Forced and child labour in supply chains has become a growing area of concern for governments, businesses, and consumers alike. In response, Canada enacted the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Supply Chains Act”) to ensure greater transparency and accountability among organizations operating within Canada. Under this new legislation, certain businesses and government institutions must issue annual reports detailing how they identify, prevent, and address these serious labour issues.
Understanding whether and how the Supply Chains Act applies can be challenging for many organizations, especially those with complex international supply chains. Below is an overview of the Act’s key obligations, who is required to report, and what steps you should consider before the next filing deadline.
1. Does the Supply Chains Act Apply to Your Organization?
The Supply Chains Act applies to certain government institutions and select covered “entities.” These include corporations, trusts, partnerships, or unincorporated organizations that:
- Are listed on a Canadian stock exchange; or
- Have a place of business in Canada, conduct business in Canada, or hold tangible assets in Canada, and meet at least two of the following conditions in at least one of their last two financial years:
- possessed at least CAD$20 million in global assets;
- generated at least CAD$40 million in total global revenue;
- employed an average of at least 250 employees globally; or
- is otherwise prescribed by regulations (which have yet to be enacted).
2. Determining Your Reporting Obligations
Even if your organization meets the definition of an entity, the reporting obligation will only apply if your organization:
- Produces goods in Canada or elsewhere;
- Imports goods into Canada that were produced outside Canada; or
- Controls an entity that engages in either (1) or (2).
Recent guidance issued by Public Safety Canada confirms that an organization engaged solely in selling or distributing goods (without also producing or importing them) does not have a reporting obligation. Public Safety Canada has indicated that it does not plan to pursue enforcement against such organizations.
3. What Must Be Reported?
The Supply Chains Act requires reporting entities to prepare a report outlining how they addressed potential child labour or forced labour in their supply chains during the previous financial year. Specifically, each report must include:
- The organization’s actions to prevent or minimize the risk of forced or child labour;
- The organization’s structure, activities, and supply chains;
- Policies and due diligence processes addressing forced and child labour;
- The risks of forced or child labour within its business and supply chains and the steps taken to assess and manage those risks;
- Any remediation measures related to forced or child labour;
- Any measures taken to address the loss of income for vulnerable families resulting from efforts to eliminate labour abuses;
- Any training provided to employees regarding forced and child labour; and
- How the organization assesses the effectiveness of its efforts to prevent the use of forced or child labour in its operations and supply chains.
4. What Labour Abuses Are Covered?
The Supply Chains Act covers both child labour and forced labour:
- Child labour includes services provided by minors (under 18) under conditions deemed illegal in Canada, dangerous, likely to interfere with education, or that meet the definition of the worst forms of child labour under Article 3 of the 1999 Worst Forms of Child Labour Convention.
- Forced labour includes services provided under coercive or unsafe conditions or those constituting forced or compulsory labour as defined in Article 2 of the 1930 Forced Labour Convention.
5. Submission Dates & Publication Requirements
Organizations that fall under the reporting criteria must submit an annual report to the Minister of Public Safety by May 31st of each year. All filed reports will be published in an online registry maintained by Public Safety Canada.
In addition, organizations must make their report publicly available in a prominent location on their website.
If the organization is a federal corporation (meaning it is incorporated under a federal law, such as the Canada Business Corporations Act) a copy of the report must also be provided to shareholders alongside the annual financial statements.
Conclusion
The Supply Chains Act represents a significant step by Canada to align with global efforts aimed at preventing forced and child labour. As the reporting deadline approaches each year, it is crucial for organizations to determine whether they fall under the Act’s scope. Non-compliance can result in substantial consequences, including federal investigations and significant fines.
In addition, responsible supply chain management signals a strong commitment to ethical business practices, a quality increasingly valued by investors, consumers, and business partners alike.
As trusted legal advisors, we help our clients determine whether they are subject to the Supply Chains Act and provide support through each step of the reporting process.
We would be pleased to work with you to navigate these new requirements. Please contact Laura for further information:
Laura Balagus
Lawyer
204.956.3516
[email protected]
Note: This article is of a general nature only and is not presented as a comprehensive review of the law or as being exhaustive of all possible legal rights or remedies. This article is not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice applicable to their own circumstances. We do not undertake any obligation to update this article to reflect changes in law that may occur in the future.