NSW Modern Slavery Act update: key findings from Report 56

The New South Wales Modern Slavery Act 2018 (NSW Act) was the first to be passed in Australia. With a threshold comparable to the UK Modern Slavery Act, significant penalties for failing to report and a focus on victim support, it was considered one of the most progressive pieces of anti-slavery legislation in the world. 

But just six months later, the passing of the Commonwealth Modern Slavery Act 2018 (Commonwealth Act) threw the progressive NSW Act into doubt. There was widespread concern regarding inconsistencies between the two pieces of legislation, particularly in respect of the supply chain transparency obligations and, consequently, the NSW Act was returned to the NSW Legislative Council’s Standing Committee on Social Issues’ (Committee) for review. 

Last week, the Committee released its report with strong support for some of the key elements of the NSW Act. Provided the NSW Government accepts the recommendations in the report, certain entities with a consolidated revenue of more than $50 million and with at least one employee in NSW will be required to report under the NSW Act and there will be penalties of up to A$1.1 million if they fail to do so.

Review of the NSW Act

On 25 March 2020, the Committee tabled its anticipated Report 56 with the Clerk of the Parliaments (Report), following its inquiry into the NSW Act. 

The Report follows a lengthy public consultation process in which the Committee considered the operability and effect of the NSW Act, a proposed amendment Bill and Regulations designed to address concerns in the Act, particularly harmonisation of the reporting requirements with the Commonwealth Act. You can read more about this process and the NSW Act here. 

Committee findings

The Committee found that the NSW Act had significant stakeholder engagement with over 100 submissions and 27 pieces of evidence provided in person. Its robust features such as a strong supply chain transparency scheme for business and government, an Anti-Slavery Commissioner, the creation of new modern slavery offences, support for victims and the establishment of a parliamentary committee to provide oversight, were particularly supported. 

However, the Committee also recognised that there was room for improvement, particularly with the advent of the Commonwealth Act. So, while remaining true to the spirit of the NSW Act, they recommended some key changes aimed to:

• harmonise the NSW anti-modern slavery scheme with the Commonwealth scheme;
• propose alignment with the Commonwealth Act statutory review to discuss harmonisation of the reporting threshold, while retaining the $50 million reporting threshold in NSW; 
• iron out some mechanics regarding the application and prosecution of penalties; and 
• enhance victim support, remove so-called ‘modern slavery risk orders’ and clarify the scope of the NSW Acts application to certain entities. 

We explain these recommendations in more detail below, but the key takeaway of the Committee’s review, found in the first of 17 recommendations, is that despite concerns to the contrary (and provided the Committee’s recommendations are accepted) the NSW Act is here to stay. 

Harmonisation between the NSW and Commonwealth reporting schemes 

A key theme of the stakeholder submissions was that having both state and federal modern slavery legislation with different supply chain transparency schemes may impose a large administrative burden on business.

In an attempt to overcome these concerns, the Committee: 

• recommended the introduction of a statutory review of the NSW Act, to be conducted in conjunction with the Commonwealth Act, where issues such as reporting thresholds and exemptions for charities and not-for-profits will be considered (on the current timetable, this review will occur any time after 1 January 2022);
  
  
• recommended that the Anti-Slavery Commissioner continue to work with business to ensure that reporting requirements and guidance are simple and clear;
  
  
• commented that it supported the ongoing work of the Anti-Slavery Commissioner to ensure that the mandatory minimum contents of statements, timing and method of publication of statements was consistent with the Commonwealth; and
  
  
• noted that the ability for an entity to voluntarily report under the Commonwealth Act and meet its obligations under the NSW Act would ‘go a long way’ to address businesses concerns about administrative burdens. 

The $50 million threshold is holding fast (for now)

The Committee recommended that the NSW Government retain the $50 million reporting threshold under the NSW Act. Many submissions from business saw the reporting threshold as unfair, as it is lower than the Commonwealth’s $100 million threshold. However, the Committee saw merit in NSW maintaining the $50 million threshold in order to use it as leverage in threshold harmonisation discussions during the statutory review proposed for 2022, and to encourage the Commonwealth to lower its threshold at that time. 

Notably, the lower threshold would bring the Commonwealth in line with the recommendations of the Joint Standing Committee on Foreign Affairs Defence and Trade - Inquiry into establishing a Modern Slavery Act, which originally proposed a reporting threshold of $50 million. 

The Committee also recommended that the NSW Government amend the NSW Act to replace the term ‘turnover’ with ‘consolidated revenue’ to bring it in line with the Commonwealth. 

Penalties 

Entities who are covered by the NSW Act are subject to penalties of up to $1.1 million if they fail to prepare or publish a statement or provide false or misleading information in a statement. However, entities with a turnover of $100 million or more falling under the Commonwealth Act are not subject to penalties. 

The penalties in the NSW Act are considered one of the robust features characteristics of the NSW Act and were strongly supported by modern slavery advocates in the Committee’s review. 

While the Committee acknowledged that the disparity in penalties is not ideal, it determined to retain penalties in order to be in a position to encourage the Commonwealth to strengthen its Act by adopting penalties at the 2022 Statutory Review. 

Significantly, rather than stepping back from the idea of penalties, the Committee recommended that the NSW Government specify a relevant authority responsible for commencing prosecutions against businesses for breaches of section 24 of the Act (transparency of supply chains). 

Other recommendations 

The Committee also made a number of other recommendations including to:

• remove Modern Slavery Risk Orders (following submissions regarding their problematic application within the NWS criminal justice system from the NSW Government, DPP and the Law Society);
  
  
• increase victim support by allowing victims of modern slavery to access recognition payments;
  
  
• create of a working group comprising Government and key stakeholders to consider further amendments to protect potential victims of forced marriage;
  
  
• clarify that local councils and not-for-profit registered clubs who meet the reporting thresholds must report under the NSW Act and encourage the NSW Government to finalise the development of a voluntary reporting mechanism for businesses falling below the $50 million threshold; and
  
  
• in relation to the extraterritorial scope of ‘modern slavery offence’, the Committee supported the proposed Amendment Bill’s clarification that extraterritorial conduct, which would constitute an offence if it occurred in New South Wales, is included under the NSW Act.

Looking ahead

The Committee’s Report provides a lifeline to the NSW Modern Slavery Act which many thought may fade into obscurity in the face of the Commonwealth Act. However its proclamation is not yet assured. 

The Committee has recommended commencement of the NSW Act by 1 January 2021. In the meantime, we await the Government’s response to the report. If positive, the NSW Act must then return to the Legislative Council which must in turn accept and adopt the recommended changes. 

The COVID-19 pandemic may have an impact on the legislative timetable in NSW and so the future and timing of the Act will remain unclear until we have an indication of the Government’s intent.

However, if everything goes to plan, if an entity that is not a charity, not-for-profit organisation or small business has a consolidated revenue of $50 million and at least one employee in NSW, it will have to report on the risks of modern slavery in its supply chain and describe what it is doing to address those risks, with significant penalties for failing to do so. 

Contact us

If you would like more information about the NSW Act, clarification on whether you are likely to be a reporting entity, questions about next steps, or some assistance in the process of preparing your modern slavery statement, please contact us using the details listed.