Understanding the scope and application of Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act

Canada's Fighting Against Forced Labour and Child Labour in Supply Chains Act (Bill S-211), which came into force on January 1, 2024, represents a landmark piece of legislation in the fight against modern slavery within Canadian supply chains. This comprehensive law applies to two distinct categories of organisations: government institutions and entities that meet specific criteria related to their business operations and financial thresholds.

The Act defines "entity" as a corporation, trust, partnership or other unincorporated organisation that is listed on a stock exchange in Canada, has a place of business in Canada, does business in Canada or has assets in Canada. Critically, entities must meet at least two of the following three criteria to fall under the Act's purview: they must have at least $20 million in assets, generate at least $40 million in revenue or employ an average of at least 250 employees. This broad definition ensures that significant players in the Canadian economy, regardless of their country of incorporation, are subject to these reporting requirements.

Government institutions are separately defined under the Act and include federal departments, agencies, Crown corporations and other bodies that are part of the federal public administration. These institutions have distinct reporting obligations that reflect their role in public procurement and service delivery. The Act's extraterritorial reach means that foreign entities conducting business in Canada or having Canadian assets must also comply if they meet the specified thresholds.

The legislation's primary objective is to increase transparency and accountability in supply chains by requiring covered organisations to report annually on their efforts to prevent and reduce the risk of forced labour and child labour. The Act defines forced labour as work or service extracted from a person under the menace of penalty and for which the person has not offered themselves voluntarily, while child labour refers to work that is likely to harm the health, safety or morals of persons under 18 years of age or to interfere with their education.

To ensure compliance organisations should first conduct a thorough assessment to determine if they fall within the Act's scope. This involves calculating assets, revenue and employee numbers using the most recent financial statements and employment records. Companies should also map their corporate structure to identify all entities within their organisation that might be subject to the Act, including subsidiaries and affiliated companies. Legal counsel should be consulted to interpret the complex definitional requirements, particularly for organisations with international operations or complex corporate structures.

Practical compliance steps include establishing a cross-functional team responsible for Act compliance, typically including representatives from legal, procurement, supply chain management and human resources departments. Organisations should develop internal policies and procedures that align with the Act's requirements and create documentation systems to track compliance efforts. Regular training should be provided to relevant personnel about the Act's requirements and the organisation's responsibilities under the legislation.

The Act also includes provisions for enforcement and penalties. Non-compliance can result in significant financial penalties, with the exact amounts to be determined through regulations. The Minister of Public Safety has the authority to request additional information from reporting entities and can publish the names of non-compliant organisations, creating reputational risks beyond financial penalties.

Organisations should view compliance with the Act not merely as a legal obligation but as an opportunity to strengthen their supply chain resilience and corporate reputation. By proactively addressing forced labour and child labour risks, companies can reduce operational disruptions, enhance stakeholder trust and demonstrate commitment to responsible business practices. The Act represents Canada's alignment with international efforts to combat modern slavery and positions compliant organisations as leaders in ethical business conduct.