Modern Slavery Clauses in Australian Manufacturing
At first glance, modern slavery does not seem to be an issue facing Australian manufacturers. But the statistics prove otherwise. The Australian government estimated that there could be between 1,300 – 1,900 people in conditions of modern slavery in Australia at any given time. The manufacturing sector is considered high-risk due to its supply chain complexities and reliance on migrant labour. Australia’s Modern Slavery Act 2018 requires heavy steel fabrication companies with annual consolidated revenue of more than $100 million to report annually on the risks of modern slavery in their operations and supply chains, and actions taken to address those risks. So, how are slavery clauses incorporated in agreements? Let us find out in this blog.
Need and Types of Modern Slavery Clauses
The policy in the Modern Slavery Act is to develop, improve and maintain responsible and transparent supply chains. Notably, the Act requires that businesses subject to it report on their due diligence and remediation processes for preventing and addressing modern slavery practices in their supply chains. Contracts may help businesses satisfy these obligations. Agreements with enforceable modern slavery clauses may also assist businesses with resisting litigation and reputational harm.
In practice, the drafting approaches for addressing modern slavery in supply chains vary widely. Many contracts between buyers and suppliers include a supplier code of conduct which may address modern slavery. Other drafting approaches include bringing warranties and representations into the contract, importing standards, or obliging a supplier to become a member of a group with prescribed supply chain management requirements which also improves manufacturing traceability. The common feature of these approaches is that they put the onus on the supplier. Consequently, these approaches are problematic because they ignore that the buyer’s purchasing practices may significantly contribute to modern slavery and human trafficking violations. These abuses include aggressive pricing, tight delivery schedules, belated changes to pipe fabrication Australia order quantities, late orders, inaccurate product specifications and forecasting of production needs, lack of support for the supplier, and failures to incentivise elimination of modern slavery in the supply chain.
Alternative Drafting Solution
A good alternative to weighing obligations on the supplier requires that, as part of metal fabrication marketing and sales, both the purchaser and the supplier maintain a human rights due diligence process. While this approach may still impose supplier representations and warranties, it also binds the buyer to responsible purchasing practices. This may include binding the buyer to a responsible purchasing code of conduct and providing for supplier termination if, through the purchasing, modern slavery is unavoidable in the supply chain. A comprehensive treatment of this alternative approach has been provided by the Working Group of the Business Law Section of the American Bar Association. Along with better sharing obligations between the supplier and purchaser, this approach helps reporting entities address their obligation under the Act by describing their due diligence and remediation processes for preventing and addressing modern slavery practices in their supply chains.
Closing Thoughts
It is necessary to recognise the signs of modern slavery. They can include apparent restriction of movement, signs of physical or psychological abuse, fear of authorities, lack of control over earnings, and retention of identity documents by someone else. Section 16(1)(c) of the Modern Slavery Act requires that the reporting entity describe the risks of modern slavery practices in its operations. the reporting entity often must do an initial scoping exercise to identify and describe the modern slavery risks. It remains essential to do this scoping exercise before embarking on the actual contract negotiations and drafting. The Australian Government has published guidance on this initial scoping exercise.
