Bill S-211: Canada’s Modern Slavery Legislation and What It Means for Corporate EntitiesThursday, October 20, 2022
Canada has recently expanded its legislative efforts to combat human rights abuses and exploitation in global supply chains. In 2016, it was estimated that approximately $34 billion of goods were imported into Canada that were at risk of being produced by forced labour or child labour.1 In 2020, it was estimated that approximately 160 million children worldwide participate in some form of child labour.2
Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (“Bill S-211” or the “Act”), if approved by the House of Commons and the Senate, will see Canada join other jurisdictions that have passed similar “modern slavery” legislation, including California, the United Kingdom, Australia, France, Germany and the Netherlands.
Mirroring recent modern slavery legislation enacted by its international counterparts, Canada’s Bill S-211 imposes obligations on corporate entities to report on measures taken to prevent the risk that forced labour or child labour is used by those entities or within their supply chains. Though Bill S-211 also applies to governmental institutions, this update focuses on the implications the proposed Act will have on corporate entities.
Subject to a third reading in the House of Commons, the Act as currently written:
- applies to all companies listed on a Canadian stock exchange as well as all companies that meet at least two of the following three thresholds: (a) over $20 million in assets; (b) over $40 million in revenue; and (c) at least 250 employees. The Act also applies to any entities otherwise prescribed by regulation;
- applies to the production, sale or distribution of goods in Canada, as well as the importation of goods into Canada, and all entities controlled by any entity engaged in any of the foregoing;
- imposes reporting obligations on entities which engage in any of such activities;
- imposes a maximum fine of $250,000 on entities, directors, officers, agents or mandataries in the event of non-compliance with the requirements of the Act; and
- grants warrantless search powers for the purpose of verifying compliance with the Act.
Bill S-211 was introduced to the Senate on November 24, 2021. On April 28, 2022, Bill S-211 passed a third reading in the Senate and has moved to the House of Commons where it completed its second reading on June 1, 2022. Currently, Bill S-211 is under consideration by the Standing Committee on Foreign Affairs and International Development. Bill S-211 will then move to a third reading later this year and assuming passage, could come into force as early as January 1, 2023.
Bill S-211, if passed, will apply to any entity that produces, sells or distributes goods in Canada or elsewhere, including any entity that imports goods into Canada, or any entity that controls another entity engaged in any of those activities.
An “entity” is defined in Bill S-211 to include all corporations listed on a Canadian stock exchange and any other corporation (including any trust, partnership or other unincorporated organization) that carries on business in Canada and is either prescribed by regulations, or meets at least two of the following three criteria:
(i) at least $20 million in assets;
(ii) at least $40 million in revenue; and
(iii) employs an average of at least 250 employees over the most recent two prior years.
The purchase, sale, distribution or import of goods includes “the manufacturing, growing, extracting, and processing of goods.” The definition of “control” is broad and permeates across jurisdictions by imposing disclosure obligations to all entities including all entities controlled directly, or indirectly, in any manner by the “entity” as defined above.
As currently written, the Act does not define “assets”, “revenue” or “employees”. As a result of this uncertainty, the Act may ultimately be broadly interpreted. Moreover, the breadth of the Act could include international entities if they carry on business in Canada.
Bill S-211 imposes reporting obligations on government institutions as well as entities. Bill S-211, if passed, will mandate that every entity provide an annual report (the “Report”) to the Minister of Public Safety and Emergency Preparedness (the “Minister”) on or before May 31 of each year. The Report can be delivered either in respect of the entity itself, or by virtue of being a party to a joint report in respect of more than one entity. The Report must include the steps taken by the entity during the previous financial year to prevent and reduce the risk that forced labour or child labour was used at any stages in the production of goods in Canada or elsewhere or the importation of goods into Canada.
The Report must also include further information in respect of each entity subject to the Report, including:
- its structure, activities and supply chains;
- its policies and its due diligence processes in relation to forced labour and child labour;
- the parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
- any measures taken to remediate any forced labour or child labour;
- any measures 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;
- the training provided to employees on forced labour and child labour; and
- how the entity assesses its effectiveness in ensuring that forced labour and child labour are not used in its business and supply chains.
The Report must then be approved and signed by the entity’s governing body and made publicly available. As currently written, making the Report publicly available requires that the Report be published in a prominent place on the entity’s website, but the Act does not elaborate on whether anything further is required to satisfy the requirement.
Enforcement and Penalties
Any entity that fails to comply with the Act could face a maximum fine of $250,000. The fine also applies to any person or entity that knowingly makes any false or misleading statement or knowingly provides false or misleading information to the Minister. The fine can also flow to directors, officers and agents of the entity if those persons are found to have directed, authorized, assented to, acquiesced or participated in the commission of the offence.
The Minister may designate any person (or class of persons) to administer and enforce reporting obligations. The Act allows for the designated person to enter any place of business without a warrant where they have reasonable grounds to believe there is any circumstance or any document relating to a circumvention of the Act. However, if the place of entry is a private residence, a warrant is required.
Bill S-211 currently enjoys broad support across the Canadian Parliament. At this stage, its passage is all but inevitable and entities operating in Canada should consider taking proactive steps including an assessment as to whether the entity will be subject to the Act. If so, it would also be prudent to implement procedures to facilitate compliance with the Act, including assembling the information required by the Report. If Bill S-211 receives royal assent before the end of this year, it will come into force on January 1, 2023, resulting in entities having to file their first Report by May 2023.
If you have any questions with respect to Bill S-211 discussed above, please contact Troy Pocaluyko (firstname.lastname@example.org), Al Wiens (email@example.com) or Jeff Arnold (firstname.lastname@example.org). The authors gratefully acknowledge the assistance of articling student Ana Savic in the preparation of this update.
This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.
If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.
1 Robert Mason, “Bill S-211: An Act to Enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to Amend the Customs Tariff” (2022) 44-1 Library of Parliament Legislative Summaries 3.
2 Ibid at 1.