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Adidas Has a $300 Million Yeezy Question to Answer

Labor campaigners have some free advice for Adidas’s incoming CEO: Compensate the workers who experienced wage theft during the Covid-19 pandemic.

Doing so is “easy,” the Clean Clothes Campaign told former Puma boss Bjørn Gulden, who will seize the German sportswear maker’s reins in January. #PayYourWorkers, a campaign endorsed by 260 trade unions and labor-rights organizations worldwide, has a “ready-made proposal” to ensure that workers “get what they are owed.”

“You just have to sign the binding agreement and you are all set,” the garment industry’s largest consortium of labor unions and non-governmental organizations wrote on Twitter on Friday.

Current head Kasper Rorsted will step down Friday, earlier than anticipated, as the fate of the bestselling Yeezy brand hangs in the balance following a highly publicized divorce from the artist formerly known as Kanye West, who drew widespread outrage after spreading antisemitic conspiracy theories in interviews and across social media. Adidas owns the intellectual property, chief financial officer Harm Ohlmeyer, who will serve as the footwear giant’s interim CEO through the end of the year, said at an earnings call on Wednesday. Rebranded shoes could hit the market as early as 2023, he suggested.

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“Cashing” in on these shoes while pocketing the $300 million a year that Ye and his company receive in royalties would be “well spent” on the Cambodian workers who are owed more than $100 million in unpaid wages, as well as others in the Adidas supply chain “who were left penniless in the pandemic,” the Clean Clothes Campaign said.

“Bjørn, we hope you’ll bring a new beginning,” it added. “In 2020 you said: ‘The bottom line is: racism & discrimination are no-go’s.’ Now put your words into action by using the money won by distancing from antisemitism towards solving some of the discrimination in @adidas’ supply chain.”

Women of color who make clothing and shoes for Adidas are especially vulnerable to union busting when they attempt to organize. They are also frequently denied severance when they lose their jobs. Case in point: Nearly 30 workers from an Adidas supplier in Yangon’s Shwepyitha Township were fired after they staged a walkout to call for better working conditions and higher pay in October, union members told Myanmar Now last week.

Managers from Myanmar Pou Chen, which did not respond to a request for comment, alerted security forces of the protest as it happened, resulting in the arrival of 10 soldiers and police officers in four army vehicles, the outlet reported.

“They warned us not to continue the protest the following day,” a woman who was later pink-slipped told Myanmar Now. “They threatened to arrest us if we protested outside the factory area, or if factory equipment was damaged during our protest. They said they had been wanting to detain us for a while.”

Adidas said that it has “objected strongly” to the dismissals, which are in breach of its workplace standards and “longstanding” commitment to upholding workers’ freedom of association. “We are investigating the lawfulness of the supplier’s actions and we have called on Pou Chen to immediately reinstate the dismissed workers,” a spokesperson told Sourcing Journal.

The Business & Human Rights Resource Centre recently criticized brands such as Adidas for not doing enough to safeguard freedom of association and collective bargaining at the Asian suppliers they work with. Despite the manifold promises by fashion purveyors to support freedom of association in their supply chains, a “huge gap” between policy and practices persists, the international think tank said. The Nike rival, for its part, said it “rejected” the allegations, insisting that it remains committed to fair labor practices, fair wages and safe working conditions throughout its supply chain.

If the fate of the existing Yeezy stock is yet unclear—Ohlmeyer said Adidas is exploring its options—it’s even murkier what will happen to merchandise that was still in production when the triple-stripe firm ended its partnership with Ye. The brand doesn’t disclose what products are made in which factories, and it declined to comment further on the collaboration’s demise beyond its initial statement.

That said, if there is a workforce reduction in Adidas supplier factories as a result of the Yeezy line ending, it will be “vital” for the Stan Smith producer to ensure that any laid-off workers receive their full wages and severance, said Ilana Winterstein, urgent appeals campaigner at the Clean Clothes Campaign. “By negotiating with unions and signing the #PayYourWorkers agreement, Adidas can ensure that even when its suppliers fail to pay severance, workers can still claim the compensation they are legally owed,” she told Sourcing Journal.

There has been at least one public fallout. Okabashi, a Georgia-based family-owned footwear company, said it has laid off 142 employees, or roughly two-thirds of its workforce, as a result of the split. Adidas first contracted the company, one of the few footwear manufacturers in the United States, to manufacture the Yeezy Foam Runner, in 2020.

“Last week Adidas announced they terminated their partnership with Ye and stopped the Adidas Yeezy business with immediate effect,” it said in a statement last week. “Adidas clearly does not tolerate hate speech and Okabashi also stands for these values.”

The layoffs, the manufacturer said, were necessary because it did not have enough orders to “keep all employees busy with work.” All of the affected workers, however, will receive severance and extended healthcare coverage. Okabashi is also working with local agencies and manufacturers to provide “support and alternative employment opportunities,” it said.