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Adidas Back in Wage-Theft Spotlight

The triple-striped one’s worker woes just doubled.

#PayYourWorkers, a campaign endorsed by 260 trade unions and labor-rights organizations worldwide, including the Asia Floor Wage Alliance, the Clean Clothes Campaign and the Worker Rights Consortium, will be taking to the streets from Oct. 24-30 to urge Adidas to address what it describes as “massive” wage theft following Covid-19’s emergence.

Demonstrations will take place in 20 cities, including Berlin, Los Angeles, Milan and the Bangladeshi capital of Dhaka.

“In actions in front of retail stores and factories, workers, unionists, and other activists will draw attention to the massive wage theft that occurred during the pandemic, as brands sought to exploit the global health crisis to increase profits,” the group said. “Workers’ and unionists’ voices will be heard directly from countries such as Indonesia and India that are rife with underpayment. In Europe and North America, activists will bring these workers’ voices to the shopping streets. Online and offline, Adidas will be confronted with the demands of workers it has thus far ignored.”

Most Adidas production takes place in countries where social protection systems, if they exist in the first place, are typically weakly enforced, the group said. Because chronically low wages don’t lend themselves well to savings, workers tend to live from paycheck to paycheck. When these don’t manifest, or worse, workers are terminated from their jobs without legally mandated severance, hunger, destitution and a mounting pile of debts usually follow.

Like most brands, the sportswear giant doesn’t own its own factories but shares production lines with other fashion firms. Still, #PayYourWorkers says Adidas sources from a number of factories linked to wage theft, including Cambodia’s Hulu Garment, which laid off 1,000 workers in 2020 without paying them the $3.6 million they were owed by law. Another eight manufacturers in the Southeast Asian country “deprived” more than 30,000 workers of $11.7 million, amounting to $387 per worker, during the April-May 2021 national lockdown, the group said.

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This past May, 5,600 workers at another of Adidas’s Cambodian suppliers, Can Sports Shoe, went on strike over unpaid wages. The factory responded, the Clean Clothes Campaign said, by having union leaders arrested, then getting local authorities to force them to sign agreements promising not to carry out additional activities that would cause “unrest.”

Cambodia is simply a microcosm of a pattern of injustice that permeates the Adidas supply chain, per #PayYourWorkers. Though Adidas reaped a net income of 1.5 billion euros ($1.47 billion) in 2021, up from 461 million euros ($451 million) the previous year, it “refuses to take responsibility,” the campaign said. It’s “time” for the longtime Ye collaborator to sign a binding agreement on wages, severance pay and the freedom to organize so that workers in its supply chain are “never again robbed of the money they’ve earned,” it added.

It’s true that the Nike rival isn’t the only brand that benefits from wage theft and union busting, said Elizabeth Cline, director of advocacy and policy at Remake, a member of #PayYourWorkers. The sorry fact is that these practices are so pervasive that they have become the norm.

“This is the kind of agreement that every brand should sign onto, but given Adidas’s track record of wage violations and massive profits, they should certainly lead in agreeing to it,” she told Sourcing Journal. “We are in a new paradigm where brands must share in the responsibility of the wages and working conditions of their garment workers.”

Adidas, however, has pushed back.

“We reject the allegations,” a spokesperson for the company told Sourcing Journal. “Throughout the pandemic, Adidas has been committed to ensuring fair labor practices, fair wages and safe working conditions throughout our global supply chain. We continued to uphold our standard manufacturing terms, including worker-rights protection. Ensuring business continuity and a functioning supply chain has kept workers in jobs.”

Earlier this month, the Stan Smith maker similarly clapped back at claims that the right to freedom of association and collective bargaining at its Asian suppliers were “under attack.” Responding to a Business & Human Rights Resource Centre report, which polled 124 union activists and labor rights advocates at 13 factories across five countries, the brand said that it continues to be “committed to ensuring legal compliance in terms of pay and benefits for all workers and tracked the working conditions in each and every factory.”

The brand has forked out before. In 2011, Indonesia’s PT Kizone factory, which had supplied university-licensed apparel to Adidas and Nike, shuttered without paying its 2,800 workers $3.3 million in severance. A partial payment by Nike was secured in “reasonably short order” through a contribution by its buying agent, according to the Worker Rights Consortium. The bulk of the severance, however, didn’t manifest until more than two years later. It was only after 12 U.S. universities severed ties with Adidas and protests proliferated at campuses across the country that the company reached a settlement with the workers’ union to pay the $1.8 million still outstanding.

#PayYourWorkers’ “global week of action” follows a “global day of action” that the group organized on Aug. 18, Adidas’s anniversary. In Toronto, Workers United and the United Steelworkers hand-delivered a “Pay Your Workers” birthday cake to the brand’s Ontario HQ, along with a letter signed by the campaign’s Canadian supporters, including the Canadian Labour Congress, Workers United Canada Council and Maquila Solidarity Network.

“Adidas has a responsibility under the UN Guiding Principles on Business and Human Rights and the OECD Due Diligence Guidance to prevent and mitigate adverse human-rights impacts in your supply chains, and to remedy harm you have contributed to or caused,” the letter read. “As a major global brand, Adidas has the financial means and the obligation to ensure that workers receive their full wages and benefits and that their associational rights are respected.”

“Please share this letter with your global head office,” it added.

Adidas revealed Thursday that it expects an operating margin of 4 percent this fiscal year, down from a prior forecast of 7 percent. Accordingly, its gross margin outlook is now poised to hover at 47.5 percent instead of the previously predicted 49 percent. Its net income for 2022 is now projected to be roughly 500 million euros ($489.7 million), down from the approximately 1.3 billion euros ($1.27 billion) it originally pegged.