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Adidas Denies $109 Million Garment Worker Wage Theft

Labor activists are accusing Adidas of “stealing” from the workers who make its clothes, despite the sportswear giant raking in billions in profits during the pandemic.

Representatives from Clean Clothes Campaign Germany say they planned to show up at Adidas’s annual general meeting on Thursday to demand that the company and its shareholders ensure that workers are “never again” deprived of the full wages and severance pay.

Cambodian workers who churned out clothing for Adidas and others were deprived of roughly $109 million in wages from April to May 2021 alone, the organization said, citing a “comprehensive” inventory by unions in 114 factories. Adidas, Clean Clothes Campaign Germany added, is linked to the largest wage theft in the factory sample. Since Covid-19 burst on the scene, some 30,190 workers across eight of its supplier factories have lost up to $11.1 million–or $387 per capita, it said.

The wage losses aren’t unique to Cambodia. In an Asia Floor Wage Alliance study published last year, more than 2,100 workers across nearly 190 factories in Bangladesh, Cambodia, Indonesia, India, Pakistan and Sri Lanka reported sharp declines in wages, in part due to order cancellations, non-payment for existing orders and other “irresponsible” practices by brands at the outset of the pandemic. Workers in Pakistan suffered the biggest hit with an average of $2.2 million in wage theft per factory in 2020, followed by Sri Lanka with $1.4 million.

Wage theft, the report said, has been a central part of most apparel brands’ business models; Covid-19 just exacerbated the problem.

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By exhibiting a “total disregard for basic justice and fairness in their supply chains,” brands forced Asian suppliers to pass on costs to workers through “overnight and illegal terminations without payment of termination benefits, layoffs without payment of wages and other practices that resulted in extreme wage theft for workers,” it said. “As a result, workers’ wages through the practice of extreme wage theft subsidized not only the impact of financial losses on suppliers, but also the stabilization and recovery of brand profits during the pandemic-induced recession.”

Adidas told Sourcing Journal that it rejects the allegations.

“Throughout the pandemic, Adidas has been committed to fair labor practices, fair wages and safe working conditions throughout its global supply chain,” a spokesperson said. “We continued to source from our partners and committed to paying all orders, whether they were completed or in process. We continued to ensure legal compliance in terms of pay and benefits for all workers and tracked the working conditions in each and every factory.”

But Clean Clothes Campaign Germany says that companies like Adidas have been denying responsibility for workers for decades. Because the problem is systemic, it said, brands must be held accountable for wage and severance theft through a legally binding agreement.

Revenue for the triple-striped firm, the organization pointed out, rose by 15 percent in 2021 to 21 billion euros ($22 billion). It said that Adidas benefitted from short-term taxpayer-funded Covid-19 aid from the government and that both it and its shareholders have a responsibility to invest a “decisive” share of the company’s profits to “protect workers’ wages and severance.”

“In the wake of the ILO’s Call to Action, and Adidas’ public commitment to EU legislation on due diligence, Clean Clothes Campaign Germany expects the company to take a leading role,” the nonprofit added. “Brands have the power to make a difference.”

In the Asia Floor Wage Alliance report, select workers ​​at 15 Adidas supplier factories across Cambodia, India, Indonesia and Pakistan reported estimated wage losses of $52,785 in 2020, which, if extrapolated to the entire workforce, would amount to $320 million. On average, 82 percent of the workers’ wages fell below the international poverty line during peak pandemic months in their countries, the study found.

Workers at Adidas supplier factories told researchers that Covid-19 was used as an excuse to selectively terminate union members or to eliminate employees without severance pay. One worker who grappled with a no-work-no-pay policy at the height of the pandemic in Indonesia said wages had fallen by 25 percent a month because of the loss in workdays.

Adidas offered a similar response when asked about the study last year.

“We continued to uphold our standard manufacturing terms, including worker-rights protection, and assisted key suppliers in securing bank financing to help them weather the Covid-19 crisis,” a spokesperson told Sourcing Journal. “Ensuring business continuity and a functioning supply chain has kept workers in jobs, with the vast majority of our supplier factories having retained their workforce, albeit with reduced working hours due to lockdowns. We continued 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.”

Still, labor campaigners like the Asia Floor Wage Alliance have sought to reframe the idea of brands as simply “buyers” of garments. Rather, they argue, brands should be considered producers of those garments, since the items they commission can’t be sold by anyone else. Worker-rights groups have also asked for a severance guarantee fund, financed by brands, that can provide workers with access to severance payments where traditional jurisdictional and governance routes fail.