Audit of the Fair Labor Association (FLA)

May 17, 2016 - In the fall of 2015, the Fair Labor Association (FLA) conducted an assessment of the HUGO BOSS production plant in Izmir, Turkey. As a member of the FLA since 2014, the company had decided to initiate this voluntarily.

HUGO BOSS has taken the FLA audit’s findings and recommendations very seriously and addressed the points raised. The Company has already incorporated 85% percent of these recommendations. It will be launching the still outstanding measures during the weeks and months ahead.

The report on the FLA website can be viewed here.

HUGO BOSS subsequently published a summary of the main findings of the assessment and the current status of the actions being taken.

Main findings of FLA assessment

HUGO BOSS has commented on some of the main points of criticism of the FLA Audit in the following and explained them in their respective context. The remarks have been divided into five sections for this purpose and the nine focal points have been classified accordingly.

PROVISIONS CONCERNING EMPLOYEES

HUGO BOSS has already reviewed and introduced changes to remedy the majority of points raised in the categories “Factory Overview”, “General Training for new Employees”, “Written Policies on Recruitment, Hiring and Personnel Development” and “Wage Deduction”. Where the FLA expressed concerns that, in its opinion, provisions of employment agreements were not fully compliant with Turkish law, HUGO BOSS has revised workers’ contracts accordingly. This also applies to the voluntary program launched by HUGO BOSS and the Izmir employment office (ISKUR) to provide training in textile-related work for women from economically deprived backgrounds. The changes included adjustments to wages.

Concerns were also raised on the subject of “Wage Deductions”. However, the company had yet to take action in connection with the points in question; in the interim the relevant provisions have been amended to prevent any future misunderstandings.

With regard to the legal obligation to pay wages in euros in Izmir’s free trade zone, HUGO BOSS had conducted a survey of employees in 2004 and decided to pay wages in Turkish lira rather than euros, in line with an exemption from the competent government ministry. Receiving wages in the domestic currency ultimately enables employees to plan their lives with greater confidence, because their earnings are not subject to fluctuations. This avoids disadvantages for company personnel, and for this reason HUGO BOSS is planning to continue its practice of paying wages in Turkish lira.

GUIDELINES

To comply with the stipulations of the assessment, changes were effected and relevant steps taken in the areas “Written Policy on Grievance System”, “Written Policy on Termination and Retrenchment” and “Disciplinary Systems”. These have now been completely implemented. In one case the internal guidelines did not comply with the HUGO BOSS Code of Conduct. This exception is founded on a relevant rule of Turkish law. HUGO BOSS has therefore not violated any laws. Although the provisions in question had never been applied to the detriment of employees, they have now been updated.

TRAINING MEASURES

HUGO BOSS has revised the training concept at the Izmir site and augmented it with modules that reflect the requirements specified in the FLA audit. Regular training sessions have been introduced for employees and management covering the HUGO BOSS Code of Conduct and, in particular, the topics of freedom of assembly and unionization. In addition, the existing training on work safety has been extended and made mandatory for all employees.

HEALTH & SAFETY AT WORK

HUGO BOSS has scrupulously addressed the findings relating to the areas “Working Time”, “Fire and Emergency Actions”, “Implementation of Workers Protection”, “Maintenance Safety“ and “Implementation of Health and Safety Practices Related to Chemicals” and taken steps designed to ease and improve day-to-day working conditions. In the cases where criticism was raised that working hours were being exceeded, these cases were typically due to exceptional circumstances (e.g. water damage in the production areas). As such, HUGO BOSS had not made decisions or taken action against the will of its employees. For future purposes, HUGO BOSS has laid down more specific guidelines and instructions for these areas and made them binding for members of staff.

When production operations were expanded, improvements were made to the alarm system so that it is audible throughout the work area. In the process, the system was tailored to the requirements of the extended production premises. Almost all of the improvements relevant to the issues in this section have already been completed.

ENVIRONMENTAL PROTECTION

HUGO BOSS has already found solutions to the four findings in the category “Implementation of Environmental Management Systems Outside of the Factory” with the goal of preventing any corresponding recurrences in the future.

WORKER REPRESENTATION

Freedom of association, which HUGO BOSS guarantees to all its employees worldwide, is a central principle of the Company’s Code of Conduct. HUGO BOSS is therefore making every effort to respond fully to any related findings.

With reference to the clarification of criticism in conjunction with “Union(s) and Worker Representation” and “Relationship between Management and Worker Representative(s),“ HUGO BOSS has called in an arbitrator (Auret van Heerden) to facilitate ongoing discussions with the FLA representatives and the relevant trade union, and to help to find appropriate solutions quickly. In this context several meetings have already been held with the Turkish trade union TEKSIF in Istanbul.

With reference to complaints about individual employees being dismissed in the past, allegedly in connection with their membership in Turkish trade unions, HUGO BOSS has presented comprehensive information to rule out any misunderstandings and determine the facts. Regarding the complaints filed in 2011-2012, the arbitrator called in by HUGO BOSS has conducted detailed discussions with the individuals in question with the goals of objectively establishing the facts and mutually finding solutions. These have included reviewing potential reinstatements and discussing this possibility with the individuals concerned. A reinstatement has been offered to five former employees, and was accepted by only one of them. In the remaining cases the offer was rejected due to moves or new employments. Beyond this, the company has taken the following additional steps:

• Personnel changes in the management of the production facility
• Closer liaising between management and the Company’s headquarter in Germany
• Seminars on freedom of association held by a recognized trainer
• Publication of regulations such as the Code of Conduct
• Articles on issues such as freedom of association in the employee magazine in Izmir
• Democratic election of a Communication Committee
• Appointment of a Social Compliance Officer

HUGO BOSS is working hard to deal with the allegations properly and, on this basis, is confident of finding consensual solutions with all the parties involved.

For further information please contact corporate_responsibility@hugoboss.com