New South Wales is the first jurisdiction to enact modern slavery legislation in Australia, with the Modern Slavery Act 2018 (NSW) (NSW Act) passing through Parliament on 21 June 2018. The NSW Act contains some key differences to the proposed Commonwealth Modern Slavery Bill 2018 (Cth) (Commonwealth Bill) which was introduced into Federal Parliament on 28 June 2018 and is expected to pass Parliament later this year.
Both the NSW Act and the Commonwealth Bill introduce reporting requirements for certain commercial entities that are aimed at increasing transparency in commercial supply chains to combat modern slavery.
However, the NSW Act and the Commonwealth Bill differ in their approach to government entities.
This article will look at the direct impacts of the NSW Act on NSW government procuring agencies which, for the purposes of the NSW Act include:
- a NSW Government agency
- a State owned corporation
- a Corporations Act 2001 (Cth) company under which one or more shareholders are a minister of the Crown
- a council, county council or joint organisation within the meaning of the Local Government Act 1993 (NSW).
Overview of the NSW Act and the Commonwealth Bill
Under the NSW Act, a “commercial organisation” with an annual turnover of $50 million or more must prepare a modern slavery statement (Statement) each financial year.
The Statement must contain such information as required by the Regulations and be published publicly within the time frame stipulated by the Regulations (likely to be within five months of the end of the financial year). The Regulations have not yet been enacted, however will likely require an organisation to include the following information in its Statement:
- the organisation’s structure, its business and its supply chains
- due diligence processes in relation to modern slavery in its business and supply chains
- the parts of its business and supply chains where there is a risk of modern slavery taking place, and the steps it has taken to assess and manage that risk
- the training about modern slavery available to its employees.
Large penalties of up to $1.1 million apply for failing to prepare or publish a Statement, or for providing false or misleading information in connection with a Statement. Statements will be published on a public register which will be kept by the Anti-slavery Commissioner (Commissioner).
For the purposes of the NSW Act, a NSW government agency is not a commercial organisation and is therefore not required to prepare a Statement. However, as set out below, the obligations on NSW government agencies, while different, end up having a very similar effect to commercial organisations.
In comparison, the Commonwealth Bill applies to Australian organisations with a revenue over $100 million per financial year which includes the Commonwealth and Commonwealth entities or companies. Similar to the NSW Act, those qualifying organisations must prepare a modern slavery statement (within six months of the end of the financial year) which is to be maintained on an online public register by the Minister of Home Affairs. The Commonwealth Bill contains some additional requirements regarding the content of the modern slavery statements, including the effectiveness of actions taken by the reporting entity, and the consultation process with other entities the reporting entity owns or controls.
Both the NSW Act and Commonwealth Bill contain “opt in” provisions allowing organisations who do not meet the thresholds to voluntarily submit modern slavery statements.
A key difference between the two regimes is the penalties for non-compliance, with the Commonwealth Bill currently not prescribing any penalties for non-compliance, compared with the potential $1.1million fine for non-compliance under the NSW Act.
The NSW Act and government procuring agencies
As noted above, NSW government agencies are exempt from preparing Statements under the NSW Act, as compared to the Commonwealth and Commonwealth entities under the Commonwealth Bill.
Instead, the NSW Act applies separately to government agencies and creates separate mechanisms to ensure the procurement of goods and services by the NSW Government are not the product of modern slavery. To this end, the NSW Act requires the Commissioner to regularly consult with the Auditor-General and the NSW Procurement Board to monitor the effectiveness of due diligence procedures to ensure goods and services are not the product of modern slavery. There is little guidance in the NSW Act regarding what regular consultation may entail or how the effectiveness of due diligence procedures may be monitored or measured.
The NSW Act also amends a number of other NSW Acts and Regulations to ensure goods and services procured by and for government agencies are not the product of modern slavery, including:
- new provisions under the Public Works and Procurement Act 1912 (NSW) which allow the Auditor-General to conduct a modern slavery audit of a government agency to determine if reasonable steps have been taken by the agency to ensure goods and services are not the product of modern slavery
- new provisions under the Public Finance and Audit Act 1983 (NSW) which allow the Auditor-General to conduct a risk-based audit to assess whether goods and services procured by government agencies are the product of modern slavery
- new provisions under the Annual Reports (Departments) Regulation 2015 andAnnual Reports (Statutory Bodies) Regulation 2015, requiring the annual report of a NSW Government Department or Statutory Body to include:
- a statement of action taken in relation to any issue raised by the Commissioner in the previous year
- a statement of steps taken to ensure the goods and services procured were not the product of modern slavery.
The Commissioner must also publish on the public register any government agency failing to comply with directions of the NSW Procurement Board concerning procurement of goods and services that are the product of modern slavery and whether the government agency has taken steps to ensure compliance in the future.
Further, the Commissioner may also develop publicly available codes of practice that promote public awareness and assist government agencies to identify, monitor and remediate modern slavery in their supply chains.
Conclusion and next steps
Both the NSW Act and Commonwealth Bill impose reporting requirements on commercial entities aimed at exposing the prevalence of modern slavery in supply chains and allow the Australian business community to take proactive and effective actions to address modern slavery.
While there are many similarities between the two legislative regimes, the different approach to government entities is a key point of difference and NSW government agencies need to be aware of their obligations in this regard.
What NSW government agencies should begin turning their mind to now is:
- what sectors are they involved in and buy from
- which of those sectors are high risk in relation to modern slavery
- which entities that they do business with are above or below $50 million and, where they are less than $50 million, whether any are opting in to the legislation
- changes to the procurement documentation, in particular Tender Returnable Schedules in relation to Supply Chains, Modern Slavery Statement, modern slavery compliance, modern slavery policies and training
- changes to commercial and construction contracts regarding modern slavery compliance, assistance with audits, proactive disclosure of identified issues or fines, and specific indemnities regarding loss or damages arising from breaches, including loss of reputation (normally excluded as consequential loss).
Authors: Scott Alden, Victoria Gordon & Lauren Stables from Holding Redlich
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