Supply Chain Innovation

Addressing the complex issue of worker severance

Wednesday, February 27, 2013

Workers are the ones most exposed and vulnerable when market conditions push companies and suppliers to reduce employment, of either a portion or the entire workforce. Many countries legally mandate payment of severance - typically calculated based on job tenure - when partial or full retrenchments arise, but there is generally no requirement in domestic law to create a fund to ensure that the factory is able to meet its severance liabilities.

On February 18, FLA's Global Forum for Sustainable Supply Chains hosted an information session in Washington, DC, to explore potential solutions to this issue. The session,"Protecting Workers' Termination Benefits in Global Supply Chains" featured a presentation by Michael L. McCord, president of the MicroInsurance Centre. During the session, McCord outlined several options for providing severance and other benefits for low-income workers.

MFP 111. Microinsurance. Part 1 - Interview with Michael McCord, President - MicroInsurance Centre, LLC from Microfinance Podcast on Vimeo.

The Global Forum is engaging with the MicroInsurance Centre and other insurance experts, as well as universities, international institutions and civil society organizations, to discuss the possible creation of an insurance-like program that would safeguard termination benefits for retrenched workers.

In support of this effort, seven Georgetown Law students are currently examining factory closures – including the impact on workers, legal options and non-legal remedies, stakeholders' roles and positions, and severance systems in selected countries – as part of a practicum course taught by Eric Biel of USDOL, Sarah Altschuller of Foley Hoag LLP, and Meg Roggensack of Human Rights First, who currently serves on the FLA Board of Directors. The course is informed by the work of the Global Forum. As a final deliverable, the students will develop strategies to address the complex legislative and regulatory challenges surrounding retrenchment.

In conjunction with the information session, some of these students met with brand representatives and McCord to discuss specific instances of factory closures and the implications those closures have on workers’ rights. “For a lot of us, we’re coming from a background of human rights, and that’s a very big umbrella,” said third-year law student Sara Blackwell. “If you’re working on human right issues, corporate responsibility seems to be hot topic these days, and it seems to be a fast developing, very challenging area of human rights. It is an exciting opportunity to work with professors who are very well recognized in the field already, and to be partnered with an organization that is very well-known and to contribute to their work.”

Learn more about the Global Forum at http://www.fairlabor.org/global-forum-sustainable-supply-chains, and download FLA’s Guidelines on Retrenchment for affiliated companies at http://www.fairlabor.org/report/fla-retrenchment-guidelines.

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