labour/lang–en/index.htm

[3] https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/prpr-rprt-en.aspx#a42

[4] https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/prpr-rprt-en.aspx#a42

[5] https://www.publicsafety.gc.ca/cnt/cntrng-crm/frcd-lbr-cndn-spply-chns/prpr-rprt-en.aspx#a43

_{This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.}