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Ethical trade body urges against force majeure terms

The Ethical Trading Initiative (ETI) has published guidance to brands on how to treat existing orders and future commitments with suppliers during the Covid-19 pandemic, which includes avoiding force majeure terms. 

The trade body’s guidance focuses on ensuring workers receive payment for completed work, urges dialogue with suppliers over ongoing orders and collective action on long-term social protection for workers.

With regards to future orders where no costs have been incurred by suppliers or factories, ETI said “it is reasonable to cancel these orders without any further obligation”, but it expects there to be dialogue with suppliers about post-coronavirus orders and support to retain capacity where possible. This should include a commitment to return with a commensurate order in future.

For ongoing orders where some costs have already been incurred, but more would be expected with a continuation, the ETI expects retailers to have an inclusive dialogue with suppliers to fully assess the costs incurred so far with the aim of agreeing a reasonable way to share them. For work already completed, it expects salaries to be paid in full by suppliers and for members to ”work hard to minimise the ongoing impact upon workers who will already be facing difficult circumstances”. 

Meanwhile, payment for completed orders should be honoured and within reasonable time. Brands should consider early payment and not withhold payments to suppliers as workers need money for medication, food or to survive periods of isolation, according to ETI. Brands should also avoid using force majeure provisions in contracts for economic reasons or summarily terminating contracts.

Brands are asked to work with their suppliers to ensure workers continue to receive salary payments to bridge the time of technical unemployment and work with suppliers to ensure that workers receive compensation packages in line with national and international standards.

Peter McAllister, ETI’s executive director, said: “ETI understands that many brands are facing huge challenges throughout their supply chains and within their own business during this period. Equally, we know that many suppliers and manufacturers are feeling the impact and will also be concerned with business continuity, however, in the long run, we all depend on each other and ultimately, workers. 

“Therefore, we expect that when difficult decisions are taken, the impact upon workers and suppliers is fully assessed and action is taken in collaboration to minimise this as much as possible.”

He added: “We will be monitoring the response from our members and we will want to see evidence that they are doing their utmost to mitigate the impact on workers, not just during the worst of the crisis, but in the medium to long-term too. Workers are in a desperate situation at the moment, and they need our solidarity and support more than ever.”

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