Canada’s Modern Slavery Act

As of January 1, 2024, Canada’s new “Modern Slavery” legislation – the Fighting Against Forced Labour and Child Labour in Supply Chains Act – came into force. When new legislation such as this Modern Slavery Act, is enacted, businesses are faced with the challenge of navigating through uncharted territory to determine if the legislation applies to them and, if it does, what is required as a result. The Article aims to provide a general guide to assist businesses in working through Canada’s Modern Slavery Act.

The purpose of Canada’s Modern Slavery Act is to enhance transparency and accountability in supply chains, encourage proactive measures to combat forced labour and child labour, and contribute to Canada’s international obligations in combating modern slavery. The Act serves as Canada’s response to the issue of forced labour and child labour and reflects Canada’s commitment to combatting modern slavery and aligning with international labour conventions.

Does Canada’s Modern Slavery Act apply to your business?

The Act applies to government institutions producing, purchasing or distributing goods in Canada or elsewhere; and to entities producing goods in Canada or elsewhere or importing goods produced outside Canada.

As such, the first step in a business’ analysis is to determine if it falls within the Act’s definition of “Government Institution” or “Entity”.

What is a Government Institution?

The Act defines a “government institution” as:

  • any department or ministry of state of the Government of Canada, or any body or office, listed in Schedule I of the Access to Information Act, and;
  • any parent Crown corporation, and any wholly-owned subsidiary of such a corporation, within the meaning of section 83 of the Financial Administration Act.

What is an Entity? 

The Act defines an “entity” as a corporation, trust, partnership or other unincorporated organization that:

  • is listed on a stock exchange in Canada; or
  • has a place of business in Canada, does business in Canada or has assets in Canada and that, based on its consolidated financial statements, meets at least two of the following criteria for at least one of its two most recent financial years:
    • it has at least $20 million in assets;
    • it has generated at least $40 million in revenue; and
    • it employs an average of at least 250 employees.
  • Is prescribed by the regulations.

The above definition of “entity” casts a rather large net. All public companies are automatically caught and any other operating business operating in Canada will need to review its financials and employee records to determine if it meets the remaining thresholds of the definition.

While the Act itself does not define “employee”, the guidance provided by Public Safety Canada states that “employee” has the same meaning as in Canadian common law and includes people employed on a full-time, part-time and temporary basis (but does not include independent contractors). Further, the number to be used is the average employed by the entity over the course of its financial year.

Producing or Importing Goods?

If a business has determined that it falls within the Act’s definition of “entity” (we will now limit our discussion to “entities” only), the next step is to determine if the entity produces, sells or distributes goods in Canada or elsewhere; imports into Canada goods produced outside Canada; or controls an entity engaged in either of the foregoing. “Production of Goods” is defined in the Act as including the manufacturing, growing, extracting and processing of goods.

The Act does not define “importing”, nor does it provide any threshold values of importation that would be required for the Act to apply. Again, we look to Public Safety Canada for guidance, which states that to be considered as an importer of goods, the entity would need to be responsible for accounting for the goods under the Customs Act. Simply purchasing goods produced outside Canada from a third party (where that third party is the importer for the purposes of the Customs Act), does not count as importing goods.

Further commentary from Public Safety Canada states that there is no minimum value of goods that an entity must import in order for the Act to apply, so it would seem that the intent is for the Act to be wide-sweeping. However, in another statement, Public Safety Canada also states that the term import (among other terms) as they are used in the Act should be understood as excluding very minor dealings. Until such time that further commentary or clarification is provided, there is no way to know what constitutes “minor”. It may be the case that a one-time, small-value import would not give rise to obligations under the Act; however, with a potential penalty for failure to file a report of up to $250,000, it may be prudent to file in any event.

What to Report?

If you have determined that your business is caught by Canada’s Modern Slavery Act, you must complete an online questionnaire and prepare a report for submission to the Minister of Public Safety by May 31, 2024 (and annually thereafter). The report must include information on the structure, activities, and supply chains of the entity as well as details of the entity’s policies and due diligence processes related to forced labour and child labour, any identified areas of risk within its activities and supply chains as they relate to forced labour and child labour, and measures taken to remediate forced labour and child labour, among other information.

See the Public Safety Canada guidelines for more information.

Public Safety Canada points out that the purpose of the new legislation is to promote transparency and require entities to take steps to identify and address risks of forced labour and child labour in their supply chains. It is not to require entities to certify that their operations are risk free or to penalize entities for identifying risks.

The lawyers at Lakefield LLP are happy to discuss your business and determine if you should file a report under this new legislation.

The information in this article does not constitute legal advice. The law may have changed since this article was first published. You should consult with your lawyer to confirm the current state of the law and obtain advice specific to your situation.