In 2024, the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the “FALC”) came into force, which imposed annual reporting obligations for certain entities.  While the 2024 reports were due last year, this is a recurring obligation with significant penalties for non-compliance.

Recently, the Canadian government issued its Report to Parliament summarizing the submissions received for the 2024 reporting cycle.  This Report serves as a reminder of the ongoing importance of timely compliance with the reporting obligations, with the next reporting deadline on May 31, 2025.

Background on the Reporting Requirements

The FALC requires certain entities to file an Annual Report outlining actions taken to prevent or reduce forced labour in their supply chains.  The reporting obligation generally applies to businesses if they meet both of the following tests:

1. Nexus Test:  A business qualifies if it meets at least one of these criteria:  (i) has a place of business in Canada; (ii) does business in Canada; and (iii) has assets in Canada.
2. Size Test:  A business qualifies if, it meets at least two of the following thresholds based on consolidated financial statements:  (i) $20 million in assets; (ii) $40 million in revenue; and (iii) 250 or more employees.

Report to Parliament

The Government’s Report to Parliament provides a snapshot of the submissions received during the 2024 reporting cycle.  Below are some key observations:

• Late Submissions: Over 6,000 Annual Reports were submitted late last year, highlighting the need for better planning and awareness among businesses to ensure timely compliance.
• Non-Compliance Penalties:  Under section 19 of the FALC, failure to comply with the reporting requirements can result in an offence punishable by a fine of up to $250,000. 

Notably, it was reported that that in the first reporting cycle, Public Safety Canada focused on raising awareness and encouraging meaningful action, and no charges under Section 19 were laid.  However, this administrative leniency could change in the 2025 reporting cycle, particularly following the recent statement from Minister Ng regarding new measures to combat Forced Labour.

Takeaways

Under the FALC, entities must submit their Annual Reports by May 31^st each year, documenting actions and measures taken during the previous year.  Failure to submit a timely or complete report could result in an offence under section 19 of the FALC, punishable by a fine of up to $250,000.

While Public Safety Canada has focused on raising awareness and has not filed any charges under section 19 of the Act for the first reporting cycle, enforcement measures may strengthen in future cycles, especially in light of the recent statement from Minister Ng.  Organizations should anticipate stricter scrutiny, and with the significant penalties, “do nothing” is an expensive strategy.

The next reporting deadline is May 31, 2025.  Businesses should begin preparing their Annual Reports now to ensure timely and complete submissions.

Want a PDF copy of this blog?