On March 5, 2024, Public Safety Canada updated its guidance on the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “Act”).
Unfortunately, the updated guidance falls short of clarifying grey areas of the Act. The changes leave some of the most ambiguous aspects unresolved and appear to, in certain instances, create even more ambiguity for some businesses wanting to comply with the new requirements.
Context
The Act came into force on January 1, 2024. On December 20, 2023, the government published the first set of compliance guidelines which, among other things, introduced an online questionnaire to be completed as part of the reporting obligations under the Act. Our bulletin on the initial guidance is available here.
Only a few months ahead of the May 31, 2024 reporting deadline, the government has now revised its guidance (the “Updated Guidance”).
Key Changes
New information regarding which entities are required to report
The Updated Guidance advises that a subsidiary must determine if the Act applies to it independently from its parent, rather than relying on the consolidated financial statements belonging to the parent. While this amendment may appear to provide clarity, its impact on the existing provisions of the Act remains uncertain when applied to specific factual contexts. Given that this is one of the more imprecise parts of the Act, business should seek legal advice to confirm how the Act and Updated Guidance impact their particular situation.
Removal of references to selling or distributing in the guidance
The Updated Guidance removes all references to the sale and distribution of goods in its discussion of the applicability of reporting requirements. This change in the guidance appears to align with the purpose of the Act and to confirm a more restrictive interpretation of the legislation, being that reporting obligations do not attach to entities that only sell or distribute goods (i.e. they neither import nor produce goods). However, it is important to note that the Act has not been amended and currently still contains a reference to entities involved in the sale and distribution of goods as reporting entities. For that reason, entities involved in the sale or distribution of goods should seek legal advice regarding the applicability of the reporting obligations.
Compliance and enforcement
The Updated Guidance includes a new section to advise that entities hold the legal responsibility to comply with the reporting requirements in the Act. The section also notes that the information in such reports may be subject to verification at any time.
Specific guidance for government institutions
Separate from the Updated Guidance related to entities, Public Safety Canada has now also published new guidance specifically for federal government institutions. For more information about how the Act applies to public sector institutions (including institutions at the provincial and municipal level), please refer to Fasken’s related bulletin: Canada’s New Forced & Child Labour Act: What Public Sector Organizations Need to Know.
If you have questions about whether the reporting requirements in the Act apply to your corporation, trust, partnership or other unincorporated organization, our team can help. Please reach out to us with questions you may have regarding your legal obligations.
