Ensuring responsible factory retrenchment, exit, and closure: Guidance for companies 

A comprehensive and robust social compliance program should take into consideration and address the effects of a company’s operations for the full employment lifecycle of workers in manufacturing facilities, from hiring through to termination. Using the Principles of Fair Labor and Responsible Sourcing and Responsible Production, the Fair Labor Association (FLA) expects its members to take steps to act responsibly in situations of retrenchment, facility exit, or facility closure, with the goal of minimizing any negative impacts on workers that could result from the company’s or the supplier’s decisions and actions in those situations. 

The Principles of Fair Labor and Responsible Sourcing and Production include specific obligations regarding retrenchment and exit: 

• Production Principle 2.1a) requires Company Affiliates to have responsible retrenchment policies and procedures in place.
• Production Principle 5.4a) requires Company Affiliates to have a documented process for responsible retrenchment, and to align this process with workplace, legal, and collectively bargained standards.
• Sourcing Principle 2.1a) requires Company Affiliates to have responsible exit policies and procedures.
• Sourcing Principle 5.4b) requires Company Affiliates to monitor facilities to ensure implementation of responsible retrenchment policies and procedures aligned with workplace, legal, and collectively bargained standards. 

This guidance provides practical assistance and a roadmap of best practices for companies and suppliers in the context of these challenging issues.