Former workers of Neo Trend remain empty-handed after 14-month-long engagement with Ethical Trading Initiative and member brand Next
The factory had put workers on suspended leave in Spring 2020, and workers had been told that they would be paid for this leave as per government regulations. Workers were also protected from being dismissed during this period because the Turkish government had introduced a ban on dismissals for the duration of the COVID-19 lockdown. However, after the final order for the factory's main buyer, Next had been completed by a small group of workers towards the end of August 2020, the factory owner emptied out the factory and sold all assets. When workers returned to work at the end of the lockdown in July 2021, the 104 workers of Neo Trend found the factory closed and were left empty-handed without their owed severance, notice and other allowances.
After finding that meetings between Next and worker representatives, and later with Clean Clothes Campaign member Labour Behind the Label, did not result in any offer from Next to compensate the workers, CCC members working on the case (CCC Turkey, Labour Behind the Label) decided to report this case to the Ethical Trading Initiative (ETI). The ETI is based in the UK and is what’s known as a multi-stakeholder initiative consisting of trade unions, NGOs and businesses, of which Next is a member. All businesses that have joined the ETI agree to adopt ETI's Base Code, a set of common standards for labour conditions based on the International Labour Organisation conventions. Member brands commit to implementing these standards in their supply chains.
The ETI is one of several voluntary initiatives through which garment companies can commit to protecting the rights of workers who make their products, and, like most initiatives, the ETI also has a procedure through which breaches of those labour standards can be raised by members and addressed. CCC decided to report the Neo Trend case to the ETI in accordance with this procedure in July 2022 and requested the ETI member NGO Homeworkers Worldwide (HWW) initiate the process on behalf of the affected workers. Unfortunately, after a 14-month-long process, the ETI has not been able to ensure that the Neo Trend workers that produced for its member Next received their owed severance.
Bego Demir from CCC Turkey: “This case proves once more that if there are no binding laws to hold companies accountable, voluntary multi-stakeholder initiatives such as the Ethical Trading Initiative cannot be the solution to achieve real remedy for workers, especially because they are financially dependent on the brands themselves. The time and efforts spent engaging with the initiative's complaints procedure ultimately hasn't resulted in any tangible change for the workers, who are still owed severance to this day.”
Below, we explain in more detail the steps that were taken in this case as part of ETI's procedure.
Original complaint filed in July 2022
The complaint filed by CCC members to the ETI’s procedure alleged that the lack of severance payments to the Neo Trends workers constituted a violation of ETI's Base Code, specifically clause 5.1:
"Wages and benefits paid for a standard working week meet, at a minimum, national legal standards or industry benchmark standards, whichever is higher. In any event, wages should always be enough to meet basic needs and to provide some discretionary income."
HWW officially reported this violation to the ETI on 18 July 2022 on behalf of CCC and the affected workers. After two months, the ETI shared Next's first response to the complaint. Next denied the allegations on the grounds that their company did not have a commercial relationship with Neo Trend in the 12 months prior to the factory closure. The company denied being the "main buyer" and listed 17 other companies that were customers "at the relevant time" - two of which are ETI members. Next said its order levels represented about 15% of the factory's production capacity and requested the ETI to reach out to other member brands doing business with Neo Trend "in the period prior to the factory closing".
Furthermore, Next argued that it was Neo Trend's own decision to cease trading and that, for this reason, it had no responsibility to the workers beyond paying the invoices for their final orders. Unfortunately, international due diligence guidelines provide little direction on this matter.
CCC submitted its response the following month, explaining that the workers had testified that they were only making clothes for Next and no other brands in the last months of production. There was no production at the factory whatsoever after the final orders for Next were shipped off in August 2020. The factory closure was officially announced as soon as companies were allowed to dismiss workers again at the end of Turkey's national lockdown in July 2021, making the 12-month period that Next referred to completely irrelevant.
ETI concludes its investigation in March 2023
ETI went on to investigate the complaint in the ensuing 4.5 months, after which HWW received the investigation report. In its report, the ETI accepted Next's argument, even though it said it had no way to validate if Next was right in claiming they were not the main buyer in the period leading up to the factory closure. In the ETI's opinion, Next had no further obligation to ensure that workers were not harmed by Next's business relationship with Neo Trend ending because it had been the decision of the factory to terminate the business. ETI did recommend that Next and the other buyers it had identified should consider "the merits of exploring collective options to achieve a resolution to the issue, including considering a financial goodwill gesture to affected workers."
In our follow-up with ETI in April 2023, we asked for more details about the evidence provided by Next that they were not the main buyer at Neo Trend and the outcome of ETI's follow-up with the other member brands that allegedly sourced from the factory in the relevant time period. The ETI then admitted Next hadn't provided any hard evidence to support its claim. The CCC members then asked ETI to consult with the three other ETI member brands that Next had said were customers of Neo Trend, and only one had ever sourced from them, and that was several years ago.
On the ETI's recommendation that Next consider "a financial goodwill gesture" to the former Neo Trend workers, we learned that the company declined to make a financial contribution out of concern that this might create a precedent. ETI was not willing to require members to comply with the recommendations of the review. NEXT ultimately refused to consider the recommendation as necessary and walked away.
Final outcome in October 2023
Through Homeworkers Worldwide, CCC submitted a formal request to appeal the ETI's decision. In accordance with their procedure, ETI appointed a committee of its Board members to consider our appeal. This committee convened on 14 September 2023 to review all the evidence that was submitted, and the conclusions were shared on 2 October 2023. While the harm to workers was not contested, the committee stated that they decided to uphold the original investigation findings and reject the appeal. We learned on 11 October that Next’s position on making a financial contribution to the affected workers remained unchanged - the company maintains that they have acted ethically and responsibly. The former workers of Neo Trend thus remain empty-handed.
This case shows that when an unscrupulous employer cheats dismissed workers of severance pay, it is all too easy for the brands previously sourcing from that supplier to wash their hands of responsibility despite their membership in a voluntary multi-stakeholder initiative. The case highlights the limitations of such voluntary initiatives in achieving remedies for workers, as previously shown by the MSI Integrity project, and underlines once more the importance of legally binding mechanisms.
