Key points ^[1]

• The Government is proposing to introduce a new modern slavery and worker exploitation legislative framework which would impose responsibilities on all New Zealand entities.
• The responsibilities would involve identifying risks of modern slavery and worker exploitation in operations and supply chains, both domestically and internationally, and taking steps to address those risks.
• The extent to which entities must go to, to identify and address modern slavery and worker exploitation, and address any risks they find, would depend on the annual revenue of the entity.
• Breach of the responsibilities would involve financial penalties, which have not yet been confirmed, but are likely to be significant.
• Submissions on the proposed framework are open until 7 June 2022.  

What is modern slavery and worker exploitation?

There is no internationally agreed definition of modern slavery, so the Government is proposing that it be defined as including the legal concepts of forced labour, debt bondage, forced marriage, slavery and slavery like practices, and human trafficking. The Government also proposed that worker exploitation be defined as including non-minor breaches of New Zealand employment standards, and would exclude minor and insignificant breaches that are not constant and easily remedied. 

What entities will be subject to new responsibilities?

Under the Government’s proposal, the new statutory responsibilities would cover: companies, sole traders, partnerships, state sector organisations, local government, charitable entities, trusts, incorporated societies and Māori trusts and incorporations.

What will the responsibilities on entities be?

Small entities (defined as having annual revenues of below $20 million) will be required to take reasonable and proportionate action if they become aware of modern slavery in their international operations and supply chains, or if they become aware of modern slavery or worker exploitation in their domestic operations and supply chains. Examples of action that could be taken may include reporting a case to the appropriate authority (eg the Labour Inspector, Immigration New Zealand or even the Police), working with the supplier to address the harm and/or changing suppliers.

Small entities would also need to undertake due diligence to prevent, mitigate and remedy modern slavery and worker exploitation by New Zealand subsidiaries or other companies under the contractual control of the entity. Due diligence is stated to broadly refer to the process of identifying the risks of exploitation across an entity’s operations and supply chains, taking steps to address any risks identified and evaluating the steps taken. Exactly how far an entity needs to go to “remedy” issues discovered is one of the specific matters on which feedback is being sought.

Medium entities (defined as having annual revenues of above $20 million and below $50 million) would be subject to the same obligations as small entities, but would also be required to disclose the steps they are taking to comply with their due diligence obligations, by publishing a modern slavery statement.    

Large entities (defined as having annual revenues of above $50 million) would be subject to the same obligations as small and medium entities, but would also be required to undertake further due diligence in relation to their operations and supply chains (not just in relation to subsidiaries, like small and medium entities).

Enforcement of obligations

The Government is proposing to introduce new offences for entities who fail to comply with their obligations. No indication of fines has been given, but it has been noted that financial penalties for non-compliance under other comparable regulatory regimes can range from $600,000 to $5 million. The Government is also considering other tools such as infringements, improvement notices and enforceable undertakings, and introducing a “naming and shaming” for bad practice, and also publicising good practice.

A number of considerations have been put forth in the Government’s discussion document in relation to how non-compliance should be punished, and how compliance should be encouraged. Appropriate enforcement action is one of the specific matters on which feedback is being sought.

What does this mean for your business or entity?

While the Government’s proposal is still in its early stages, businesses and other entities which will be covered by it may wish to start considering which category they will fall into (small, medium or large), what their responsibilities will be under this framework once legislated, how they will monitor compliance, and whether there are any particular risks that their operations or supply chains may be affected by modern slavery or worker exploitation.

Get in touch

The consultation period for submissions on this framework closes on 7 June 2022. If you would like further information about the proposed framework, how it would impact your organisation, and/or if you would like assistance with making a submission, please contact one of our experts. 

Special thanks to Darren Gunasekara for his assistance in writing this article.