The Fighting Against Forced Labour and Child Labour in Supply Chains Act (the "FCLA") entered into force on January 1, 2024. While much of the attention surrounding the FCLA has focused on its impact on Canadian corporations, the FCLA also has important implications for public sector organizations and their procurement activities.

In this bulletin, we discuss the FCLA and key takeaways for public sector organizations.

FCLA: Overview & Application

The FCLA is supply chain transparency legislation which seeks to combat forced and child labour by requiring "government institutions" and "entities" (i.e., certain businesses and, as discussed below, certain provincial agent Crown corporations) to prepare and submit annual reports about their supply chains and related matters.

Which "Government Institutions" Are Covered?

"Government institution" under the FCLA has the definition as under the Access to Information Act ("ATIA") – those entities listed under Schedule I of the ATIA and any parent Crown corporation, and any wholly-owned subsidiary of such a corporation, within the meaning of section 83 of the Financial Administration Act. Therefore including federal departments, ministries of state, Crown corporations (both parents and subsidiaries), as well as other enumerated institutions (e.g., Canada Border Services Agency).

Reporting Requirement for Government Institutions

Government institutions that produce, purchase, or distribute goods in Canada or elsewhere must file an annual report. The report must detail the steps taken in the previous fiscal year to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods produced, purchased, or distributed by the institution. The report must also address:

  • its structure, activities, and supply chains
  • its policies and due diligence processes in relation to forced labour and child labour
  • the parts of its activities 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
  • any measures taken to remediate any forced labour or child labour
  • 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
  • the training provided to employees on forced labour and child labour
  • how the government institution assesses its effectiveness in ensuring that forced labour and child labour are not being used in its activities and supply chains

Although Public Safety Canada has not released specific guidance for government institutions on preparing reports, its guidance for business entities is helpful given the similarity in reporting requirements.

Reporting Requirement for Public Sector Organizations That Qualify as "Entities"

Although Public Safety Canada recently clarified that provincial and municipal government institutions do not qualify as "government institutions", certain sub-federal public sector organizations such as provincial agent Crown corporations may still have reporting obligations if they fall under the definition of "entity".

A public sector organization could qualify as an "entity" if it is a corporation, trust, partnership, or other incorporated organization that has a place of business in Canada, does business in Canada or has assets in Canada and meets at least two of the following size-related thresholds for at least one of its last two fiscal years:

  • has at least $20 million in assets
  • generated at least $40 million in revenue
  • employs an average of at least 250 employees

If the public sector "entity" is engaged in any of the following activities, it must prepare and file a report:

  • producing, selling, or distributing goods in Canada or elsewhere;
  • importing into Canada goods produced outside Canada; or
  • controlling an entity engaged in any of the aforementioned activities.

Importation Ban

The FCLA should also be considered in relation to recent amendments to the Customs Tariff that entered into force on January 1, 2024 (Bill S-211), broadening Canada's existing importation ban on goods tainted by forced labour to prohibit goods mined, manufactured, or produced wholly or in part using child labour.

As part of their procurement activities, whether acting as importer or purchasing from others, all public sector organizations (whether or not they are covered by the reporting requirements as a Government institution or entity) will need to ensure that goods are free of forced and child labour taint. Such goods cannot be imported to Canada and all persons have the obligation to report any such illegally imported goods in their possession to the Canadian Border Services Agency (CBSA).

Key Takeaways

  • Public sector organizations should determine whether they qualify as a "government institution" or "entity".
  • Reporting organizations should be in the process of preparing their annual reports for the May 31, 2024, submission date.
  • Consider the implications of the FCLA and the importation ban on procurement practices, including review of procurement documentation and supplier agreements, to ensure appropriate coverage (for example, updating procurement policies and supplier codes of conduct; requiring supplier certifications; ensuring procurement documentation and supplier agreements permit compliance audits and termination rights).

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.