Recruitment Fees at CM-3

Decision: conditional continuation under a binding corrective action plan with a defined exit trigger. Not immediate exit.

Criteria.

• Severity: worker-paid recruitment fees and 68-hour weeks are serious and are recognized forced-labor risk indicators. There is no finding of child labor, confinement, or document withholding, which would change the answer toward suspension.
• Counterfactual: exit does not help 9,000 workers. It moves our volume to a facility nobody has audited, and it is not executable within 14 weeks.
• Leverage and willingness: we are roughly 12% of that plant's capacity, the supplier has six years of good performance and no prior labor findings, and this was our audit. This is a supplier we can change.
• Our contribution: a three-week forecast acceleration created the overtime peak. That shapes both the remedy and the negotiation.

Corrective action plan.

• 30 days: supplier CEO signs a remediation agreement with a remedy schedule and financial consequences; independent firm completes off-site worker interviews.
• 60 days: recruitment fees reimbursed directly to all affected workers, 24-month lookback, bank records verified, including workers who have left. Labor agent contracts rewritten to an employer-pays model.
• 90 days: dormitory remediation funded and scheduled, shower ratio corrected.
• 90 days and ongoing: weekly hours reporting capped at 60 including overtime with a line-level hard stop; second shift added or volume re-phased with our planning team.
• Quarterly: unannounced audits plus off-site worker interviews for four quarters.
• Owners: our category manager and the supplier's HR director for hours; our sustainability lead and supplier CEO for reimbursement; our general counsel for the contract amendments.

Governance and trigger. Monthly review with the supplier CEO; escalation to me and general counsel on any missed milestone. Pre-agreed exit trigger: any case of document retention, confinement, or underage labor, or two consecutive missed milestones. Qualify the alternates now so the option is real rather than theoretical.

Reimbursement mechanics.

• Pay workers directly, never through the labor agent, since the agent collected the fee.
• Use a 24-month lookback and include workers who have since left, establishing amounts from payroll, recruitment records, and worker interviews.
• Communicate in Vietnamese, in writing and in person, with a channel to report retaliation.
• Independent verification with a phone sample of recipients.
• Do not require workers to sign anything waiving claims or making the payment conditional on continued employment.

Why reimbursement is non-negotiable. The fee was a cost of doing our work imposed on the worker; remediation means returning the worker to the position they would have been in. It is also the practical defense if the goods are examined under forced-labor import rules, where fee-based recruitment is precisely the fact pattern screened for and a documented reimbursement program is material evidence.

Overtime: our part of the root cause. The 11-week peak coincides with our three-week forecast pull-in. A supplier cannot absorb a 20% volume acceleration and hold 60 hours. Actions:

• Re-phase the forecast where the market calendar allows, or split 15-20% of volume to a qualified alternate for the peak cycle.
• Fund a second shift for the peak period and model that cost against the air-freight and late-launch exposure of a missed holiday.
• Insert a change-control clause: forecast shifts above 10% inside 12 weeks carry a capacity cost and joint sign-off, so this does not recur.
• Report hours weekly by line, visible to the supplier's HR and our audit firm.

Internally. The overtime finding is partly ours and I would say so. That is not weakness; it is what makes the rest of the plan credible with the supplier, and it fixes the cause rather than the symptom.

Principles. Accurate, specific, quantified, and identical everywhere: annual report, retailer questionnaires, sales decks. The reputational risk is not the finding; it is a finding that contradicts a public claim.

Board and audit committee, immediately. Written brief covering what the audit found, the numbers (three findings, 9,000 workers at the site, our share of capacity), the plan and milestones, financial exposure including remediation cost and expediting, and the exit trigger. Do not wait for the quarterly pack.

The retailer, within two weeks and before they discover it. Retailers run their own audits. A pre-brief with a remediation plan is a supplier behaving responsibly; a late disclosure is a supplier caught. Provide the plan, the reimbursement numbers, and an invitation to audit.

Annual report or sustainability statement, in this shape: our audit program covered 84% of tier-one spend; at one facility we identified nonconformances on worker-paid recruitment fees, working hours, and worker housing; we required a corrective action plan; 1,240 workers were reimbursed a total of $612,000; recruitment is now employer-paid and hours are capped with weekly monitoring; we continue to source there because exit would not improve worker outcomes, and we have set defined triggers for suspension. Include finding counts and closure rates, including those not yet closed.

Marketing. Pull or qualify the responsible sourcing language in the retail deck until the milestones are met. One unqualified claim in a sales document can become a regulatory problem under greenwashing rules and will certainly become a credibility problem.

What not to do. Say nothing, describe the audit only as completed, or report program coverage without its findings. Selective reporting is now the most common failure mode in supply chain disclosure and the easiest to check.