Labour racketeering in fashion: from withdrawal of the court-ordered receivership to the Legality Protocol of the Provincial Government

by Marta Vignati

The Court of Milan, Prevention Measures Division, has recently revoked the judicial administration order issued in April 2024 against one of the companies of a well-known fashion group, responsible for the production of clothing, footwear and bags.

The charge concerned the omission of controls on the production chain, which would have been necessary to prevent exploitation of workers. The company placed under judicial administration was not, in fact, under investigation, but it was accused of not having taken adequate action and of not having been able to prevent and stem the exploitation along its production chain, thus culpably facilitating labour racketeering (for more information on the subject click HERE).

The revocation measure, issued a few months in advance of the deadline, refers to a “virtuous path taken (by the administered company) in line with the instructions given by the Court”. These instructions include the verification of suppliers, the termination of relationships with “at risk” subjects, and the implementation of best practices.

On this point, referring to the provision with which the Court had ordered the measure, it is emphasised that among the preventive tools against the proliferation of illegal conduct within the supply chain, the adoption and implementation of an effective Organisation, Management and Control Model and the proceduralisation of the processes regarding the selection and monitoring of suppliers play a central role.

In detail:

  • As for Models 231, it is necessary to verify that they include the assessment of the risk of labour exploitation by contractors in the production chain, also providing for specific on-site audits (as required under the provisions of judicial administration).
  • For Chairmen or members of the Supervisory Bodies, ad hoc checks should be introduced as part of the annual Action Plan and specific information flows requested regarding suppliers.
  • It is also essential to establish a procedure that defines the criteria for selecting suppliers, starting with an examination of the different types of company suppliers and an analysis of their economic and business impact.
  • It is then necessary to establish criteria for the evaluation of suppliers – the so-called “monitoring” – capable of excluding those who do not meet predetermined reliability criteria (so-called “at risk” suppliers).

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Finally, it should be noted that, considering the various judicial administration measures that have affected several companies operating in the fashion sector connected to critical issues in the subcontracting chain, a Protocol to prevent labour racketeering in the fashion sector is currently being defined and approved. This document follows on from and is modelled on the one that has already affected the logistics sector (which we discussed HERE), with the necessary particularities that depend on the specific sector.

This document was requested by the Prefecture and the Court of Milan, to counter the phenomenon of labour exploitation and guarantee virtuous supply chains, according to a common monitoring system.

The key principle of the Protocol is transparency throughout the production chain.

In order to implement this, a supply chain platform will be set up, on a voluntary basis, with the aim of registering contracting companies and facilitating checks by the client companies. The documents certifying compliance with tax and labour regulations by the various companies will be uploaded to this platform, thus also making checks by the Authorities easier.