LABOUR EXPLOITATION IN THE CONTEXT OF SUPPLY CHAINS IS STILL UNDER THE RADAR OF ITALIAN PUBLIC PROSECUTORS

Introduction

In 2024, Italian public prosecutors (especially, the Milan one) increasingly focused their attention on the issue of labour exploitation in the context of supply chains (please click here to check out our previous blogpost on this topic). 

This investigative trend seems to continue also into 2025, with Italian upstream companies (mainly in the fashion and logistic sectors) still being targeted. 

The issue at stake 

Pursuant to Article 603-bis of the Italian Criminal Code, labour exploitation occurs when a person either recruits workforce to be employed by third parties or directly employs workers, under exploitative conditions and by taking advantage of the workers' state of need.

Recent investigations targeted various allegedly illegal practices which would be indicative of labour exploitation at the supplier level, including possible violation of the applicable rules on minimum wage, working hours, rests, health and safety. Such practices may amount to a breach of Italian employment law provisions, and not only expose the relevant employers to potential sanctions but may also trigger joint liability mechanisms along the supply chain.

In the cases of labour exploitation at the supplier level, the fault of the upstream companies could stem from their failure to adopt adequate measures to ensure that the activities of their suppliers are carried out in compliance with the applicable regulations. As a matter of fact, companies at the top of the supply chain may benefit from this lack of oversight, deriving an advantage from lower production costs and, consequently, higher profits. 

Measures adopted against upstream companies involved

One of the main measures adopted by Italian Courts to fix this lack of oversight is to impose on the relevant company the so-called judicial administration (amministrazione giudiziaria). 

This is a precautionary measure that Courts may impose, inter alia, when there are indicators that a company’s business activities could facilitate illegal behaviours by third parties. It entails the appointment of a special administrator to review relationships with suppliers, cut ties with those involved in labour abuse and improve the companies’ control systems. 

The application of judicial administration does not require the company to be directly guilty of any criminal activity. Instead, it is sufficient that, due to organizational deficiencies or inadequate controls, the company may inadvertently facilitate third parties in engaging in criminal offences.

Conclusions

Given the latest measures adopted by Italian Courts, there remains a pressing need for companies leading supply chains to ensure strong supplier control frameworks are in place, so as to mitigate the risk of being involved in labour exploitation-related issues.