On May 11, 2023, Canada passed An Act to enact Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (the “Act”). As we reported previously, the Act will create supply chain transparency and reporting obligations for certain companies as part of Canada’s efforts to fight against forced labour and child labour in Canadian supply chains.

What Obligations Are Placed on Companies?

Covered companies will be required to report to the Minister of Public Safety and Emergency Preparedness (the “Minister”) on or before May 31 of each year. Group companies may provide a joint report.

The report must include the steps the company has taken during the previous financial year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods in Canada or elsewhere by the company, or of goods imported into Canada by the company.

The report must also include information about the company’s:

1. Structure, activities and supply chains;
2. Policies and due diligence processes in relation to forced labour and child labour;
3. Parts of its business and supply chains that carry a risk of forced labour or child labour, and the steps it has taken to assess and manage that risk;
4. Measures taken to remediate any forced labour or child labour;
5. 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;
6. Training provided to employees on forced labour and child labour; and
7. Methods for assessing its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

Reports must be approved by the company’s governing body (or if a joint report, the governing body of each company included in the report; or the governing body of the company, if any, that controls each company included in the report).

Reports must be made available to the public, including by publishing a copy in a prominent place on the company’s website. Companies incorporated under the Canada Business Corporations Act or any other Act of Parliament must provide a copy of the report to each shareholder, along with its annual financial statements.

To Which Companies Does This Apply?

The Act will apply to companies that meet the definition of “entity”:

An “entity” is generally defined as:

A corporation or a trust, partnership or other unincorporated organization that:

1. Is listed on a stock exchange in Canada;
2. 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 conditions for at least one of its two most recent financial years:
   
   1. It has at least $20 million in assets;
   2. It has generated at least $40 million in revenue; and
   3. It employs an average of at least 250 employees; or
3. Is prescribed by regulations.

The Act further specifies that reporting obligations apply to those “entities” that are producing, selling or distributing goods in Canada or elsewhere; importing goods into Canada that were produced outside of Canada; or controlling an entity engaged in these activities. (Government institutions producing, purchasing or distributing goods in Canada or elsewhere will also be subject to reporting obligations.)

What are the Consequences for Non-Compliance?

Despite the relatively narrow definition of “entity” above, the Act will permit a “person” designated by the Minister to enter any place to conduct a search where they have reasonable grounds to believe there is anything to which the reporting obligations apply, or any document related to the administration of the reporting obligations. (The designated “person” has not yet been identified).  For this purpose, the designated person will have broad powers, including:

1. Examining anything in the place, including any document;
2. Using any means of communication in the place, or causing it to be used;
3. Using any computer system in the place – or causing it to be used – to examine data contained in or available to it, or to reproduce the data – or causing it to be reproduced – in the form of a printout or other intelligible output and to remove any printout or output for examination or copying;
4. Preparing a document based on the data or causing one to be prepared;
5. Using any copying equipment in the place, or causing it to be used;
6. Taking photographs or making recordings or sketches of anything in the place;
7. Directing any person to put any equipment in the place into operation or to cease operating it;
8. Prohibiting or limiting access to all or part of the place or to anything in the place; and
9. Removing anything from the place for the purpose of examination.

Every person or entity is guilty of an offence punishable on summary conviction and liable for a fine of not more than $250,000 for the following offences:

• Failing to comply with annual reporting obligations;
• Failing to make the annual report (or revised report) available to the public;
• Failing to give assistance reasonably required to enable the designated person to exercise their powers listed above;
• Failing to comply with a Minister’s order requiring an entity to take necessary corrective measures to file an annual report;
• Contravening the prohibition against obstructing or hindering a search by a designated person; and
• Knowingly making any false or misleading statement, or knowingly providing false or misleading information to the Minister or the person designated to administer and enforce an entity’s reporting obligations.

Individual directors, officers, agents, or mandataries of the person who directed, authorized, assented to, acquiesced in, or participated in the commission of any of these offences may also be subject to penalty.

When Will This Come Into Force?

The Act will come into force on January 1, 2024. This means that companies must prepare to report to the Minister by May 31, 2024.

Companies should prepare for the Act’s coming into force by first determining whether the Act’s reporting requirements are applicable. If so, companies should conduct due diligence within their organization and supply chains to assess the risk of forced labour and/or child labour. To the extent companies have supply chain transparency and reporting obligations under legislation in other jurisdictions, they may also consider how these efforts may be coordinated or consolidated. Indeed, this Act is part of a growing patchwork of national and supranational laws requiring employers to conduct due diligence of their operations and those of their business partners in order to address human rights risks such as forced labor and child labor.  Littler will continue to monitor and advise on these developments in the Business and Human Rights space.