NEXT supplier Neo Trend in Turkey closed down in the middle of the pandemic and the factory owner fled the country, leaving workers with nothing. The 104 workers who were employed there are calling for justice. NEXT must ensure workers are paid what they are owed.

Neo Trend Textile closed officially on 1 July 2021 due to loss of orders in the pandemic. 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 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 buyer Next had been completed by a small group of workers towards the end of August 2020, the factory owner started emptying out the factory and selling all factory 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 due severance, notice and other allowances.

The factory owner has transferred all financial resources out of the company and left the country, meaning workers have no access to justice via the courts in Turkey. Neo Trend workers have tried to get support from Next, which according to worker testimonies was the only buyer, since the fall of 2021. While Next representatives attended a meeting with a union that was supportive of the workers, this did not result in any concrete outcome. A group of workers has approached the Clean Clothes Campaign network for support in this case. They have since established a formal Worker Committee to represent themselves. At this time, 30 workers are participating, and it is these workers whom the CCC network is seeking remedy for, although it is possible that more may come forward in due course. Unfortunately, Next has refused to engage with the worker committee. The company has merely offered their support if “the workers choose to pursue a legal avenue as per local labour law”, which is highly unlikely to result in any payment to the workers for the aforementioned reasons.

It is clear to us that in cases of factory closure in countries with limited or no recourse to justice for workers, buyers in supply chains have a duty to ensure that workers are not left without their legally owed severance and wages, as outlined in the UNGPs. As the rights situation in any given country is clear to brands when making sourcing choices, the much-reduced risk that brands enjoy the vast majority of the time, needs to be offset by a responsible approach taken when the liability for workers’ rights isn’t picked up by suppliers. Factory closures are a case in point, where the disappearance of employers doesn’t remove the duty on companies further up the supply chain to ensure that workers are dismissed legally with the full amounts owed under the law. We are requesting that NEXT, as the main buyer, engage constructively to ensure the sum that is owed to these workers is transferred to them.

When Ung Chanthoeun found that the factory she had worked at for 17 years had closed in July 2020 during the pandemic, it was a devastating blow. She said, “When I heard that Violet closed, I felt like I lost everything I ever thought possible. It’s hard to get money for my child’s schooling or to pay the bank, or for medical treatment when my family is sick.”

Virtually every worker has a family that depends on her income. Stealing compensation from workers is stealing from families.

Chanthoeun’s story is not unique. When the Violet Apparel factory, owned by Ramatex, closed over eighteen months ago, 1,200 workers were left without jobs.  The workers are owed $343.174 in unpaid compensation. Including damages that they are legally entitled to, this figure goes up to $1.4 million. Matalan was one of Violet Apparels biggest buyers. Both Matalan and Ramatex can afford to pay the workers what they are owed. Matalan’s operating profit increased by 371% from £7.4m to £34.8m in the third quarter of 2021 alone. Despite these profits, both companies are failing the workers who have stitched their clothes.

The compensation is critical to Cambodian garment workers, who in 2020, were only paid a basic wage of $192 per month. To put this into perspective, the Asia Floor Wage Alliance estimates the living wage in Cambodia to be $588 per month. This means that workers like Chanthoeun, had no realistic way to save for a crisis like Coronavirus, or sudden job loss due to factory closure – it was already a challenge to survive on such low wages from day to day.  The compensation owed to Ramatex workers like Chanthoeun is crucial, it is a lifeline for workers to support themselves and their families.

For years Matalan has positioned itself as a modern family brand. The brand itself says that “Matalan takes time to listen, understand and evolve to fit changing modern family needs…” However, withholding compensation from the 1,200 workers like Chanthoeun not only harms the workers, but cuts children and families off from the income they rely on.  

Many Ramatex workers are having to make difficult decisions, as they struggle to cover basic living costs. Keo Chenda, former union vice-president at Violet Apparel says, “My life at the moment is quite miserable. Back then when I had a job I made money to support my family. Now I only work as a daily wage worker, earning $1 per hour. It’s not a fulltime and regular job. My children are two and five years old. I have to pay for the bills of the children every month and my income is just not enough.”

Although the Ramatex workers are not direct employees of Matalan, the brand has a responsibility to ensure that workers in their supply chain are paid what they are owed. For decades, big brands like Matalan have adopted aggressive purchasing practices, which push wages down and incentivise the erosion of labour rights. The exploitation of workers around the world, is directly linked to how big brands buy from their suppliers. Cheap labour and poor working conditions mean that brands like Matalan can sell clothes at bargain prices, and keep their profits at the top of the supply chain.  Matalan is complicit in the sustained underpayment and exploitation of workers, now it must step in to ensure that workers receive their legal entitlements.

It is time for Matalan to put its family values into practice and make sure that Cambodian workers are paid what they are owed. As former Ramatex worker Oeun Kunthea says, “I expect Matalan to intervene and make sure I get the full compensation. With that money I can start a small business so I can support myself and my family.

The UK was once a pioneer on business and human rights. But now, the UK is clearly falling behind other countries in its duty to protect our human rights and environment from corporate abuse, following the European Council tabling its directive for new EU mandatory human rights and due diligence laws last week.

The UK was the first country to develop a ‘Business and Human Rights National Action Plan’ based on the UN Guiding Principles on Business and Human Rights (UNGPs) and one of the first to pass a domestic supply chain law, in the form of the Modern Slavery Act.

The clear next step for the Government, following a year where it has chaired the G7 and COP26, is to show global leadership by introducing a new law to require companies to conduct human rights and environmental due diligence in order to prevent and mitigate the risks that their actions pose. This law must also include legal liability for harm – modelled on the UK Bribery Act’s ‘failure to prevent approach’ as already recommended by Parliament’s Joint Committee on Human Rights – to ensure access to remedy for victims of abuses.

So why should the UK do this now?

Companies want the UK must stay in step with other jurisdictions

European states and the EU bloc itself are now introducing new laws placing due diligence obligations and liability on companies operating in their jurisdictions. In many instances, these laws will apply to UK companies doing business in these states. This will have major consequences for these businesses, compounding an already distinct lack of clarity on their legal obligations on human rights abuses and environmental destruction. If good practice in the UK remains to be only encouraged by voluntary guidelines or limited and toothless reporting obligations, companies doing the right thing will face a clear competitive disadvantage.

As a statement endorsed by 36 businesses and investors, including the British Retail Consortium, John Lewis, Tesco, Asos, and Primark outlines: “We call on the government to introduce a new legal requirement for companies and investors to carry out human rights and environmental due diligence…. Legislation can contribute to a competitive level playing field, increase legal certainty about the standards expected from companies, ensure consequences when responsibilities are not met, promote engagement and impactful actions between supply chain partners and, above all, incentivise impactful and effective action on the ground.”

We need it not just to regulate global supply chains, but for our own UK human rights

Due to the global nature of UK business value chains, a new UK law would have a global impact on the improved realisation of human rights in all territories where UK businesses operate. But it would also have clear effect in the UK. As an expert legal opinion into the potential liability of Boohoo for alleged supply chain abuses in Leicester found, Boohoo’s story is, “… a compelling example of a situation in which such legislation might have made a difference”.

In the absence of new laws we face a profound ‘governance gap’ in how we regulate business on human rights and the environment and the result of this governance gap is that it creates potential and actual corporate impunity for the ongoing abuses of human rights and unjust environmental destruction suffered by people and communities in the UK and around the world.

Most importantly, a new law can help protect the rights of people and communities around the world from potential or actual corporate abuse.

It is not enough to only ‘encourage’ business to undertake human rights and environmental due diligence: soft law approaches are not sufficiently effective to change how businesses operate with respect to human rights. While the UK has made progress in recent years, it must now step forward with the binding laws we urgently need to change the situation faced by people, workers and communities around the world suffering abuses of their rights and environment.

The time to act is now.

This blog is an excerpt from a statement signed by Labour Behind the Label and other organisations in the Corporate Justice Coalition on 23rd February 2022. See the full statement here.