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Karnataka Garment Workers Win Half the $59 Million They’re Owed

The “worst case of wage theft” that labor campaigners have seen has taken a turn for the better.

The Worker Rights Consortium (WRC) revealed last week that 14 major garment manufacturers in the southern Indian state of Karnataka have agreed to honor a minimum-wage increase that has gone unacknowledged and unpaid since April 2020. They have also promised to dole out $28.6 million in arrears, a sum that accounts for roughly half of the $58.7 million that the Washington, D.C. think tank says has been denied to hundreds of thousands of workers since the dispute’s inception.

The news comes one month after Shahi Exports, India’s largest garment manufacturer and supplier to brands such as Gap, H&M and Zara owner Inditex, agreed to pay its 80,000 workers the correct minimum wage, along with $10 million in back wages from months of underpayment. It also follows a series of letters from the American Apparel & Footwear Association to the Clothing Manufacturers Association of India urging factory owners to immediately administer the minimum-wage increase and pay arrears in full. (Neither organization responded to emails requesting comment.)

“These commitments by some of the largest Indian factories, supplying a who’s who of top Western brands—from Abercrombie to Zara—to end this massive wage theft from workers making their clothes are encouraging, but far too long delayed,” Ben Hensler, the WRC’s general counsel, told Sourcing Journal.

Together, the 14 manufacturers employ more than 205,000 of the 400,000 workers that the organization estimates have been affected by the wage theft, which AAFA president and CEO Steve Lamar said 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. India is the fourth-largest garment exporter to the United States.

“Though these commitments will raise wages and deliver compensation for hundreds of thousands of workers, this is money these brands never should have allowed supplier factories to deny their workers in the first place,” Hensler said. “It is crucial that brands and retailers secure such commitments from all their suppliers, and make sure this money reaches all the workers to whom it is owed, in the correct amounts.”

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Even so, there are holdouts. The WRC identified at least two major suppliers—FFI Global, which makes jeans for G-Star Raw, Wrangler owner Kontoor Brands and The North Face parent VF Corp., and Creative Group, which provides garments to C&A and Matalan. Neither manufacturer, it said, has committed to paying the minimum-wage hike or any amount of back wages.

C&A told Sourcing Journal that all three of its suppliers in Karnataka—Arvind, Creative Group and Shahi Exports—have already paid the so-called “variable dearness allowance,” which is based on inflation, for 2021, and that they have promised to do so retrospectively for 2020. The Belgium- and Germany-based retailer said that it is monitoring developments “closely and regularly” and has so far found “no irregularities.”

“We expect all of our suppliers, and the factories that they use, to meet our high standards and comply with all regulatory and legal requirements in the countries and regions where they operate,” a spokesperson from Matalan said. The company noted that while Creative Group hasn’t been one of its suppliers since Aug. 2020, it has received confirmation that the manufacturer will comply with all legal obligations. “We are aware of an ongoing review into the variable dearness allowance in Karnataka and appreciate that a quick conclusion to this review would provide clarity for everyone concerned,” the spokesperson added.

VF Corp. said that it has also confirmed that all payments will comply with the increased minim-wage hike. “We have been in communication with the WRC to share this update as well,” a representative told Sourcing Journal.

Sanjay Pillai, director of CSR at FFI Global, said that the supplier has “always pegged” worker wages “far higher” than the minimum wage stipulated by the state. “In light of the current verdict we have initiated an additional audit of our back wages,” he added. “We do not anticipate any impact for us. We further would like to reiterate that information given to your organization by [the] Workers [sic] Rights Consortium might not be based on facts.”

Creative Global, G-Star Raw, and Kontoor Brands did not respond to requests for comment.

The WRC also flagged Go Go International, which supplies to Ann Taylor, Bestseller and George by Asda, for only committing to pay any back wages in full after mid-2023. Go Go International, Asda and Ann Taylor did not return emails seeking a statement.

Bestseller said it’s engaging in an “ongoing dialogue” with Go Go International to truncate the timeframe. “As per our code of conduct, Bestseller requires suppliers to respect the laws concerning compensation for work,” a spokesperson told Sourcing Journal. “Failure to pay legal wages is a zero-tolerance issue in our supply chain and Bestseller does offboard suppliers that show no willingness to remediate…violations.”

“The pandemic has taken so much from garment makers that it’s unconscionable that there was a 22-month wait for makers to get what is legally owed to them,” Ayesha Barenblat, founder and CEO of ethical fashion nonprofit Remake, told Sourcing Journal. “At Remake we campaigned, wrote hundreds of letters, tagged and demanded better from Zara and H&M who we heard back from, and Abercrombie and American Eagle, who were silent.”

Barenblat said she was pleased that all four brands’ suppliers have now committed to returning to workers the wages they’ve toiled for.

“This is no small feat and thanks to the unions, brave makers and solidarity across our network of organizations,” she said. “But we will be watching closely to ensure that suppliers honor their commitment. I also hope brands sourcing from Karnataka increase their prices to support the increase in the minimum wage.”

Nivedita Jayaram, Asia coordinator of labor rights at the Asia Floor Wage Alliance (AFWA), which fights for living wages for garment workers, agreed that the victory for workers and their unions in Karnataka constitutes the “very least” that brands and their suppliers can do to uphold labor rights in their supply chains: compliance to local minimum-wage laws.

“In other words, this victory is also a disappointing realization that brands, without a massive international campaign, are unwilling to even respect national labor laws in garment-producing countries, despite recurring reports of wage theft and other labor violations in their supply chains during the Covid-19 pandemic,” she told Sourcing Journal. “Enough evidence exists to show that minimum wages are set at poverty level in Asian garment-producing countries to attract business from fashion brands, and even these wages were denied to workers, during a global pandemic, pushing workers into severe hunger, debt and poverty.”

The AFWA has been calling for governments and other global institutions to recognize and treat brands not as “buyers” but as “joint employers” that can be held equally liable, since the items they commission can’t be sold by anyone else.

“It is important to also note that the fight against this wage theft and poverty-level wages in the industry, cannot be won at an industrial level, without workers and their unions having the ability to hold brands, legally accountable for labor violations in their supply chains,” Jayaram said.