On 8 April, the Government announced that it is commencing consultation regarding a legislative response to Modern Slavery and Worker Exploitation, Forced Labour, People Trafficking and Slavery.
Developed by the Ministry of Business, Innovation and Employment (MBIE) and the Modern Slavery Leadership Advisory Group, chaired by Rob Fyfe, the legislative proposals would adopt a disclosure and due diligence approach which places obligations on all types of entities, regardless of size. This could include companies, sole traders, partnerships, state sector organisations, local government, charitable entities, trusts, incorporated societies and Māori trusts and incorporations.
New Zealand clearly has an important role to play in the global fight against modern slavery and worker exploitation. However, the proposals appear to go much further than other jurisdictions' modern slavery regimes, including Australia's. The wide-reaching application of the proposals raise important questions as to whether the approach is proportionate, particularly in respect of smaller businesses.
What is Modern Slavery and Worker Exploitation?
Modern slavery is severe exploitation that a person cannot leave due to threats, violence, or deception. It includes forced labour, debt bondage, forced marriage, slavery, and human trafficking. Worker exploitation, for the purpose of the proposed legislation, includes non-minor breaches of employment standards in New Zealand. The International Labour Organisation estimates that there are approximately 40 million victims of modern slavery in the world, while there have been numerous cases of exploitation identified in New Zealand in recent years.
Work to date
In 2021, Workplace Relations and Safety Minister Michael Wood released New Zealand's Plan of Action against Forced Labour, People Trafficking and Slavery (Plan). This followed the Government's commitment in its 2020 Election Manifesto to continuing “work to stamp out migrant worker exploitation with a focus on exploring the implementation of modern slavery legislation in New Zealand to eliminate exploitation in supply chains”.
The Plan outlined 28 high-level actions that a range of Government agencies will undertake through to 2025, categorised under three key pillars:
- Prevention: aiming to prevent the conditions that enable forced labour, people trafficking and slavery through awareness raising and training.
- Protection: aiming to enable victims to be identified and protected, and ensuring the range of support available to victims is fit-for-purpose.
- Enforcement: aiming to ensure that the tools to prosecute and penalise those who exploit, or benefit from exploitation, are effectively and efficiently used.
Proposed Legislation
Under the proposals, the legislation would only be one part of the response, and would be accompanied by extensive promotion, guidance, and support for entities.
The legislative responsibilities would be graduated depending on the size of the entity based on annual revenue:
- All types of entities would be required to take reasonable and proportionate action if they become aware of modern slavery in their international operations and supply chains, or modern slavery or worker exploitation in their domestic operations and supply chains. Parent or holding companies of, or companies that have significant contractual control over a New Zealand entity, must undertake due diligence to prevent, mitigate and remedy modern slavery and worker exploitation. These obligations apply regardless of the entity's size, and appear to extend to foreign entities.
- Medium ($20-50 million annual revenue) and large ($50 million and above annual revenue) entities would also be required to disclose the steps they are taking to address modern slavery in their international operations and supply chains, and modern slavery and worker exploitation in their domestic operations and supply chains.
- Large entities would also be required to undertake due diligence to prevent, mitigate and remedy modern slavery in their international operations and supply chains, and modern slavery and worker exploitation in their domestic operations and supply chains.
This proposal goes much further than other jurisdictions' regimes. For example, Australia's modern slavery regime imposes reporting requirements on entities that have a consolidated revenue of at least AU$100 million over its 12-month reporting period, and is either an Australian entity at any time in that reporting period or a foreign entity carrying on business in Australia at any time in that reporting period. While MBIE has acknowledged that there will likely be some benefit in seeking to align New Zealand's annual disclosure requirements with Australia's, there would be a lack of alignment in terms of who those disclosure requirements would apply to, based on the current proposal.
There may also be some practical challenges requiring smaller businesses to take action in respect of their international operations and supply chains. Clear guidance would be needed as to what is reasonable and proportionate action to limit unduly burdensome compliance obligations and costs. Similar challenges may arise for smaller businesses in relation to a legislative requirement to conduct due diligence into modern slavery and worker exploitation issues. MBIE has also sought views on whether all entities should be required to remedy harms they have caused or contributed to.
Next steps
This is a material legislative proposal that is currently intended to affect all businesses, small and large. Given the potentially burdensome and wide-reaching obligations that will be imposed, the business community's input into this process will be important. There are also opportunities for businesses (in particular, those with a presence in other jurisdictions) to seek alignment as much as possible with those jurisdictions, particularly Australia.
MBIE is accepting submissions until 5pm on 7 June 2022. Please get in touch with your usual Russell McVeagh contact or one of the authors if you would like to discuss the implications of these proposals further.