The Modern Slavery Bill (Bill) did not get through its final readings before Parliament is dissolved on 1 October ahead of the election.  However, the Bill can be reinstated after the election and a modern slavery reporting regime for New Zealand still looks likely as it has been supported by most political parties.  The select committee, which reported back at the end of last month, recommended that the Bill be passed, with some amendments.

As discussed in the article we published in May, the Bill establishes a reporting regime under which entities with total revenue exceeding $100m must report annually on matters relating to modern slavery within their operations and supply chains.

Many of the recommendations address the "pain points" we identified in our earlier article by better aligning the regime with Australia's and making the Bill more workable to comply with.

Key changes

Transition period

  • A transition period has been introduced.  The first reporting period will now be the 12-month period beginning after legislative commencement.  Practically, this means entities will have between 24 and 36 months (depending on their balance date) following commencement before their first statement is due.

Better alignment with financial reporting regime

  • The reporting threshold of $100m remains unchanged, but an entity must meet it in each of its two preceding accounting periods.  Therefore, if you experience a temporary increase in revenue that pushes you over the reporting threshold just for one year, you will not need to report

  • It has also been clarified that the reporting threshold is calculated on a consolidated basis, bringing within scope entities that, together with their subsidiaries, meet the $100m revenue threshold

  • The reporting period has been amended to align with entities' financial reporting cycles.  Reports will now be due six months after an entity's balance date.

Group reporting and overseas equivalent reports

  • Joint group reporting is now expressly permitted

  • Recognised equivalent overseas reports can now be provided by entities to satisfy their obligations.  At present, only Australian modern slavery statements will be recognised.

Application to the public sector

  • The Bill will continue to apply to the public sector.  However, notable changes have been made which include:

    • clarifying that entities like the Offices of Parliament and the Reserve Bank come within the scope

    • allowing for one consolidated public sector statement to be prepared which covers all public sector agencies that meet the threshold

    • clarifying that public sector agencies are exempt from liability under the Bill.

Enforcement

  • The Committee has broadly aligned the penalty regime with New Zealand's existing climate-related disclosures framework.  The amended penalties include:

    • an offence related to knowingly giving a false or misleading statement or information

    • an offence related to liability of directors or senior managers

    • pecuniary penalties of up to $600,000.

The strict liability offences (which carried fines of up to $200,000) for failing to submit a statement, and for providing false or misleading information have been removed in favour of the above.  The Bill also clarifies that action under the Fair Trading Act cannot be taken against a false, misleading or unsubstantiated modern slavery statement.

  • The Crown procurement exclusion provision, which required that the Crown not pay money to an entity convicted of an offence or ordered to pay a penalty under the regime, has been removed

  • Director and senior management liability has been retained.  However, the scope of management liability has been refined and limited to "senior managers".  It is worth noting that, on its final day of consideration, the Committee received Australia's consultation paper on the proposed changes to its regime, which did not provide for director or management liability.  The Committee did not have enough time to consider the paper but stated that some of its members consider that New Zealand should be aligned with Australia on penalties.  This indicates a possible appetite for the removal of director and management liability.

Next steps

Parliament rose on 24 September before the Bill could have its second reading.  However, it has cross-party support, so it is a question of when, not if, it will be passed.  If your organisation is likely to meet the reporting threshold, you should start thinking now about how this will impact you and begin considering the practicalities surrounding compliance.

Co-authored by Hugo Young (Solicitor).