Potential for new Modern Slavery Act to burden SMEs

Eakin McCaffery Cox Partner Gregory Ross discusses the potential for the new Modern Slavery Act 2018 (Cth) to affect Small to Medium-sized Enterprises in terms of unexpected compliance costs and asks: Is the Anti-slavery legislation putting the squeeze on SMEs? Gregory Ross


What and Why Of Anti-Slavery Legislation 

You may have read in the media of new Anti-slavery legislation. It can and will impact on business operations of many businesses, large and small.

Modern antislavery legislation has its origin in human rights developments and is not something that anyone is likely to disagree with.

However, the new legislation involves Business, not just Government, in the fight against slavery.

The new legislation, both NSW and Commonwealth versions, are very much aimed at using businesses as an enforcement method, rather than relying on diminished resources of the state. That will impose a cost on business operations. Has that cost been properly considered?

Who does it catch? Where do the Small Fry fit In?

The legislation is very much aimed at requiring commercial organisations to look at their processes and their chain of supply with a view to identifying and reporting on identified “slavery” risk activity upstream or downstream in the chain of supply. It will include arrangements with related companies.

The new legislation operates upon the basis that relevant commercial entities will have to check their own operations and those relevantly in their chain of supply with a view to reporting risks of slavery activity. 

Whilst aimed primarily at organisations with large turnovers, I have a concern that small business enterprises may be caught up in the operation of the legislation at not insignificant cost. This reflects that Government and commercial organisations caught by the legislation will probably impose the obligations contractually too on other smaller entities in the supply chain.

It is interesting to note that the Commonwealth government has issued a draft set of guidance on the operation of the legislation and called for public submissions on the draft by 19 May 2019. 

“Slavery” is to be understood very generally and covers things like conduct of almost any type including slavery, servitude and/or forced labour to exploit children or other persons.

Modern slavery legislation as Australians see it has its origins in UK legislation, the Modern Slavery Act 2015 (UK) and New South Wales and the Commonwealth of Australia have, to varying extents, worked from that example. Many jurisdictions, including the United States of America, have a range of types of antislavery legislation. Other Australian States are expected to follow the same path.

There are, unfortunately, some significant differences between the NSW and Commonwealth of Australia legislative developments which I do not deal with here.

Whist the legislation attaches only to commercial entities with largish turnovers, the legislation will also have impacts, up and down the chain of supply, especially where the supply is, in the end, to Government.

What do you have to do?

The legislation requires, in general terms, affected commercial organisations to check their own procedures and those of suppliers and persons to whom they supply to identify and be satisfied as to whether any prescribed “slavery” activity is involved. Where it is involved, there is an obligation to report it.

Next steps: –

  • Determine whether the legislation is applicable to your organization;
  • Check current human rights/modern slavery policies of your company and its suppliers;
  • Get ready to be able to publish compliant modern slavery statements;
  • Become familiar with the Commonwealth Law and the NSW regulations when in place

Industry Consultation on Draft Guidance – Commonwealth

Interestingly, the Commonwealth government, at the end of March 2019, issued something of an industry call seeking comment on its draft Guidance for Reporting Entities.

Entities, large or small, wishing to comment on the Draft Guidance on Modern Slavery as issued by the Commonwealth government have until 19 May 2019 to do so. Visit the Department of Home Affairs website for more information.


Disclaimer: The text of the paper is only a summary and discussion of particular facts and principles. It is not to be taken as legal or commercial advice as to any particular factual circumstances. Please contact the author if you have any queries about this article or about making submissions about compliance costs and/or issues of demonstrable compliance in tender evaluations or other selection processes, in response to the Draft Guidance.


Gregory Ross, LLB, has been a Partner at Eakin McCaffery Cox Lawyers since 2010 and was Special Counsel at the firm between 2001 and 2008. Prior to his return as Partner he was Special Counsel at Shaw Reynolds Bowen & Gerathy and has had a part-time appointment with the Independent Commission Against Corruption. Gregory’s legal practice reflects his many years of legal, commercial, policy and probity experience in NSW and beyond. As an Accredited Specialist in Government and Administrative Law, Gregory advises government bodies to develop legislation, contracting and process arrangements. He also leads the firm’s Intellectual Property practice, advising on issues including copyright, licensing, trademarks and confidentiality agreements. He advises on contracts with entities and enforcement of IP rights in India. Contact Gregory at ross@eakin.com.au or connect via LinkedIn and Twitter .