Victoria Ball and Steve Nichol of law firm Trowers and Hamlins on the implications of the Modern Slavery Act.
For many, the concept of slavery evokes archaic images of bygone eras. However, the recent CIOB report, Modern Slavery: the Dark Side of Construction, highlights the fact that slavery in its modern form is not merely ongoing – it is a global phenomenon, and the construction industry is very much in the spotlight.
In the face of increasing pressure, governments across the world are now looking to combat this issue. In the same way that the UK’s Bribery Act 2010 has led the charge on the international fight against corruption, the Modern Slavery Act 2015 appears set to prompt a sea change in the way companies and countries approach the treatment of workforces worldwide.
The Modern Slavery Act became law in March 2015 and applies to all large businesses carrying out business in the UK, regardless of where they are registered. Other jurisdictions – including Qatar, stung by criticisms of human rights abuses surrounding the 2022 FIFA World Cup – are introducing legislation in various forms. The effect is likely soon to be that compliance with anti-slavery legislation, in one form or another, will be relevant for organisations across the world.
It seems likely that few industries will be as significantly affected by this tide of anti-slavery regulation as the construction industry. The CIOB report identifies the “dark side” of the industry, or the exploitation of low-skilled migrant workers in particular, as a pressing issue both here in the UK and across the world.
The Modern Slavery Act introduces two main offences: the first relating to slavery, servitude or forced labour, and the second to “human trafficking”, which is defined as arranging or facilitating the travel of another person, with a view to that person being exploited – irrespective of whether that person consents to travel.
In addition to this, section 54, also known as the Transparency in Supply Chains (TISC) clause, introduces an obligation on commercial organisations with annual turnover of more than £36m to prepare a “slavery and human trafficking statement” each financial year. This requires them to state what steps, if any, have been taken to ensure slavery and human trafficking are not taking place in any of the organisation’s supply chains and in any part of its business.
The breadth of the statement is immediately evident, and it does not apply only to supply chains and business operations within the UK. The implication is that companies should not be taking a laissez-faire attitude to the acts or omissions of their supply chains. Instead, they are forced to acknowledge that they have at least a moral obligation to prevent human exploitation throughout the chain.
Client pressure
The Act does anticipate that organisations could respond simply stating that no steps have been taken to prevent slavery and human trafficking. However, it is to be hoped that the construction industry as a whole will demand more of its members.
"Companies should be proactive, putting in place new, clear policies and guidelines, revamping due diligence when selecting suppliers, carrying out risk assessments and audits of their existing procedures, and introducing training on the requirements of the Act."
The primary sources of pressure will inevitably be clients. In common with the response to the Bribery Act 2010, it seems likely that invitations to tender will soon require declarations of compliance with the Modern Slavery Act by tendering contractors, as well as clear statements of the steps taken to combat slavery and human trafficking, and similar statements from primary subcontractors. Less enlightened contractors may soon find themselves losing out on work.
But in any event, no reputable contractor should want to risk being associated with what is clearly morally abhorrent behaviour. Companies should be proactive, putting in place new, clear policies and guidelines, revamping due diligence when selecting suppliers, carrying out risk assessments and audits of their existing procedures, and introducing training on the requirements of the Act to all key members of staff.
The Act is also likely to prompt specific language in construction contracts – again, as is commonly the case with the Bribery Act. Given the reputational consequences that might follow, it seems likely that clients will want to include specific obligations on contractors and their supply chain to comply with the Act.
A clear breach of the Act is likely to become a termination event, with clients and main contractors pursuing civil remedies for losses suffered as a consequence of a breach in the supply chain. Clients will be seeking robust protections in respect of the Act and contractors are likely to demand the same of their supply chain.
The obligation to produce a slavery and human trafficking statement will come into force in October. Guidance is expected over the coming months, and the CIOB has also promised a toolkit to assist organisations with compliance. Between now and October, however, all those in the construction industry will need to give serious consideration to the effect of the Act on their businesses, and the steps that will need to be taken as a result.
Steve Nichol is partner in the London construction team and Victoria Ball is associate in the Birmingham construction team at law firm Trowers & Hamlins
Main image: Richard Messenger
