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AAFA: Minimum-Wage Non-Payment in India Puts Members at ‘Great Risk’

A U.S. fashion trade group that represents brands such as Adidas, Gap and Levi Strauss is urging garment manufacturers in the southern Indian state of Karnataka to “immediately” administer the minimum-wage increase that has gone unpaid since April 2020, resulting in what one labor campaigner has described as the “worst” case of wage theft he has witnessed.

In a letter to the Clothing Manufacturers Association of India (CMAI) dated Jan. 19, Steve Lamar, president and CEO of the American Apparel & Footwear Association (AAFA), said that it expected any arrears to be paid in full “no later than March 2022,” nearly two years after the government raised the so-called variable dearness allowance (VDA), which is based on the rate of inflation, to 417 Indian rupees ($5.56) per month. The Worker Rights Consortium estimates that more than 400,000 workers are waiting to receive wages surpassing $55 million.

The owners of more than a thousand factories argue, however, that they’re not liable for the hike, since the labor ministry issued a proclamation suspending the minimum-wage increase after Covid-19 started ravaging the country. They’re also appealing a decision by the High Court that the postponement was illegal and that manufacturers are required to pay the correct wage, plus all compensation previously owed.

“While we understand that a case on this issue remains pending before the Honourable High Court of Karnataka, legal experts agree that prior decisions by the High Court make clear that the increases in the dearness allowance are legally owed to workers,” Lamar wrote. “I strongly urge your members to immediately pay workers the legally mandated dearness allowance…and pay any arrears owed to workers in full in a timely manner, but no later than March 2022.”

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India is now the fourth-largest exporter to the United States. Shipments have ballooned by nearly 40 percent in the past 11 months alone, a feat that Lamar credited to “your industry’s strong commitment to corporate social responsibility as well as the reliability of India as a major supplier.”

But the “ongoing uncertainty” created by repeated delays in the case, along with the suppliers’ “steadfast refusal” to pay has not only put the reputation of the AAFA’s members at “great risk” but has also “begun to undermine” the retail industry’s “longstanding and growing” sourcing relationship with Karnataka while threatening the “very economic livelihoods” of thousands, Lamar said.

The CMAI said that it has “noted the concerns articulated” by the AAFA and has “initiated the process of finding win-win solutions.” In a response to Lamar dated Jan 22, Rajesh Masand, the trade group’s president wrote that it has “initiated a dialogue” with brands and other stakeholders and is “evolving a consensus to come out of this compelling situation that has been brought on us.”

“Pending resolution of the matter in court, the industry is aligned to paying an amount equivalent to the VDA from Jan. 2022 along with the respective month’s wages,” Masand said. “This way, no further liability will be created. The industry is also in dialogue with the stakeholders to explore ways to further ameliorate the situation. We shall keep you posted on the developments.”

The CMAI has taken the steps “in spite of the fact that…the VDA matter is sub-judice and pending before the Hon’ble Division Bench of the High Court of Karnataka, Bengaluru, India,” he added. “We have to wait for the final verdict from the Hon’ble Court. The Indian judicial process is resilient, fair and completely independent, and we are confident of a fair outcome. Having invoked the courts, we all have to honor the decision of the Court.”

‘When will brands accept responsibility?’

Worker-rights groups have been calling on brands and retailers to take a more proactive stance in ensuring that their suppliers are compensating their workers according to Indian law. Earlier this month, the Business & Human Rights Resource Centre asked 22 Karnataka-sourcing brands, many of them AAFA members, to outline the steps they have taken to identify suppliers that have been paying workers below the minimum wage and ensure that affected workers are paid both owed wages and the new minimum wage going forward.

Though all brands boast policy commitments that promise full payment to workers in their supply chains, only 17 outlined a plan to redress the wage theft. (Besides Benetton Group, the only company that failed to respond, Nike, Puma, Target and Walmart did not specify a roadmap.) A scant five brands—Abercrombie & Fitch, Asos, Marks & Spencer, Next and Zara owner Inditex—indicated that affected workers in their supply chains have started to receive some of the wages owed to them.

“The specific case relates to a supplementary payment to workers within the Indian state of Karnataka that form part of court proceedings, which are pending resolution,” a spokesperson for Inditex said. “In spite of this, as soon as we were aware, we engaged the eight factories we work within the area to urge them to make this supplementary (VDA) payment ahead of the court resolution. They are progressively making these payments.”

Meanwhile, the Karnataka Garment Workers Union (KOOGU) has appealed to brands sourcing from the region to join workers and factories in collective bargaining talks with Shahi Group, India’s largest garment manufacturer, and others. Writing to Abercrombie & Fitch, Benetton Group, Carhartt, Columbia, Decathlon, H&M, Tommy Hilfiger and Vans, the organization said if purchasing prices are set too low, then manufacturers will struggle to meet increased wage commitments.

“We consider this coming together of all key stakeholders—international brands, suppliers, trade unions and governments—with a resolve to take concrete steps to protect the income and livelihoods of the workers who have worked hard for the industry and also to save the industry itself, as highly farsighted, invaluable and absolutely necessary at this time,” KOOGU wrote earlier this month.

Only three of the brands—Carhartt, Decathlon and H&M responded, according to KOOGU, though none said they would participate in negotiations. KOOGU said in a recent tweet that it and Shahi Group will continue their dialogue because they have no choice but to work together. “When will brands accept responsibility and take their seat at the table?” it asked.

Editor’s note: This story was updated on Jan. 29, 2022, to include a response from the CMAI.