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A Croatian trade union and Clean Clothes Campaign filed a complaint for irresponsible disengagement with the German National Contact Point (NCP) against the German brand Olymp on behalf of former workers at a Croatian garment factory. We are seeing a growing focus on responsible disengagement across NCP cases and several examples of litigation.

About the case

  • The Croatian trade union Novi Sindikat and Clean Clothes Campaign filed a complaint for irresponsible disengagement with the German National Contact Point (NCP) against the German brand Olymp on 25 October. The complaint was filed on behalf of former workers at the Croatian garment factory Orljava. Due Diligence Design received a copy of the complaint.
  • According to the complaint, Olymp was Orljava’s main customer for several decades. The two parties had contractually agreed that the factory would not sell its products to other major German buyers. At the beginning of the pandemic, Olymp significantly reduced its orders, resulting in the layoff of approximately half of Orljava’s workers. In October 2020, Olymp informed the factory that it would be ending its relationship with Orljava. Olymp’s last orders were completed in April 2021.
  • Orljava was not able to find new buyers and declared bankruptcy in July 2021. The laid-off workers received some severance immediately and additional severance payments from the Croatian government a year and a half later. During the period that workers were waiting for their full severance, worker representatives requested that Olymp provide financial relief.
  • The complainants allege that Olymp violated the OECD Guidelines for Multinational Enterprises by not exiting responsibly from the factory. According to the complainants, Olymp did not conduct appropriate due diligence on the potential impacts of its disengagement and did not take sufficient actions to mitigate the impacts on workers. Given that Orljava was highly specialised in the production of men’s dress shirts through its long-standing relationship with Olymp, the complainants argue that Olymp should have anticipated that finding a new buyer would be difficult, particularly in the context of the pandemic. The complainants argue that Olymp should have found an alternative to disengagement during the crisis to prevent harm to workers.
  • The complainants also allege that Olymp failed to provide reasonable notice of its disengagement to worker representatives, including the trade union Novi Sindikat, to ensure that the trade union had the opportunity to negotiate mitigation plans (e.g. severance payments, retraining or other benefits).
  • The complainants are requesting that
    • Olymp pay €1,000 in damages to the 172 workers who lost their jobs to compensate for delayed payments and high inflation.
    • Olymp mitigate the harm to workers, for example by helping them to find alternative employment and/or engaging with them about the possibility of restarting production with another factory in the same area. Many of the laid-off workers are still reportedly unemployed.
    • The NCP provide clarification on what Olymp should have done in order to exit responsibly and how the company may improve its policies to prevent similar situations from occurring at other suppliers in the future.
  • As a next step, the German NCP will determine whether the case merits further examination.

Context & implications

  • This case is being brought under the German NCP rather than the German Supply Chain Due Diligence Act, in force since January 2023. Olymp is a medium-sized company with around 500 employees in Germany and is not covered by the German Supply Chain Act, which currently applies to companies with more than 3,000 employees in Germany.
  • The German NCP sits in the Foreign Trade Department of the Federal Ministry for Economic Affairs and Climate Protection. The department has handled 36 complaints since 2004, but the majority of recent complaints have been rejected at the initial assessment stage for lack of jurisdiction and insufficient basis in the OECD Guidelines. We expect that this case will be accepted by the German NCP because responsible disengagement falls under the OECD Guidelines.
  • We are observing an increased focus on responsible disengagement and severance payments in recent NCP cases, campaigns and litigation. See, for example,
    • Our analysis of the Australian NCP’s decision that a mining company’s divestment from Myanmar was irresponsible
    • Our analysis of the litigation against G-Star Raw for irresponsible disengagement from a Vietnamese factory.
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