Canada's anti-modern slavery legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act, (the "Act") came into force on January 1, 2024.

There is a nuanced legal distinction between municipal corporations and their business counterparts, with significant implications for governance and compliance in the municipal landscape.

The Act requires government institutions and certain entities to provide annual reports on how they have addressed forced labour and child labour risks in regard to their operations and supply chains. The first reporting deadline is May 31, 2024.

Application of the Act

The Act applies to government institutions and certain entities, including corporations, trusts, partnerships or other unincorporated organizations, that produce, sell, distribute or import goods or that control entities that do so.

It is clear from the definition of "government institutions" that the Act applies only to federal government institutions. However, what is not clear is whether the Act applies to municipalities.

Are municipalities considered "corporations" within the meaning of the Act?

In Canada, the governing legislation for municipalities generally defines a municipality as a "corporation" or "municipal corporation." However, there are several differences between municipal corporations and other business corporations incorporated under provincial or federal corporate legislation:

  • Structural differences – Municipal corporations have different organizational structures, objectives and responsibilities than other corporations.
  • Exercise of powers – Generally speaking, other than in cases like municipal utility companies, municipalities exercise their corporate powers for municipal purposes rather than business purposes.
  • Goals and objectives – Municipal corporations are concerned with the betterment of civil administration and local government rather than bringing profits to shareholders.
  • Ownership – Municipal corporations are not owned by their shareholders but are accountable levels of government.
  • Limitations – As creatures of statute, while municipalities generally have natural person powers, those powers are limited by their governing provincial legislation.

Due to these differences, it is unclear whether the word "corporation" in the Act was intended to include municipal corporations. However, it is also important to note that many of the above distinctions may not apply to a corporation controlled by a municipality.

Considering the Act's focus on an entity's business activities, it is questionable whether the legislature intended for the Act to apply to municipal corporations.

Takeaways for municipalities

There are currently no Regulations in place for the Act. Section 23 of the Act provides that the Governor in Council may make regulations regarding the definition of an "entity" and in doing so, acknowledges the current definition's ambiguity.

Until the Regulations or case law provides clarity regarding the definition of "entity" or "corporation" under the Act, there is some uncertainty as to whether the Act applies to municipal corporations. In light of this uncertainty, municipalities are encouraged to seek legal advice regarding compliance with the Act.

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.