Modern Slavery Act

What is going on with the Modern Slavery Act 2015?

The UK’s modern slavery legislation has had a significant effect on supply chain management for organisations of all sizes dealing with the UK market.  There have been a number of attempts to beef up enforcement and an influential House of Commons committee looked at the way in which the law operates in 2021 with a particular focus on the use of forced labour in China. On 16 October 2024, a special House of Lords Committee published its report ‘The Modern Slavery Act 2015: becoming world-leading again’. As hinted at in the title, the report suggested that the UK has fallen behind: “When the Modern Slavery Act was passed in 2015, it was said to be world-leading. Since then, the world has changed and best practice has moved on.”

What is the Modern Slavery Act?

The Act received Royal Assent on 26 March 2015. It sought to do a number of things including:

• consolidate and simplify existing offences into a single Act;
• put in place reporting obligations for organisations including those based outside the UK
• ensure that those involved in criminal activity receive suitably severe punishments for modern slavery crimes (including life sentences);
• enhance the courts’ ability to put restrictions on individuals where it’s necessary to protect people from the harm caused by modern slavery offences; and
• create an Independent Anti-Slavery Commissioner to improve and better coordinate the response to modern slavery.

There are 3 types of criminal offences under the Modern Slavery Act 2015:

1. Slavery, servitude and forced or compulsory labour,
2. Human trafficking, and
3. Committing any offence with the intent to commit human trafficking.

Which part of the Modern Slavery Act 2015 was is most relevant for businesses?

Section 54 of the MSA 2015 contains the duty on companies supplying goods or services to have transparency and accountability measures in place.  It applies to commercial organisations (bodies corporate and or partnerships) which have a total turnover (gross annual revenue) of at least £36 million. 

In-scope organisations need to prepare a slavery and human trafficking statement every financial year, and that statement must be approved and signed by an appropriate senior person in the business in order to ensure a level of senior accountability. Depending on the type of commercial organisation, this could mean approval from the board of directors, members, or partners. The statement must set out the steps taken to ensure that slavery and human trafficking are not part of the business or supply chains, or state that the organisation took no such steps.  This has been a real area of focus for pressure groups since the Act came in with many looking critically at the steps a company has put in place.

The scope of this requirement has extraterritorial effect, it applies to organisations formed outside of the UK if the organisation meets the turnover threshold, and they have a demonstrable business presence in the UK (e.g. receiving income from the UK or having a UK office). For the purposes of the turnover threshold worldwide revenue counts not just money from UK sales.

How does the scope of section 54 apply to subsidiaries and parent companies?

The statutory guidance states that “any organisation in any part of a group structure will be required to produce a statement” if they are a body corporate or partnership wherever incorporated and have an annual turnover of £36m or more. The guidance clarifies that “if any organisation in any part of a group structure meets these requirements, it is legally required to produce a statement.” Therefore, there may be circumstances where a large parent company has a large subsidiary, and both organisations are required to produce the statement. However, parents are allowed to produce one statement that a subsidiary (or subsidiaries) can use to meet this requirement.

How is section 54 enforced?

There is currently no criminal enforcement for section 54. The Secretary of State may enforce section 54 duty by way of an injunction. If an organisation fails to comply with the injunction, it will be in contempt of court and could by subject to an unlimited fine.  

Despite the fact that enforcement is cumbersome there have been efforts to encourage companies to comply.  We have seen campaigns by UK Government to enforce compliance and to encourage filings on the Modern Slavery Statement Register which currently has more than 56,000 entries.  We know that UK Government has sent more than 17,000 letters to CEOs and business leaders seeking compliance.  Many companies who do business with UK Government have also been encouraged to register as part of the purchaser’s due diligence process.

What did this 2024 report say about the Section 54 requirement?

The House of Lords report referenced the March 2021 report by the House of Commons Business, Energy and Industrial Strategy Committee (BEIS Committee) which found evidence that many major companies with a UK presence could not demonstrate that their supply chains were free from the forced labour of Uyghur people. This reported noted that the BEIS Committee had suggested section 54 be strengthened by widening the scope and imposing fines for non-compliance.  The BEIS report led to front-page news articles on some of its findings and criticism of The Walt Disney Company in Parliament.

The House of Lords report also noted that while the Home Secretary can enforce the section 54 duties via injunction, this power has never been used.

Overall, the House of Lords report highlighted inconsistent statements and lack of mandated requirements as key factors making it difficult for companies to be held accountable for their transparency. Additionally, the report expressed how the current enforcement approach is not effective.

What does the report recommend?

Recommendations in the report include, but are not limited to:

• The Government make the publication of modern slavery statements mandatory, with more specific topics to be covered to encourage consistency and include a description of how the organisation assessed the effectiveness of its actions.
• Proportionate sanctions for non-compliant organisations.
• Standardised and accessible guidance for compliance, which will also aim to increase awareness of the requirements.
• Extending section 54 requirements to bodies in the public sector so that they fulfil their duty of care by investigating their supply chains for evidence of exploitation.
• Introducing legislation requiring companies meeting the threshold to undertake modern slavery due diligence in their supply chains, and to take reasonable steps to address problems. Also, UK due diligence laws should be compatible with the standards of the international landscape, which will also make compliance easier for companies.
• The introduction of forced labour related import bans in the UK.  This would align the UK more closely with the US where export bans have increased the importance companies have attached to supply chain due diligence.  There have been attempts to use existing law, the Foreign Prison-Made Goods Act 1897, to look at the importation of goods but so far without success.
• To improve information and data sharing mechanisms across multiple agencies, including between the police and the NHS.

A key concern of this report is that the UK has fallen behind on international developments, what are some examples of developments in other countries?

Since 2015 a number of jurisdictions have adapted their own laws to try and look at the same issues.  Examples include:

• The EU Corporate Sustainability Due Diligence Directive 2024: this addresses the importation of goods with suspected forced labour in the supply chain.
• The German Act on Corporate Due Diligence Obligations in Supply Chains , which entered into force in January 2023.
• The 2017 French Duty of Vigilance Law.
• The 2022 Norway Transparency Act.
• The Australian Modern Slavery Act 2018.

As we’ve already said a key development has also been the use of import laws in the US which has led to port seizures and other complications.  It seems likely that the incoming Trump administration will continue to use these type of controls in tandem with increased duties on countries like China where the perception is that forced labour reduces cost to make home produced goods less competitive.

What happens next?

The Government has two months to respond to this report.  Our view is that the report is likely to be taken seriously.  Two of the key movers in the BEIS Committee now have influential roles.  The Committee Chair Darren Jones is now Chief Secretary to the Treasury and a rising star in the new Starmer Government.  Nus Ghani who was the lead member for the BEIS Committee’s investigation is now the Deputy Speaker of the House of Commons and Chairman of Ways and Means. There seems to be a head of steam behind amendments to the Act however the Starmer Government has a number of pressing demands on its resources and Parliamentary time is likely to be tight.

What can organisations do to prepare?

Whether or not UK law does change with the increased concentration on supply chain compliance organisations may want to consider:

1. Overall, it would be good practice for organisations to gain a more comprehensive understanding of their supply chains. This could include steps such as supply chain mapping, designating appropriate oversight, and opening more dialogues with suppliers.
2.  Making sure that their organisation adopts a proper due diligence process.  This will include checking the organisations they deal with and their location.  Resources like the Global Slavery Index and the resources on children’s rights provided by Humanium can help as part of that process.  But geography will not tell the whole story – we have seen incidents of ‘false flagging’ where countries in problematical countries hide their ownership by registering subsidiaries in another country.  We have also seen examples of slaves being imported into the UK to manufacture goods using forced labour conditions.  There are more tips for due diligence below.
3. Being clear of suppliers what is expected of them and embodying those commitments into written contractual terms.  This might include audit rights and rights to demand shipping documents and invoices to check the origin of goods and raw materials.
4. Training employees and board members on the risks.  Those involved in the procurement process will be key.
5. Making sure helplines are in place to receive reports of potential concerns.
6. Having an investigation plan in place to help respond to concerns.

There is no one-size-fits-all checklist of specific practices to take or red flags to watch out for in supply chain due diligence, different industries will have different areas of concern. Examples could include:

• Checking import documents for either mismatched information, or for goods imported from high-risk countries.
• Keeping up-to-date on geographic areas with higher risks of human rights abuse.
• Keeping up-to-date on high-risk products or industries. For example, recent UK government guidance cited an NGO study that identified the top 5 most valuable products imported per year that have risks of forced labour include: Garments, Electronics, Fish, Textiles, and Timber.
• Reviewing suppliers’ recruitment policies and / or their Modern Slavery policy prior to onboarding.
• Site visits before and after onboarding a supplier, where reasonably practicable.  This action may be more relevant to organisations who deal with physical goods, with factories in their supply chain.
• Service supplier audits, which may be more applicable in industries such as cleaning, warehousing, and catering, where worker pay is often low.  

Lastly, keep a close eye on the topic of Modern Slavery during regulatory change horizon scanning.  

For more information, please contact our Corporate Governance and Compliance specialists at Punter Southall Law.

Additional resources:

1.  Details of the 2020 House of Commons committee report are here: Forced labour in UK value chains – Committees – UK Parliament
2. The 2024 House of Lords report is here: The Modern Slavery Act 2015: becoming world-leading again
3. The Modern Slavery Statement Register is here: Find modern slavery statements – GOV.UK
4. Government guidance on procurement is here: PPN 02/23 – Tackling Modern Slavery in Government Supply Chains – Guidance (HTML) – GOV.UK