In our previous article, we highlighted developments in Canada’s modern slavery framework. Here, we update developments relating to modern slavery, including the impending legislation Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff. Bill S-211 has already passed through the Senate, and on June 1, 2022, it passed its second reading at the House of Commons. It is currently in the committee stage at the Foreign Affairs and International Development committee. While Bill S-211 has not been enacted yet, it will come into force on January 1 of the year following the year in which it receives Royal Assent, which potentially may be this year, 2022. As set out below, S-211's primary focus is reporting obligations for certain governmental and private sector entities and does not extend to due diligence requirements adopted in other jurisdictions. Accordingly, private entities should be prepared to comply with the reporting requirements of Bill S-211 as early as spring 2023 if S-211 is passed and enters into force in 2022.

We have also highlighted other key legislative and legal developments of importance.

1. Legislative Developments

1. Key Requirements under Bill S-211

Entities

As currently drafted, Bill S-211 will apply to any entities (a) producing, selling or distributing goods in Canada or elsewhere; (b) importing into Canada goods produced outside Canada; or (c) controlling an entity engaged in any activity described in (a) or (b) (Reporting Activities).

An entity is defined as a corporation or a trust, partnership or other unincorporated organization that (a) is listed on a stock exchange in Canada; (b) 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: (i) it has at least CA$20 million in assets, (ii) it has generated at least CA$40 million in revenue, and (iii) it employs an average of at least 250 employees; or (c) is prescribed by regulations, which have yet to be enacted (a Reporting Entity).

Reporting obligation

Reporting Entities that engage in the Reporting Activities must, on or before May 31 of each year, report to the Minister of Public Safety and Emergency Preparedness (the Minister) on the steps the entity has taken during its 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 Reporting Entity or of the goods imported into Canada by the Reporting Entity (the Report). The Report must include the following information of each entity subject to the Report:

1. Its structure, activities and supply chains;
2. Its policies and its due diligence processes in relation to forced labour and child labour;
3. (the parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;
4. Any measures taken to remediate any forced labour or child labour;
5. Any 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. The training provided to employees on forced labour and child labour; and
7. How the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

Further, the Report must be approved by the Reporting Entity's governing body, and the Report must be approved by including (a) a statement that sets out whether it was approved pursuant to the approval of the governing body and (b) the signature of one or more members of the governing body of each Reporting Entity that approved the Report.

Additionally, the Reporting Entity must make the Report available to the public, including by publishing it in a prominent place on its website. In turn, the Minister must also maintain an electronic registry containing a copy of every Report, as amended. The registry must be made available to the public on the Department of Public Safety and Emergency Preparedness website.

Finally, a Reporting Entity that is incorporated under the Canada Business Corporations Act or any other Act of Parliament must provide the Report as amended to each shareholder, along with its annual financial statements.

Offences and punishment

As currently drafted, Bill S-211 also contemplates offences for those Reporting Entities that fail to comply with their reporting obligations, including the filing of the Report. Bill S-211 outlines that every person or entity that fails to comply or that contravenes the requirements is guilty of an offence publishable on summary conviction and liable to a fine of not more than CA$250,000. Moreover, every person or entity that knowingly makes any false or misleading statement or knowingly provides false or misleading information to the Minister is guilty of an offence punishable by summary conviction and liable to a fine of not more than CA$250,000. Finally, if a person or an entity commits an offence, any director, officer or agent or mandatary of the person or entity who directed, authorized, assented to, acquiesced in or participated in its commission is a party to and guilty of the offence and liable on conviction to the punishment provided for the offence, whether or not the person or entity has been prosecuted or convicted.

2. Other pending legislation

In addition to S-211, there are currently two other bills that have been deposed in Parliament.

Bill C-262, An Act respecting the corporate responsibility to prevent, address and remedy adverse impacts on human rights occurring in relation to business activities conducted abroad (Bill C-262), passed through its first reading at the House of Commons on March 29, 2022. It has not since progressed. Bill C-262 applies to entities that: (a) are incorporated or formed under an Act of Parliament, provincial legislation or otherwise formed in Canada; or (b) has a place of business in Canada, carry on business in Canada or have assets in Canada that are used to carry out the entity's business. Bill C-262 goes significantly further than Bill S-211 in that it would impose a due diligence obligation on entities caught in its scope. This obligation would include a duty to avoid causing any adverse impacts on human rights occurring outside Canada as a result of acts or omissions of affiliates and as a result of its business relationships.

Bill C-243, An Act respecting the elimination of the use of forced labour and child labour in supply chains (Bill C-243), imposes an obligation on certain entities to report on the measures taken to prevent and reduce the risk that forced labour or child labour is used at any step in the production of goods in Canada or elsewhere by them or in the production of goods they import into Canada. Bill C-243 provides for an inspection regime and gives the Minister of Public Safety and Emergency Preparedness the power to require an entity to provide certain information. Similar to Bill C-262, Bill C-243 passed its first reading at the House of Commons on February 8, 2022, and has not progressed since.

Ultimately, given the advanced stage in Parliament of Bill S-211 and its previous iterations, it is most likely that the reporting obligations are the only legislative requirements that companies will need to be mindful of near future.

2. Litigation and modern slavery in Canada

1. Kilgour v. Canada

In Kilgour v. Canada, 2022 FC 472, representatives of a non-governmental organization (the NGO) asked the Federal Court of Canada, via judicial review, to find that the Canada Border Services Agency (the CBSA) has the authority under the Customs Tariff Act, SC 1997 c. 36 to implement a presumptive determination with respect to all goods imported from the Xinjiang region of China. The claimants claimed all such goods have an increased likelihood of being produced using forced labour and thus should be presumptively prohibited from import into Canada unless the importers provide clear and convincing evidence to the contrary. A similar prohibition is currently in place in the United States for certain goods from China implemented through the Uyghur Forced Labor Prevention Act. The CBSA denied the request on the basis that it did not have the legal authority to apply such a presumption and must examine case-by-case circumstances to determine whether or not goods are prohibited. The Federal Court upheld the CBSA's approach under the current law.

2. Transnational tort liability and securities-related litigation

In addition to reporting obligations, Canadian corporations will want to ensure their supply chains are free from modern slavery to protect against any transnational tort claims or overly broad statements made in securities filings. Recent cases in Canada and the UK based on transnational torts have opened the possibility that claims may be brought in Canada for a corporation's actions abroad. While such claims face jurisdictional hurdles, a growing number of cases have found success against jurisdictional challenges, with a smaller number finding success on the merits.

In a similar vein, disclosures made to Canadian securities regulators relating to modern slavery also pose litigation risks. For example, Québec's securities regulator provides specific guidance on modern slavery disclosure. To the extent that disclosure statements are overly broad or do not take into account modern slavery risks in their supply chains into account, companies may be subject to disclosure litigation.

3. Practical Considerations

It is important to highlight that Bill S-211 may be subject to further revisions as it continues its way through the House of Commons. As such, it is unclear what the ultimate law will look like and whether any of the reporting requirements above may change. Additionally, it is unclear whether Bill S-211 will receive Royal Assent this year, and if so, Reporting Entities would be required to file the Report on or before May 31, 2023. Given the scope of information that must be included in the Report, Reporting Entities are encouraged to become familiar with Bill S-211 and tap into its current resources to try and determine where the information required to be reported can be found and how the Reporting Entity currently tracks this information, if at all. 

The Dentons International Trade team keeps abreast of leading global developments. If you have any questions, please feel free to reach out to Paul Lalonde, Yasmin Shaker, Sean Stephenson or Daniela Acevedo with any inquiries.

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