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Year 2 of the Government of Canada’s Fighting Against Forced Labour and Child Labour in Supply Chains Act: What to Expect?

Torkin Manes LegalPoint
 

Last year, in 2024, the Canadian federal government enacted the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”) as a means of preventing and reducing the risk of forced labour and child labour in supply chains by instituting mandatory reporting requirements for certain entities. The purpose of the Act is to contribute to the implementation of Canada’s international commitment to fight against both forced labour and child labour, through the imposition of reporting obligations on entities producing goods in Canada or elsewhere or importing goods produced outside of Canada.

We have previously written on the new requirements under the Act, please see our previous article here.

The Act requires entities and government institutions that meet certain criteria, outlined below, to report on all steps taken in the last financial year to prevent and reduce the risk of forced labour or child labour in its supply chains. The deadline for the submission of an annual report this year under the Act is May 31, 2025.

Who does the Act apply to?

The Act applies to both government institutions and private entities that meet certain criteria under the Act. Under the Act, an “entity” includes a corporation or trust, partnership or other unincorporated organization that either (a) is listed on a stock exchange in Canada; or (b) has a place of business in Canada, does business in Canada or has assets in Canada and that, based on consolidated financial statements, meets either of the two of the following conditions for at least one of its two most recent financial years: (i) it has $20 million in assets or more; (ii) it has generated at least $40 million in revenue; and (iii) it employs an average of at least 250 employees.

Reporting Obligations under the Act:

The Act imposes an obligation on entities to provide an annual report to the Minister of Public Safey and Emergency Preparedness on or before May 31 of each year it (a) produces, sells or distributes goods in Canada or elsewhere; (b) imports into Canada goods produced outside Canada; or (c) controls an entity engaged in any activity described in (a) or (b). The entity must make its annual report available to the public, including by publishing it in a prominent place on its website. Where an entity is incorporated under the Canada Business Corporations Act or any other act of Parliament, it must provide its annual report to its shareholders, along with its annual financial statements.

Enforcement under the Act:

A person or entity who commits an offence under the Act is punishable on summary conviction and liable to a fine of not more than $250,000. Offences under the Act include, but are not limited to, an entity failing to submit an annual report or failing to make the annual report available to the public by publishing it on a prominent place on its website.

The Act also imposes personal liability on directors, officers or agents who direct, authorize, assent to, acquiesce, or participate in committing an offence under the Act. Employees or agents are presumed to act on behalf of their employer when they commit offences under the Act, unless the employer can establish that they exercised due diligence to prevent the commission of the offence.

Recap of 2024 Reporting under the Act:

For the first reporting cycle, Public Safety Canada focused its implementation efforts on establishing the report intake process, issuing guidance for government institutions and entities, and conducting targeted engagement to increase awareness of the reporting requirements. Public Safety Canada produced an Annual Report to Parliament on reports submitted under the Act in 2024. The report provides a comprehensive overview of the risks of forced labour and child labour that reporting entities and government institutions have identified, as well as the steps that these organisations have taken to address the risks. It is worth noting that in the first reporting year of the Act, no enforcement orders were made pursuant to section 18 of the Act and no charges were laid against any person or entity under section 19 of the Act.

Preparing for 2025 Reporting under the Act:

Public Safety Canada has provided additional guidance for entities and government institutions on process and report requirements under the Act on its website. For assistance in preparing an annual report, or for more information on corporate compliance and how to navigate obligations that may arise from the Act, please contact Roland Hung, a partner in the Corporate/Commercial Group or Laura Crimi, an associate in the Corporate/Commercial Group at Torkin Manes LLP.