Unlawful intermediation and labour exploitation: Model 231 becomes a company guarantee certificate

“Ethical codes, management and control models, and sustainability certifications are meaningless when, for the sake of achieving the highest profit at the lowest possible cost, a production system is allowed to be created down the chain that is based on production with an exploited workforce”.

This is the conclusion of the Public Prosecutor at the Milan Prosecutor’s Office in his final considerations presented to the Court of Milan following investigations carried out by that office for the crime of unlawful intermediation and exploitation of labour in the supply chain of a well-known company operating in the fashion sector.

As a result of the investigations carried out, it emerged that the company used a work contract to appoint third-party companies to carry out the entire production process. However, these third parties only provided sampling of materials. The third-party companies, in turn, outsourced the actual production of the entire line to sub-suppliers who employed unlawful, non-EU labour, in breach of the regulations on occupational health and safety, working hours and minimum wages, all of which are indicators of serious exploitation of labour which however allowed costs to be reduced.

In light of all this, with a decree of 3 April 2024, the Court of Milan ordered, as a preventive and non-sanctioning measure, the judicial administration of the client company for a period of one year. Although it did not directly carry out the unlawful conduct, the Court found that the company never effectively monitored the production chain, “by verifying the real business capacity of the companies with which it entered into supply contracts and the actual production methods adopted by them, and that it had remained inactive even when it became aware of the outsourcing of production by the supplying companies and had failed to take any action”.

With the same decree, the Court ordered, among other things, that the judicial administration examine the structure of the company with particular reference to the organisation and management model drawn up under Italian Legislative Decree no. 231/2001 and specifically the provisions regulating the relationship with suppliers and production chain audits.

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In conclusion, also in the light of recent events, it is becoming increasingly evident how effective implementation of an Organisation and Management Model allows the company to not only achieve continued improvement in performance but also to comply with the applicable legal requirements. In addition, effective implementation inevitably entails the adoption of Models that are adapted to the company’s business and that prevent the risk of committing a criminal offence.

Although the adoption of Organisation and Management Models is ultimately discretionary, it is now obvious that they are tools that allow the company, on the one hand, to prevent the commission of offences and, on the other, to limit (if not exclude) its liability, avoiding serious consequences in terms of sanctions, financial repercussions and reputational damage.

Other related insights:

• Liability under Italian Legislative Decree no. 231/2001: obtaining minimal advantage does not exempt the employer
• Fictitious contracts and illegal labour supply: liability 231 for tax offences