Canada’s Forced Labor Law Poses Significant Reporting Obligations on Multinational Companie

A proposal reflecting Canada’s commitment to participate in the international fight against forced labor and child labor was reported to the House of Commons on November 30. Once passed, the bill (S-211) would require certain private-sector entities to report annually on measures they have taken to prevent and reduce the risk that they or their supply chains are using forced labor or child labor. Multinational companies that do business in Canada and meet the size and activity requirements might be subject to this law.

The law applies to two types of companies: 

• Listed on a stock exchange in Canada, or
  
  
• Does business or has assets in Canada, and 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:
  
  
  1. Has at least CAD$20 million in assets
     
     
  2. Has generated at least CAD$40 million in revenue
     
     
  3. Has an average of at least 250 employees

Under the proposed legislation, every reporting entity must, on or before May 31 of each year, file a Supply Chain Risk Report with the federal government. The report must set out the steps the company has taken during its previous financial year to prevent and reduce the risk of forced or child labor at any step of the production of goods in Canada or elsewhere, or of goods imported into Canada by the company.

In addition, the Supply Chain Risk Report must also include the following information:

• The company’s structure, activities and supply chains
  
  
• Its policies and due diligence processes in relation to forced labor and child labor
  
  
• The parts of its business and supply chains that carry a risk of forced labor or child labor being used and the steps it has taken to assess and manage that risk
  
  
• Any measures taken to remediate any forced labor or child labor
  
  
• 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 labor or child labor in its activities and supply chains
• The training provided to employees on forced labor and child labor
  
  
• How the entity assesses its effectiveness in ensuring that forced labor and child labor are not being used in its business and supply chains.

Additionally, the report will be made publicly available, and non-compliance could lead to significant penalties. Further, The Supply Chain Risk Report must be approved by the board of directors and signed by one or more directors. Therefore, planning must begin at the Board level to ensure that management is appropriately and effectively tasked and resourced to carry out the necessary due diligence to identify, assess and address the risks of forced labor and child labor in the company’s operations and supply chains.