What Canada’s new forced labour reporting law means for mining companies

Canada may soon have a new public reporting regime that will have immediate implications for mining companies. 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, is poised to imminently pass third reading in the House of Commons. If passed, the act will create disclosure obligations for many Canadian mining companies and clarify and expand existing laws on forced labour and child labour.

Disclosure requirements

Bill S-211 will require government institutions and certain “entities” – that produce, sell or distribute goods, import into Canada goods produced outside Canada, or control an entity that engages in such an action – to submit a public annual report. TSX and TSXV listed mining companies meet the definition of “entity.” The report would describe the steps they have taken in the previous fiscal year to prevent and reduce the risk that forced labour and child labour is used at any step of the production of goods in Canada or elsewhere by the entity – or of goods imported into Canada.

If the Bill passes and receives Royal Assent in 2023, the first report will be due in May 2024. Mining companies would have to disclose the steps they are taking this fiscal year to address these risks.

What is an entity?

The definition of an “entity” is similar to that found in the Extractive Sector Transparency Measures Act – a corporation or a trust, partnership or other unincorporated organization that

> is listed on a Canadian stock exchange;

> has a place of business in Canada, does business in Canada, or has assets in Canada and that meets at least two of the following conditions for at least one of its two most recent financial years:

• it has at least $20 million in assets,

• it has generated at least $40 million in revenue, and

• it employs an average of at least 250 employees; or

> is prescribed by regulations.

Public annual report content and scope

Mining companies that fall under S-211 would have to include information on the following:

> its structure, activities, and supply chains;

> its policies and its due diligence processes in relation to forced labour and child labour;

> the parts of its business and supply chains that carry a risk of forced labour or child labour being used and the steps it has taken to assess and manage that risk;

> any measures taken to remediate any forced labour or child labour;

> any measures taken to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply chains;

> the training provided to employees on forced labour and child labour; and

> how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being used in its business and supply chains.

The annual report must be approved by the reporting entity’s governing body.

In addition to the disclosure requirements, the bill creates personal liability for directors and officers, among others, who direct, authorize, assent to, acquiesce in, or participate in an offence under the proposed act. Failure to comply with the requirements under the new legislation can lead to a summary conviction with fines up to $250,000.

Since 40% of the world’s public mining companies are listed on TSX and TSXV, many mining companies will meet the definition of “entity.” In turn, a subset of these mining entities satisfies the test to publicly report. As many mining companies operate in multiple jurisdictions across the globe, some companies may already disclose similar information according to the laws of the relevant countries, including the laws of Australia.

What mining companies can do now

Although there are no prescribed guidelines on the type of measures a mining company must take to combat modern slavery, any public reporting will need to withstand public, investor, and lender scrutiny. This includes demonstrating year-on-year improvement and effectiveness of any measures that are implemented.

Mining companies should review their supply chain due diligence and monitoring practices now, familiarize themselves with best practices, understand the differences between Canadian and other jurisdictions’ legislation combating modern slavery, and implement appropriate systems, processes, and practical strategies to prevent and mitigate the risk of forced labour and child labour in their supply chains.

Sharon G.K. Singh is a partner and co-head of aboriginal law practice, Sabrina A. Bandali is a partner, and Jessica B. Horwitz is a partner at Bennett Jones LLP.

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