Canada: Forced Or Compulsory Labour Laws In Canada – Gardiner Roberts LLP

Introduction

On May 11th, 2023 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” received Royal Assent. The
legislation will come into force on January 1^st, 2024.
The first reports under the legislation are due May 31, 2024.

The purpose of the Act is to implement Canada’s
international commitment to combat forced labour and child labour
by imposing reporting obligations on (i) government institutions
producing, purchasing or distributing goods in Canada or elsewhere;
and (ii) certain business entities producing goods in Canada or
elsewhere or importing goods produced outside Canada.

The Canada-United States of America – Mexico Agreement
(“Cusma”) came into effect on July 1, 2020 and replaced
the North American Free Trade Agreement implemented in 1994.

Article 23.6 of CUSMA provides:

Canada was at risk of a complaint under CUSMA. The United States
introduced legislation on forced labour in mid 2022. Canada lagged
behind. In late 2022 an Uyghur activist raised concern that Canada
(as a US trade partner) was doing little to stop the trade in
forced-labour goods. The Canadian government was facing criticism
in the press. According to a news article in December 2022, the
score was U.S. 2398 v. Canada 1 – for the number of shipments
in 2022 stopped at customs over suspicions that they contained
forced-labour goods. The sole intercepted shipment, clothing from
China, was let in after an appeal by the importer [The Xinjiang
region is estimated to account for 20% of the world’s cotton
production and 80% of China’s domestic cotton production]

The International Labour Organization published a report in
September 2022. It reported that 27.6 million people are trapped in
forced labour—an increase of 2.7 million individuals since
2016. The worsening situation is attributed to the compounding
effects of the pandemic, political instability and unsafe migration
in recent years.

Canadian Decisions on the Forced Labour Issues in
2022

In Kilgour v. Canada 2022 FC 472, the applicants and an
Intervener asked the Federal Court of Canada to find that the
Canada Border Services Agency (“CBSA”) had the authority
under the Customs Tariff, SC 1997 c. 36 to implement a
presumptive determination with respect to all goods imported from
the Xinjiang region of China. They claimed all such goods had an
increased likelihood of being produced using forced labour, and
thus should be presumptively prohibited from import into Canada,
unless the importers provided clear and convincing evidence to the
contrary. The original request was made to CBSA to implement the
presumptive determination. The CBSA responded that it did not have
the authority to implement the presumption. The Court dismissed the
application for judicial review. It noted that Held: The
application for judicial review was dismissed. The Court noted that
(a) CBSA reply was not a matter amenable to judicial review, (b)
the applicants did not have standing to bring the application, (c)
the CBSA’s interpretation of the legislation was reasonable,
(d) the border agency’s focus on producers or importers, rather
than regions or countries, and the prohibition on such goods was
correct and was correct in the application on a case-by-case basis
and (e) each shipment of goods that arrives in Canada is subject to
an officer’s determination on origin, tariff and value, and
such decisions can be appealed through administrative
mechanisms.

In Uyghur Rights Advocacy Project v. Canada, 2023 FC
126, the Uyghur Rights Advocacy Project (“URAP”) brought
an application for judicial review of the acts and omissions of the
Government of Canada. URAP contended that Canada, by its acts and
omissions, was not respecting its international obligations under
Article I of the Convention on the Prevention and Punishment of
the Crime of Genocide, by failing to prevent – or take
any steps to prevent – the ongoing genocide against the
Uyghur population. This lack of action, according to URAP,
contributed to the crimes committed against the Uyghur people of
China. URAP asked for five declarations from the Court, namely:

1. The crime of genocide is currently being committed against the
   Uyghur population on the territory of the PRC, since at least
   2014;




2. Canada is bound by the provisions of the
   Convention;




3. Canada knows, or should have known, that the crime of genocide
   is being committed against the Uyghur population since at least
   2014, or alternatively;




4. Canada knows, or should have known, of the existence of a
   serious risk that genocide would be committed against the Uyghur
   population on PRC’s territory; and;




5. Canada, by its acts and omissions, is in breach of article I of
   the Convention.

The Federal Court of Canada dismissed the application for
judicial review noting:

Legislation in Place Prior to Bill S-211

Canada does have legislation in place that prohibits forced
labour or exploitation of labour. The legislation is not as far
reaching as Bill S-211 into the supply chain.

The Criminal Code of Canada provides:

Criminal Code of
Canada – 279.04 Exploitation

(1) For the purposes of sections
279.01 to 279.03, a person exploits another person if they cause
them to provide, or offer to provide, labour or a service by
engaging in conduct that, in all the circumstances, could
reasonably be expected to cause the other person to believe that
their safety or the safety of a person known to them would be
threatened if they failed to provide, or offer to provide, the
labour or service.

Factors

(2) In determining whether an
accused exploits another person under subsection (1), the Court may
consider, among other factors, whether the accused

(a) used or threatened to use force
or another form of coercion;

(b) used deception; or

(c) abused a position of trust,
power or authority.

The Canada Labour Code (which applies
to employees of federal undertakings) provides:

178 Minimum
wage

(1) Except as otherwise provided by
or under this Division, an employer shall pay to each employee a
wage at a rate

(2) (a) not less than the minimum
hourly rate fixed, from time to time, by or under an Act of the
legislature of the province where the employee is usually employed
and that is generally applicable regardless of occupation, status
or work experience; or

(b) where the wages of the employee
are paid on any basis of time other than hourly, not less than the
equivalent of the rate under paragraph (a) for the time worked by
the employee.

The Crimes Against Humanity and War Crimes Act
(2000) is a relatively new piece of legislation.
Section 6 provides:

Genocide, etc., committed outside
Canada

(1) Every person who, either before
or after the coming into force of this section, commits outside
Canada

(a) genocide,

(b) a crime against humanity, or

(c) a war crime, is guilty of an
indictable offence and may be prosecuted for that offence

The legislation defines “crimes against humanity” as
“murder, extermination, enslavement, deportation,
imprisonment, torture, sexual violence, persecution or any other
inhumane act or omission that is committed against any civilian
population or any identifiable group and that, at the time and in
the place of its commission, constitutes a crime against humanity
according to customary international law or conventional
international law or by virtue of its being criminal according to
the general principles of law recognized by the community of
nations, whether or not it constitutes a contravention of the law
in force at the time and in the place of its commission.”

Bill S-211 – What Does it Seek to Accomplish and What
Does it Require

Bill S-211 has been criticized as inadequate and a “half
measure”. It simply requires Canadian institutions and private
sector businesses to report the steps they have taken to prevent
and reduce the risk of forced labour and child labour used at any
step of the production of goods.

Companies caught by the Bill are required to file a report by
May 31st of each year.

The idea is that over time, this increased compliance attention
will discourage upstream suppliers from engaging in such practices
if they want to continue supplying goods to the Canadian
market.

Reporting entities include all Canadian federal government
institutions and departments, Crown corporations and their
wholly-owned subsidiaries, as well as any other private sector
“entity”

It applies to any “entity” that is:

1. producing, selling or distributing goods in Canada or
   elsewhere;




2. importing into Canada goods produced outside Canada; or




3. controlling an entity engaged in any activity described in
   paragraph (1) or (2), with control defined broadly as any direct or
   indirect control or common control “in any manner”.

“Entity” is defined as: as a corporation or a trust,
partnership or unincorporated organization that is:

1. is listed on a stock exchange in Canada;




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

   1. it has at least C$20 million in assets,

   
   

   2. it has generated at least C$40 million in revenue, and

   
   

   3. it employs an average of at least 250 employees;

or

1. is otherwise prescribed by regulations, (which have yet to be
   enacted)

Reports must include:

1. the entity’s structure, activities and supply chains;




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




3. 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;




4. any measures taken to remediate any forced labour or child
   labour;




5. 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;




6. the training provided to employees on forced labour and child
   labour; and




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

Bill S-211 contains additional elements of note:

1. It extends the import ban under Canada’s Customs
   Tariff to goods that are “mined, manufactured or produced
   wholly or in part” with “child labour” in addition
   to goods produced with “forced labour” and “prison
   labour” which are already prohibited.




2. It codifies a Canadian definition of both “child
   labour” and “forced labour”, adopting the
   definitions from Article 3 of the International Labour Organization
   (ILO) Worst Forms of Child Labour Convention, 1999 and Article 2 of
   the ILO Forced Labour Convention, 1930 respectively.




3. It introduces a definition of “production of goods”
   meaning “the manufacturing, growing, extracting and processing
   of goods.”




4. It gives new enforcement powers to the Minister of Public
   Safety and Emergency Preparedness, including powers of search,
   inspection and seizure of documents and evidence.




5. Importantly, Bill S-211 also 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.

The Bill does not prescribe the specific measures that a company
must take to remediate forced labour or child labour in its supply
chains. It also doesn’t state the steps they have to take to
prevent and reduce the risk of forced labour and child labour used
at any step of the production of goods. There is no guidance on
what inquiries a company has to make downstream the supply chain.
Is a survey of their suppliers sufficient? Should they require
declarations from suppliers? Should they incorporate warranties in
supply contracts, together with reporting requirements? How should
a company structure its procurement process? How is this achieved
if multiple intermediaries are involved?

At a minimum an entity must take certain steps. These should
include:

1. Conducting due diligence to both identify any forced labour or
   child labour in their respective supply chains and track the
   effectiveness of certain frameworks and policies to ensure that the
   risk of forced labour and child labour is reduced. See for example
   the United Nations Business and Human Rights Navigator – Due
   Diligence Considerations
   [1];




2. Implementing supplier codes of conduct setting out certain
   necessary prohibitions and monitoring procedures regarding
   suppliers’ labour practices and, specifically, the use of
   forced labour or child labour;




3. Training directors, officers and internal personnel on their
   duties in light of the obligations under Bill S-211; and




4. Proactively reviewing and updating contracts with existing
   suppliers to ensure that any risks associated with forced labour or
   child labour are promptly addressed and mitigated.

The reports required under Bill S-211 must be approved by each
respective entity’s governing body and such approval must be
“evidenced by the signature of one or more members of the
governing body of each entity that approved the report.” This
leads to the question as to whether the individuals signing the
reports can also be held personally liable for any
misrepresentations in the report. The government has indicated its
intention to hold directors and officers accountable for the
disclosure required under the legislation and, based on the current
wording, if any such persons direct, authorize, assent to acquiesce
in or participate in knowingly providing false or misleading
information, they can be fined up to $250,000. The Bill grants the
Minister extensive search powers of premises including residential
properties.

Obviously supply chain transparency should be a vital part of
any company’s ESG framework. The rise of ESG reporting
requirements has put pressure on companies to
“greenwash.” This has resulted in a sharpened focus of
regulators and activist investors through legal proceedings. The
cost of inaction may be the greatest impact of Bill S-211. A PDF
version is available to download here.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.