Manufacturers and retailers have been urged to check they and their suppliers are using only legitimate gangmasters after it emerged hundreds may have missed a deadline to apply for a compulsory licence.
The Gangmasters Licensing Authority, which will police providers from next month, said only 915 gangmasters had applied to be registered out of an estimated 2,000 in the UK.
It said 548 licences had been issued so far, with 17 refused due to reasons such as not paying the minimum wage or inadequate health and safety procedures.
Under the Gangmasters Licensing Act, all labour providers supplying workers to farmers, packers and manufacturers must be licensed by 1 October. After that date it will be an offence to operate without a licence. After 1 December companies could face prosecution if they employ unlicensed workers.
Penalties could include prison sentences of up to a year for food processors, farmers and packers convicted of employing illegal workers, and ten years for unlicensed gangmasters.Retailers could be at risk of prosecution if they own the packhouse or processing plant using an unlicensed provider, or if they are aware or complicit in exploitation.
However, for the major supermarkets, the threat of embarrassment should be enough incentive alone to check all was in order in their supply chains, said Mike Wilson, chief executive of the Gangmasters Licensing Authority.
"Turning a blind eye where there is any likelihood or suggestion of illegal or exploitative practice by a supplier or between the supplier and labour provider invites suspicion of collusion," he said.
A spokesman for the BRC said retailers were taking their responsibilities seriously by making their suppliers clear about their duties. "If they're not in line, they won't be used by the retailers."
Any new licence which has been granted takes a month to process but the GLA is encouraging gangmasters to continue to apply, promising to look more favourably on late applications than on those who try to evade the law.