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Indian Garment Workers Inching Toward Wage-Theft Win

The uncertainty and stalling over compensation for garment workers in India’s Karnataka appears to be coming to an end.

Pending payments are set to be released by Thursday, including back wages to more than 80,000 workers at Shahi Exports, India’s largest garment manufacturer. The region’s clothing manufacturers association called for members to pay workers the full Variable Dearness Allowance (VDA) this month and expeditiously compensate them for all arrears owed dating back to April 2021.

Variable dearness allowance (VDA) is the component announced each year to compensate for the changing consumer price index.

After months of pressure from global worker unions as well as brands and manufacturers sourcing from this Southern Indian hub, including C&A, Gap, H&M and Benetton, the payments issue seems to have found a resolution.

In a letter to the brands late last week, the Clothing Manufacturers Association of India (CMAI) noted that although the matter was still awaiting a verdict from the High Court in Karnataka, “it had been decided to proceed ahead with the VDA of 417.60 rupees for 2021-22, primarily with the object of ensuring workers well-being, given the indefiniteness involved.”

It also said that “if there is no final direction in the matter pending before the Karnataka High Court regarding the VDA from April 2020 to March 31 2021, the companies are advised to start make the payments by May 2022,” giving the matter a concrete timing that would prevent further delays in payments to workers.

The seemingly small amount of 417.60 rupees–an estimated $5.60 a month for the VDA from April 2021–affects more than 400,000 workers. Karnataka is home to approximately 1,000 garment factories, with many clustered around the state capital of Bengaluru. This adds up to an estimated 9,186.32 rupees or $123.06 owed to each garment worker towards VDA arrears calculated for 22 months, starting from April 2020 according to the Garment and Textile Workers Union (GATWU).

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While Scott Nova, executive director of the Workers’ Rights Consortium, an advocacy group based in Washington D.C., called the crisis in Karnataka “the worst case of wage theft” he has ever witnessed, estimating that workers have lost out on more than $55 million since April 2020, brands and retailers have been been contacting their suppliers to ensure workers get fair payments.

However, manufacturers believe that the issue is not about theft at all, but rather about fair pricing—and their own survival.

Hard-pressed manufacturers in Karnataka told Sourcing Journal that they’re facing an uphill battle on all front. “The context needs to be understood,” said Naseer Humayun, regional secretary, Clothing Manufacturers Association of India (CMAI). “Due to the unprecedented impact of the pandemic and national lockdown for more than 50 days from March 24, 2020, the provincial government of Karnataka deferred payment of the Variable Dearness Allowance in July 2020 for 82 scheduled employments, including the garment sector. Some trade unions filed a case in the High Court of Karnataka in Aug 2020, following which, the position taken by the industry was that the judicial verdict needs to be made as the matter is sub-judice,” he said, pointing out that the government of Karnataka was guided by the ‘big picture of saving jobs and preventing industrial sickness’, and that the labor-intensive garment sector and its thin, 2 to 5 percent margins needs special care as the second-highest employer in the country.

“However, given the indefiniteness of the situation, we took a tough call to pay now,” he said, adding that although worker well-being was a priority, there were also concerns about “the long-term financial impact of this as there are very small manufacturers who operate in this segment and the resultant economic impact [is worrisome].”

“Unfortunately, without understanding the situation, some Western trade unions have made it a point to target the manufacturing sector in India. We wish they would focus more on getting a fair price for manufacturers so that better wages could be paid to workers here,” he said.

The American Apparel & Footwear Association (AAFA) urged full compensation for workers, on Wednesday writing to CMAI to “establish a hard deadline for payment of any arrears even in the event that the court does not issue a decision soon so that workers are fully compensated as soon as possible.”

“We understand that many large suppliers are aligning on a payment scheme of all arrears from April 2021 and go-forward VDA being paid in February 2022 payroll, and for the payment of the balance of April 2020 to March 2021 by May 2022 payroll in the event that there is no Court decision before then. We urge the entire industry to align around this payment schedule,” AAFA president and CEO Steve Lamar.

The letter laid out what India has on the line. “Your positive actions thus far in this case clearly demonstrate why U.S. garment imports from India have grown steadily over the last decade, surging 39.9 percent in the first 11 months of this year alone. That growth has been spurred by your industry’s strong commitment to corporate social responsibility as well as the reliability of India as a major supplier. As a result, India is now the 4th largest supplier of garments to the U.S. market,” Lamar wrote.

Although the CMAI has played an active role in the negotiations, CMAI chief mentor Rahul Mehta said associations can’t dictate what their members do.

“Associations can always assist in trying to communicate best practices to their members, but I don’t think it is the role of any association to compel or force any of their members to act on requirements of buyers which are in addition to the legal requirements,” he said.

“For example, in the case of wages, associations cannot force members to pay more than the minimum wages prescribed by law in their respective country,” he said. “I would say the buyers have to accept that their vendor partners should follow the laws of their particular country and that should suffice. If they have higher requirements, then it has to be between them and their supply chain partners,” Mehta said.

This channel of communication has become crucial during Covid-19, changing the lives of the workers in Karnataka.

As the Karnataka Garment Workers Union (KOOGU) proposed during this process—that the three main parties in the global supply chain, workers, suppliers and international brands—do need to work together to find solutions as the pandemic continues to impact the world.