NSW Government response to the Legislative Council’s Standing Committee inquiry into the Modern Slavery Act 2018 (NSW)

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Since its enactment, the Modern Slavery Act 2018 (NSW) (NSW Act) has been shrouded in conjecture and uncertainty as to if and when it will commence due to conflicting provisions with the Modern Slavery Act 2018 (Cth) (Commonwealth Act). On 24 September 2020, in response to a report by the NSW Legislative Council’s Standing Committee, the NSW Government sought to put to the debate to rest by conditionally committing to commence the NSW Act by 1 January 2021. While the NSW Government remains reluctant to commence a regime that is inconsistent with the Commonwealth Act – with particular regard to reporting thresholds – it has declared that it will engage in discussions with the Commonwealth Government with a view to achieving a harmonised modern slavery regime. To the extent that the NSW Act compliments and is not inconsistent with the Commonwealth Act, we can expect to see the regime in force in early 2021.

The NSW Act has been widely praised for seeking to introduce one of the most robust anti-slavery regimes in the world. However, since its enactment, the NSW Act has been shrouded in conjecture and uncertainty as to whether it will ever commence. This speculation revolved around whether / how the NSW Act can be enforced in conjunction with the Commonwealth Act which was passed around six months after the NSW Act, and is now in force.

Although operating to the same ends, the NSW Act and Commonwealth Act diverge on key issues, including:

Issue

NSW Act

Commonwealth Act

Reporting threshold (consolidated revenue in financial year)

AUD50 million

AUD100 million

Penalty

 

Criminal penalties of up to AUD1.1 million for:

  • failure to prepare a statement
  • failure to publish a statement

None – the Commonwealth Act imposes a “name and shame” approach, akin to that taken in the United Kingdom

The differences between the NSW Act and Commonwealth Act are significant as they create concurrent regimes which apply inconsistently, and arguably unfairly, to different sized entities. There is real risk of a scenario in which an organisation with revenue under AUD100 million is subject to a substantial penalty for the same conduct that a much larger company is only “named and shamed” for. Naturally, the dual regime has sparked considerable concern and consternation amongst stakeholders that the regulatory compliance burden is distorted and unreasonable.

On 6 August 2019, the Legislative Council Standing Committee on Social Issues (the Committee) announced an inquiry into the NSW Act, and on 25 March 2020, the Committee released its final report containing 17 recommendations (the Report). The recommendations in the Report called for national harmonisation of laws, however, not at the expense of the threshold requirements and penalties proposed by the NSW Act. Therefore, despite a preference for a standardised national approach, the Report provided overarching support for the tougher, more ‘robust’ NSW Act and recommended the NSW Act commence by 1 January 2021.

On 24 September 2020, the NSW Government issued its response to the Report (the Response) with a commitment to implement a modern slavery regime in NSW.  It is apparent , however, that the NSW Government is reluctant to commence a regime that is inconsistent with the Commonwealth Act and has made an “in-principle” commitment to commencing only the components of the NSW Act that complement the Commonwealth Act. Accordingly, the support in-principle to proceeding with commencement of the NSW Act by 1 January 2021, has been conditioned upon discussions with the Commonwealth on the issue of harmonisation. The Response states that these discussions will be targeted at reforming the reporting threshold so that it is consistent across both pieces of legislation and “ideally at AUD50 million”. It will be interesting to see whether the Commonwealth Government has any appetite to reduce its reporting threshold in view of the fact that the Commonwealth Act was introduced 6 months after the NSW Act and was therefore aware of the distinction at the time of drafting. As discussions unfold, this is something medium-sized businesses need to maintain a close eye on as they consider their own reporting obligations.

Despite the Report coming out strongly in favour of penalties, the Response is largely silent – only noting the recommendation that the NSW Act be amended to specify a relevant authority to conduct prosecutions, subject to the Commonwealth discussions. It is not clear whether the penalty regime is currently considered by the NSW Government to be complimentary to, or inconsistent with, the Commonwealth Act. On the face of it, such a fundamental divergence would not align with the objective of harmonisation; however, if the reporting thresholds are equalised there is a persuasive view that the penalty regime would serve to compliment the “name and shame” approach. It is expected that this question will represent a key issue in the upcoming discussions.

Irrespective of its final form, the existence of Commonwealth and State Modern Slavery laws in Australia will increase the burden on corporates to self-regulate and monitor their supply chain activity. To keep up to date with further developments and to understand how they may affect your business please contact our team.