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Nike, Primark Address Factory Worker Wage Theft Reports

The garment workers hailed from different parts of South and Southeast Asia, yet their stories were startlingly similar.

Speaking at a recent webinar organized by the Asia Floor Wage Alliance, a coalition of labor unions and other advocacy groups, the workers described factory closures, indiscriminate layoffs and wage losses that have left many on the edge of starvation and destitution. With their respective countries now being brutalized by new waves of Covid-19, their circumstances have taken a more fraught and urgent turn. Yet the Western brands they produce clothing for have, for the most part, responded with silence, they said.

“Brands are not fulfilling their corporate social responsibility commitments,” Nasir Mansoor, general secretary of the National Trade Union Federation in Pakistan, said through a translator. “All the big brands are here in Pakistan but they are not accountable for anything.”

The Covid-19 pandemic dealt the garment industry a body blow, but few suffered as much from the economic fallout as the workers residing at the lowest rungs of the supply chain. Most of them already earned persistently low wages, leaving them with few savings to cushion any shortfalls. When brands in North America and Europe canceled or refused to pay for in-progress and completed orders at the outset of the outbreak, their actions had a cascading effect that aggravated wage theft, severance denials and other exploitative practices.

According to “Money Heist,” a new report by the Asia Floor Wage Alliance, brands adapted to the changes wrought by the pandemic by employing “predatory” purchasing practices, forcing suppliers to accept orders at lower prices and delaying payments, resulting in a greater reduction in wages and benefits for workers. Some factories demoted their workers or refused to recognize their seniority. Others replaced secure, longer-term employment contracts with precarious, shorter-term versions. Layoffs were used to trim the size of workforces, as were “disciplinary actions” that led to termination without severance or other forms of wage theft.

An analysis of more than 2,100 workers across nearly 190 factories in Bangladesh, Cambodia, Indonesia, India, Pakistan and Sri Lanka estimated wage losses of $157 million, pushing 74 percent of them below the poverty line. Pakistan bore the brunt of the damage with an average of $2.2 million in wage theft per factory, followed by Sri Lanka with $1.4 million. Together, these facilities made products for companies such as Adidas, Bestseller, C&A, H&M, Zara owner Inditex, Nike, Primark, Calvin Klein owner PVH Corp. and Walmart, the Asia Floor Wage Alliance said. Many of them reaped healthy profits even at the height of the pandemic last year.

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Nike, for instance, ended the 2020 fiscal year with $37.4 billion in revenue, yet workers across 18 Nike supplier factories in Cambodia, Indonesia, Pakistan and Sri Lanka reported $144,615 in wage theft, according to the report.

The Just Do It firm said it is “deeply committed” to ethical and responsible manufacturing, which includes an “expectation that all people who make our products are safe, respected and treated fairly,” a spokesperson told Sourcing Journal. “As suppliers navigate the pandemic, we continue to clearly communicate our expectation that suppliers consider their employees’ health and livelihoods and continue to comply with legal requirements and the Nike code of conduct on the provision of wages, benefits and severance.”

Primark, whose 20 factories in Bangladesh, India and Pakistan allegedly owe $89,935 to their workers, also said it takes its responsibility to the people who make its products “very seriously.”

“We know how devastating Covid-19 has been for the global garment industry. We have continued to work closely with our suppliers throughout this time to ensure our code of conduct, which sets an internationally recognized mandatory standard for every factory making products for our suppliers, has continued to be upheld,” a spokesperson for the discount retailer said. “Ensuring our suppliers uphold the high ethical standards we expect is a key part of our ongoing commitment to improving and protecting the working lives of the people who make our products.”

Adidas offered a similar response, insisting that it “[ensures] legal compliance in terms of pay and benefits for all workers and [tracks] the working conditions in each and every factory,” a spokesperson told Sourcing Journal.

But the Asia Floor Wage Alliance said brands need to shoulder most of the blame after “abandoning” workers in their time of need—even as the governments of garment-producing countries had to roll out stimulus packages to “subsidize” their profits.

Wage theft has become a “central aspect” of the business model of apparel brands and not the unintended result of crises such as the pandemic, according to Nivedita Jayaram, Asia coordinator for labor rights at the organization.

“Brands actually caused and contributed to these human-rights violations in their supply chain,” she said. “Workers ended up providing a reverse labor subsidy for brands’ super-profits, leading to a mining of workers’ bodies to stabilize and recover brand profits.”

H&M, which the study said was complicit in the biggest share of wage theft—$306,398—from 49 supplier factories in all six countries, told Sourcing Journal that it is continuously monitoring wage payments at the suppliers it works with to ensure that workers are “correctly compensated” at all times, though it acknowledges that workers have been in an extremely vulnerable situation with fewer working hours and lower take-home wages as a result of lockdowns across the world.

“There is undeniably a need for structural change in several garment-producing countries with weak social protection systems,” a spokesperson for the Swedish fast-fashion chain said. “H&M Group wants to take an active part in contributing to the establishment of such systems. If any stakeholder has information about violations taking place at a supplier of ours, we would highly appreciate if that information is shared with us so we can take action and address it through our normal procedures.”

The report claimed that brands have offloaded the risks associated with manufacturing to their suppliers—and ultimately, workers—by making unilateral cost-cutting decisions, refusing to share the financial burdens that have emerged from the pandemic-induced recession and exploiting jurisdictional and governance weaknesses to “evade liability” for any violations in their supply chains. ​​

Fashion businesses have skirted their responsibilities by “hiding” behind initiatives such as the International Labour Organization’s Call to Action, for which they did not have to contribute any money, said Anannya Bhattacharjee, international coordinator for the Asia Floor Wage Alliance. “And today, after a year, we have seen that despite such a high-profile attempt, nothing meaningful has happened.”

A recent ILO update estimated that 6,031 beneficiaries in Bangladesh, where 4.1 million workers are employed in the apparel sector, have received just $640,476, or three payments of roughly $36, as of mid-April. In Indonesia, only seven factories covering 9,000 workers have received a total of $730,000 under a German “income protection” scheme. Workers in Haiti, Myanmar and Pakistan have so far received nothing. The same is true in Cambodia, where the disbursement of funds is being “delayed” by the pandemic.

“One year into the pandemic, we have seen governments and suppliers in Asian countries, do something. Some have done very little and some have done a bit more, but they have all tried to do something,” she added. “However, the brands who are the actual benefactors of this supply chain have done nothing. Not only have they not done anything they have actively inflicted gross damage to the lives of hundreds of thousands of workers.”