Browse through the 2,000 plus modern slavery statements published to date on the Australian register. You might see that there has been considerable interest in the use of “modern slavery clauses”. These clauses aim to remediate risks that are caused or contributed to by reporting entities or to which they are directly linked through their operations or supply chains. 

Although such clauses can help remediate risks and create a solid foundation for cooperation between suppliers and their customers, some caution is still needed.  That’s because the quality of the modern slavery clauses that have been described in the published statements ranges from well-tempered to confused to downright dangerous.

How do you tell the difference? You need to start with a clear understanding of what prohibitions exist and what Australia’s Modern Slavery Act requires.

Distinguishing good from bad

Did you know that the Act doesn’t actually prohibit modern slavery? That’s done by the criminal law.

Did you know that the Act doesn’t actually require you to eliminate modern slavery from your supply chains? It only requires some entities to report on the risks of modern slavery in their operations and supply chains and actions to address those risks.

Now think about some of the modern slavery clauses you might have seen:

• the ones that reference so-called “duties of care” supposedly set out in the Act;
• the cut-and paste ones that require you to warrant that your supply chain is free from slavery, servitude, forced or compulsory labour and human trafficking as defined by the Modern Slavery Act 2015; [1]
• the ones that require you to comply with all your legal obligations, including WHS, but which forget to say anything meaningful about modern slavery and the Criminal Code;
• the ones that require you to warrant that you will comply with all rules or international treaties signed by any government authority in relation to corporate social responsibility; but which fail to appreciate that, under our law, those rules only become binding in Australia once they are passed into domestic legislation – and they are often passed into domestic legislation subject to reservations or variations;
• the ones that include indemnities and hold-harmless provisions.

There are plenty of other examples of poorly constructed clauses out there!

Consequences of breach

Have you ever thought about what the consequences of a breach of these clauses might be? Can your customer refuse your claims for payment? Can you customer terminate your supply agreements? Have you even supplied what you agreed to supply (e.g., services free from any connection to forms of modern slavery through your operations or supply chains)? Can your customer sue you for damages?

Poorly designed modern slavery clauses do nothing to address modern slavery risks. They attempt to shift the burden of compliance in one direction. In doing so, they provide false comfort to parties who rely on them. They add unnecessary costs to transactions in which they are deployed.

A better approach

So, learn how to identify them. Explain to your customers why you can’t or won’t sign them, and help your customers to understand the important contribution that you can both make to combatting modern slavery, not only through well designed modern slavery clauses, but more importantly, through well-designed workforce governance controls and practices

Andrew C. Wood

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[1] The MSA 2015 is actually and Act of the UK Parliament! The Australian MSA (Modern Slavery Act 2018 (C’th) doesn’t actually define these terms. They’re defined in the Criminal Code. “Modern Slavery” is given an extended meaning in the MSA (C’th).