Canada’s Bill S-211: How to Comply with New Reporting Obligations on Prevention of Forced and Child Labour

On January 1, 2024, the following legislation came into force in Canada: 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 (the “Act”). The obligations in the Act are built on the definitions of “child labour” and “forced labour” as set out in the International Labour Organization (“ILO”) Worst Forms of Child Labour Convention and the ILO Forced Labour Convention. This legislation codifies, in part, what many organizations may have already practised or have as part of their respective corporate social responsibility (“CSR”) policies and commitments. The Act sets out new import bans and requires federal government institutions and certain other public and private companies to report on steps taken to reduce and prevent the risk of forced labour and child labour being used in their respective supply chains. The reporting requirement is coming due on May 31, 2024.

The introduction of the Act may not create a significant additional obligation for organizations that have previously introduced policies and procedures regarding social concern and stakeholder corporate governance policies supporting CSR objectives and initiatives. Through internal examinations of procurement processes, organizations could implement agreements and mechanisms which seek to mitigate these CSR-related risks of child labour, forced labour and “modern slavery,” as well as potentially reducing exposure to other financial, regulatory, occupational health and safety, and associated legal risks.

Who Is Required to Comply With the Act?

Along with certain federal government institutions and ministries, certain private sector “entities” that meet the criteria set out in the Act will also be required to comply with its reporting obligations. An “entity” is defined under the Act as a corporation or an unincorporated organization, including a trust or a partnership, that:

1. Is listed on a stock exchange in Canada; 

2. 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 criteria below for at least one of its two most recently completed financial years:

1. Has at least C$20 million in assets;
2. Has generated at least C$40 million in revenue; or
3. Employs an average of at least 250 employees; or

3. Is otherwise prescribed by any regulations that may accompany the Act.

The Ministry of Public Safety (the “Ministry”) has advised that the categories of corporation, trust, partnership and other unincorporated organizations, for the purposes of the Act, should be interpreted broadly and extend to similar forms of business organization. The Ministry stipulates that this would include categories such as unlimited liability corporations, limited partnerships and royalty trusts.

The Act also notes that the entities must be engaged in the following activities:

1. Producing, selling, or distributing goods in Canada or elsewhere, where “production of goods” is defined as the “manufacturing, growing, extracting and processing of goods”;

2. Importing goods produced outside Canada into Canada; or

3. Controlling an entity engaged in any of the foregoing activities, where “control” is defined as any direct or indirect control or common control in any manner.

While the Act does not define the terms “selling,” “distributing” or “importing,” the Ministry has stipulated that such terms are not intended to capture services that solely support the production, sale, distribution or importation of goods. For example, business services such as marketing, administrative services, financial services and software services would not be captured.

Entities are permitted to apply the ordinary sense of these words to judge whether they are engaged in any of the covered activities, but excluding distribution as a “support service” could be a limited exemption. However, entities that generally provide “goods” and “services” as part of their business can be captured by the Act. There is not yet further guidance or regulation on this issue. Given the broad definition of what constitutes an “entity” and given that there is no minimum threshold for the production, sale, distribution or import of goods that triggers the reporting obligation under the Act, companies across a variety of sectors and jurisdictions will be required to comply with the Act as drafted.

What Obligations Are Introduced by the Act?

The Act introduces new obligations that the covered entities must comply with:

1. All entities must publish an annual report, beginning May 31, 2024, that sets out the steps that the organization has taken during its previous fiscal 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 organization;

2. Private entities will also be required to report on any steps taken during their previous fiscal year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods imported into Canada by such entities; and

3. The Act extends the existing import ban under Canada’s Customs Tariff to goods that are mined, manufactured or produced wholly or in part by forced labour or child labour.

How Will the Act Be Enforced?

The Act contemplates that failing to file an annual report, failing to have the annual report approved by the organization’s board of directors, failing to have the annual report signed by a director, and knowingly making a false or misleading statement in the annual report will constitute an offence. Furthermore, for federally incorporated companies, failing to send the annual report to the company’s shareholders with the company’s annual financial statements will also constitute an offence.

Broadly speaking, the Act equips the Minister of Public Safety with far-reaching investigative powers and the authority to take any necessary measures against organizations deemed to have committed an offence, including fines of up to $250,000 per offence; and directors and officers who direct, authorize, assent to, acquiesce or participate in the commission of an offence may be personally liable.

Entities must conduct their own assessment of coverage under the Act and, if subject to the above requirements, take steps now to meet the May 31^st deadline.

A more comprehensive analysis of this Act is available here, courtesy of our ESG & Sustainability Group.

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