What Are The Offences?
There are several sections of offences and Section 1 & 3 are most typically found in construction but in summary:
Section 1 – Slavery, servitude and forced or compulsory labour
A person commits an offence if—
(a) the person holds another person in slavery or servitude and the circumstances are such that the person knows or ought to know that the other person is held in slavery or servitude, or
(b) the person requires another person to perform forced or compulsory labour and the circumstances are such that the person knows or ought to know that the other person is being required to perform forced or compulsory labour.
Section 2 – Human trafficking
(1) A person commits an offence if the person arranges or facilitates the travel of another person (“V”) with a view to V being exploited.
(2) It is irrelevant whether V consents to the travel (whether V is an adult or a child).
(3) A person may in particular arrange or facilitate V’s travel by recruiting V, transporting or transferring V, harbouring or receiving V, or transferring or exchanging control over V.
(4)A person arranges or facilitates V’s travel with a view to V being exploited only if—
(a)the person intends to exploit V (in any part of the world) during or after the travel, or
(b)the person knows or ought to know that another person is likely to exploit V (in any part of the world) during or after the travel.
Section 3 – Meaning of exploitation (Slavery, servitude and forced or compulsory labour)
Slavery, servitude and forced or compulsory labour
(2)The person is the victim of behaviour—
(a)which involves the commission of an offence under section 1, or
(b)which would involve the commission of an offence under that section if it took place in England and Wales.
Securing services etc by force, threats or deception
(5)The person is subjected to force, threats or deception designed to induce him or her—
(a)to provide services of any kind,
(b)to provide another person with benefits of any kind, or
(c)to enable another person to acquire benefits of any kind.
This sections would cover Sexual Exploitation, Removal of Organs etc, Securing services etc from children and vulnerable persons.
Section 4 – Committing offence with intent to commit offence under section 2
A person commits an offence under this section if the person commits any offence with the intention of committing an offence under section 2 (including an offence committed by aiding, abetting, counselling or procuring an offence under that section)
Did You Know That, Criminal Penalties Apply To All Businesses?
Following on from Altion Law’s participation in the panel discussions on Modern Slavery at UK Construction Week, concerns were raised that the construction industry had interpreted that only companies with a T/O in excess of £36m were caught by Modern Slavery. The Modern Slavery Act 2015 is very clear that it applies to all commercial organisations supplying goods or services and covers slavery, servitude, forced and compulsory labour and human trafficking.
The £36m is the figure at which a business must publicly report on the steps it has taken to combat Modern Slavery in a published statement. Even if a business has not taken any steps it must still report this inactivity.
Whilst the public reporting requirement is only for commercial entities with a turnover of above £36m the criminal offences can be applied to any corporate entity or individual (Directors, Company Secretaries and Senior Managers) and compliance with modern slavery therefore applies to all commercial organisations regardless of size.
How Can Altion Law Help?
Our legal and consulting experts can provide practical and strategic programmes, tailored to your commercial and sector specific needs. These include:
- Bespoke training appropriate for board level through to risk manager or site manager level and draft policies and codes of conduct.
- Assistance with undertaking a human rights/modern slavery risk assessment, and generating a risk map of prioritised exposures together with recommendations and options to ensure compliance
- Advise on global supply chain compliance and due diligence measures.
- Create and implement internal monitoring tool, including key performance/compliance indicators
- Carrying out interviews with key stakeholders, suppliers and local leadership, both for pre-emptive situations and where risk measures are raised.
“These crimes must be stopped and the victims of modern slavery must go free. This is the great human rights issue of our time, and as Prime Minister I am determined that we will make it a national and international mission to rid our world of this barbaric evil.
Just as it was Britain that took an historic stand to ban slavery two centuries ago, so Britain will once again lead the way in defeating modern slavery and preserving the freedoms and values that have defined our country for generations.”
Source: Daily Telegraph, My Government will lead the way in defeating modern slavery
First article written by Theresa May after becoming Prime Minister 30 JULY 2016.
It’s estimated that the construction sector employs 7% of the global workforce but a 2015 research report by the European Union, identified the construction industry as number two on the list of economic sectors in the EU most prone to labour exploitation.
|Labour||Material supply chain|
|Agency work is common||Long complex supply chains|
|Third party and intermediary||Who produces materials?|
|Outsouring and subcontracting||Multi country, cross borders|
|High demand for low skilled, manual, low waged work||High demand / moving timescales|
- Reputational risk – pressure and campaign groups will be targeting organisations and there will be negative public attention for those entities that are seen to be flagrantly disregarding the requirements.
- Legal – increased risks of litigation and breaching of procurement terms and contracts.
- Financial – decreased access to investor funds, some banks will refuse to provide banking facilities to companies with significant risks in these areas, as well as a revenue loss from decreased clients or customers.
- Operational and procurement – disruption to supply chains, labour disputes and loss of workforce on the operational side. Additionally, many companies will find that a statement or policy becomes a evidential requirement of any tendering or procurement exercise.
But in addition to these individuals could find themselves facing some of the following issues:
- Personal liability incurred by signatory as a result of perceived negligence when signing off S54 statements if found to be inaccurate.
- Threat of criminal sentences and potential imprisonment for directors, company secretaries and senior managers.
- Directors and Officers Liability Insurance
- Does it cover middle management?
- Both Criminal and civil claims?
- Failing to act with reasonable care, skill and diligence under Companies Act 2006
- Shareholders could demand civil proceedings against Director
- Haulage/Transport industry – forfeiture/detention of land vehicle, ship or aircraft
There are several but some of the more commonly accepted indicators that will need to form part of your due diligence and supply chain checks should include:
- Restricted movement: victims kept against their will.
- Overtime: working unreasonable hours with little or no breaks.
- Recruitment fees/loans: migrant workers charged large agent fees for work in another country and unable to pay off the debt based on wages. Employers deduct excessive costs from wages for basic living expenses.
- Documents: employers take possession of workers’ documents.
- Payment: workers are paid in cash, rather than through a documented system.
- Subcontracted work: workers are subcontracted throughout the supply chain, limited visibility.
- No complaints procedure: workers cannot express their grievances and protect their rights.
- Living conditions: workers may live together on site or in employer provided accommodation, often very poor living conditions.
- Behaviour: victims may exhibit signs of anxiety and fear. Limited possessions e.g clothes safety kit. Maybe prevented from speaking to third parties.
Reporting: Section 54 carries an Annual Reporting Requirement which requires every business which carries out all or some of its work in the UK and has an annual turnover of at least £36 million to publish a slavery and human trafficking statement every financial year. This part of the Act has extra territorial effect and will require non – UK incorporated businesses to report on Modern Slavery, even if they only have margin UK turnover.
- The statement is to be prominently placed on the company website for easy access. If no website, it must be provided within 30 days if a written request is made.
- It must be approved by the board of Directors and signed by a Director.
- If a business fails to publish a statement, the SoS can bring civil proceedings in High Court.
If no steps have taken place the organisation must still submit an annual return stating that no action has taken place.
It is important to understand that the £36m applies to reporting requirements but the requirements of complying with the Modern Slavery Act will still apply to businesses trading below this level.
Corporations need to respond to demonstrate ethical leadership and review their business compliance in order to address modern slavery risks and manage the transition towards greater transparency in this area.
- Ensure there is clear responsibility at a senior level and board approval of a policy.
- Establish what the business is currently doing to address modern slavery. This can also include any existing work on human rights reporting as part of other corporate reporting requirements.
- Undertake due diligence to map supply chains if not already done and risk assess and prioritise those based upon severity. The due diligence must be reasonable and proportional, there is no one size fits all. The due diligence must reflect the severity and likelihood of risk depending upon the size, nature and type of operations.
- Training and staff awareness. Importance of capturing and retaining evidence and ongoing checks.
- Create a plan for risk management and take action to stop or prevent immediate harm and remedy where possible or use leverage or influence to mitigate the remaining harm. Where a risk is so severe, the relationship must be terminated if the risk cannot be remedied.
- Finally track performance and be prepared to report and answer questions publically on your progress.
Construction has third party labour providers, migrant workers, low skilled workers, sub contracting, outsourcing etc. Understanding the background checks that are being conducted on workers and where they are sourced from is very important. Businesses should be conducting due diligence and verifying the circumstances of workers within its supply and labour chains.
If as part of due diligence someone is identified as a victim of slavery, they are entitled to help and protection from the UK government.
This is called the National Referral Mechanism. The National Referral Mechanism has been put in place to identify victims of trafficking and to refer them to organisations that will offer help and support.
Report using appropriate forms, call modern slavery help line 0800 0121 700
If immediate danger – call police
There are significant sentences if offence (human trafficking) was undertaken by UK national (regardless of location of offence) or for Non UK national the arranging or facilitation, or any part of journey taking place in UK. For Section 1 (slavery, servitude and force or compulsory labour) if it took place in UK or was commissioned in UK there are also significant sentences and fines.
The courts also have the power to make slavery and trafficking reparation orders against a person if the person has been convicted of an offence under section 1, 2 or 4, and a confiscation order is made against the person in respect of the offence.
A slavery and trafficking reparation order is an order requiring the person against whom it is made to pay compensation to the victim of a relevant offence for any harm resulting from that offence. This could include, housing, psychological care, medical costs, educational costs etc.
There is already some evidence of application of this concept in other high risk industries such as Excise and Money Laundering. They establish the consequences of a supply chain due diligence failure
Kittel Principle According the Kittel principle, a trader is liable for VAT fraud and HMRC may refuse a company’s right to deduct VAT if, “it is ascertained, having regard to objective factors, that the taxable person knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT”.
This standard applies if a trader knew or should have known the goods were connected to fraudulent activity so the burden is higher upon traders to ensure they operate at an industry standard level of knowledge regarding the VAT status of the goods they trade and also of the traders they do business with. Therefore, even a lack of knowledge of the other party’s VAT fraud is no defence if a trader should have known.
Due Diligence is a critical part of any defence.
The recent Tribunal Case of Safe Cellars Ltd v HMRC  addressed the question of due diligence requirements in the excise industry and whether poor due diligence procedures can result in revocation of excise licenses
- Safe Cellars due diligence was found to fall far short of the required standard and the Judge made very strong remarks regarding this.
Safe Cellars (a bond in Manchester), recently lost its appeal against the revocation of its excise licences by HMRC. In its Judgment, the Tribunal carefully considered the issue of due diligence and what due diligence should be undertaken by companies in the excise industry supply chain.
The Tribunal upheld HMRC’s decision and in so doing the Tribunal Judge made some damning statements about Safe Cellars due diligence, such as:
“no reasonable person would consider that [the due diligence] provided any reasonable degree of comfort that the transactions in which Safe Cellars participated would not be linked to excise Fraud’
“[Safe Cellars] complete failure to exercise almost any rigorous due diligence about the traders of particular concern was a Nelsonian blind eye of elephantine proportions.”
The Judge concluded that due diligence was clearly more than ‘merely collecting bits of paper’ and should include:
- Objectively assessing the risks of fraud within supply chains
- Putting in place reasonable and proportion checks on day to day trading
- Having procedures in place to take effective action and documenting the checks that are to be carried out.
In addition, the Judge found that the due diligence requirements are not unfair:
‘The revocation of the approval is harsh but in the context of a justified regime does not seem to us to be wholly unfair’
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