Guidance for Licensees on Worker Suspensions/Terminations during the Covid-19 Crisis

Please see here a guidance document on compliance with national labor laws during the Covid-19 crisis that the WRC is providing to university licensees.

The economic repercussions of the Covid-19 pandemic are roiling global apparel supply chains. As brands, including university licensees, cancel orders with factory suppliers, many factories are in turn suspending production and laying off large numbers of workers. Adding to the disruption, factories in many countries are subject to emergency shutdowns called by governments, or they are unable to obtain necessary material (fabric) due to shutdowns in other countries.

University licensees and other apparel brands are responding to the same harsh reality that confronts the entire retail industry: a massive collapse in demand. Suddenly facing huge financial challenges, apparel brands are scrambling to minimize inventory and conserve cash by cancelling orders—including, in many cases, orders that factories are already producing or have been completed and are ready to ship.

The logical response of the brands’ supplier factories is to slash their payrolls and, indeed, large-scale layoffs are taking place in countries across the supply chains. There is not just a great risk but a likelihood in this situation that many factories will not pay legally mandated compensation—severance benefits for those who are permanently terminated and financial assistance for workers suspended during temporary shutdowns—to some or all of the workers they are laying off.

Information the WRC has helped to gather from factory owners in Bangladesh shows that this is indeed happening. The failure to provide such compensation or assistance does not simply violate factories’ legal obligations to workers. It denies workers, in countries in which social safety nets are generally minimal or non-existent, what is often the sole source of funds to support their families in their time of greatest need.

University labor codes are silent on the question of how licensees approach the reduction of orders from their supplier factories. However, university standards do obligate licensees to ensure that their suppliers comply with the law when the latter suspend or dismiss workers as a result of reduced orders.

It is important, amidst the unfolding chaos across apparel supply chains, that university licensees monitor mass suspension and dismissal of workers at factories making university apparel, confirm whether suppliers are paying workers what they are legally owed, and press suppliers to comply with their obligations. For the hundreds of thousands of workers who sew university apparel, their ability to get their families through this crisis will depend substantially on whether they receive legally due compensation if they lose their jobs.

To assist licensees in meeting these obligations, we are providing them with a detailed summary of the key legal requirements related to suspension and termination of employment in major apparel exporting countries. The summaries also address any additions, or changes, to these obligations under new laws or policies enacted by governments in response to the crisis. As this situation is still in flux, we will continue to update these summaries to reflect new developments.

As companies up and down the supply chain fight for survival, none of us is operating under the illusion that large-scale suspensions and terminations of workers are going to go smoothly and by the book. At the same time, it is clear that garment workers and their families are among those least well-equipped to bear the economic fallout of a global pandemic. University codes provide a vital instrument to protect workers at a time when they and their families have never needed it more.

In addition to sharing this guidance with licensees, we are monitoring developments at collegiate factories and will document any cases where workers are dismissed without payment of legally earned compensation. We will then work with licensees on corrective action.

As always, please let us know if you have any questions or would like to discuss this.