UK Government Proposes Tighter Reporting Requirements Under Modern Slavery Act, but No Action on Enforcement Measures

Following a review of the Modern Slavery Act 2015 (MSA) and the Home Office ‘Transparency in Supply Chains Consultation’ that closed in September 2019, the UK government is proposing a tightening of the reporting requirements placed on companies and public sector organisations under the MSA.

The changes proposed by the government in response to the consultations would extend the number of organisations subject to MSA reporting obligations; introduce binding rules on the content, timing, and publication of modern slavery statements; and potentially introduce a single enforcement body to oversee MSA compliance. However, the review stops short of recommending financial or civil penalties for organisations that fail to comply with MSA requirements.

Extension of the duty to report

The proposals would extend the duty to prepare a modern slavery statement to public bodies with annual budgets in excess of £36 million, as well as companies with annual turnover in excess of this amount.

Contents, timing, and publication of modern slavery statements

Current Home Office guidance ‘recommends’ that organisations include the following areas in a modern slavery statement for the financial year:

• organisational structure and supply chains;
• policies on modern slavery and human trafficking;
• due diligence processes in relation to slavery and human trafficking;
• risk assessment and management in relation to modern slavery;
• actions taken to prevent slavery and human trafficking in their businesses or supply chains, measured against performance indicators, where possible; and
• details of staff training undertaken on slavery and human trafficking risks.

The proposed reforms would make it mandatory for organisations to cover each of the above reporting areas comprehensively in their modern slavery statements. Reporting entities would also be legally required to disclose any of the areas listed above where they have failed to take any action and ‘encouraged’ to give reasons for such failures.

The proposals also include the introduction of a uniform annual reporting deadline of 30 September. This would place the deadline for producing modern slavery statements six months after the end of the UK financial year (April through March). This proposal aims to remedy the current situation, in which modern slavery statements are published at disparate times of the year in line with various corporate financial reporting periods.

In addition to unifying the reporting period, the Home Office also proposed that reporting organisations publish modern slavery statements not only on their websites, but also on a centralized government web portal. This change would make it easier for consumers and other interested parties to access information on organisations’ compliance with the MSA and anti-trafficking track records.

Enforcement and civil penalties

Whilst the government’s response to the consultation includes a proposal to create a unified enforcement body to oversee MSA compliance, the response has stopped short of recommending enhanced civil penalties for noncompliance with the MSA. Currently, the sole sanctions under the MSA for a failure to report are the risk of being publicly ‘named and shamed’ by the Home Office and possible exclusion from the ability to tender for government contracts. However, to date, only the Crown Commercial Service has exercised its discretionary power to prevent companies in breach of MSA reporting requirements from tendering for their contracts.

Divergent responses to the consultation have led the Home Office to conduct a further review before announcing a decision on any enhanced sanctions under the MSA. However, the Home Office has indicated that one option under consideration is the introduction of a variable monetary penalty for future breaches of the MSA. This would be a civil rather than a criminal penalty, and the Home Office has stated that enforcement action would not be launched for at least a year following any changes made to MSA reporting requirements.

Practical tips for reporting organisations

In light of the proposed tightening of reporting requirements, and potential future sanctions, reporting entities may want to review their current compliance with MSA reporting standards and also review previous modern slavery statements for any gaps in reporting on key areas.

Reporting entities may also want to start scanning their supply chains for any potential areas of risk or concern. In addition, organisations may want to review their progress against previous modern slavery statement action points and consider enhancing their policies on training staff to spot signs of modern slavery or human trafficking.

In light of the proposed unifying of reporting deadlines and the fact that statements are now likely to be placed on a centralized register, the risk of adverse publicity for failing to meet MSA reporting standards has increased considerably. Additionally, the Home Office has written to all organisations that are currently obliged to prepare modern slavery statements to remind them of their obligations under the MSA. As a result of this and the expected one-year grace period that reporting organisations may expect before enforcement of any sanctions, it appears unlikely that reporting organisations will see continued leniency in enforcement standards moving forward.