Labor Rights in Licensing Agreement: The Impact of Nike’s Proposed Changes
April 14, 2017
In December, we shared our assessment of the impact of new licensing contract language Nike was proposing to some universities at that time.
I write today with an update. Nike is now proposing different, more detailed, language at many universities. A number of WRC affiliates have shared this language with us and requested our assessment. We want to share that analysis with you.
It is important to note that the impact of this new language would be quite broad, with factory access for the WRC being only one element of a larger set of impacts.What Nike is proposing would mean major changes to the labor rights policies of many universities, diminishing their power to determine the conditions under which their logo goods are made.
Please note that the following analysis is based on comparing the most common version of the standard Nike licensing agreement with the new language Nike is proposing. We recognize that not every institution has the same language in its existing Nike agreement and that the gap between current terms, and Nike’s proposed terms, may be greater or smaller for some institutions.
The proposed changes would have the effect of restricting or eliminating the following rights, which many universities enjoy under their existing licensing agreements:
➢ Universities’ Right to Establish their Own Labor Standards: Currently, universities set their own labor standards. Nike’s language would change this, replacing the university’s labor code with Nike’s code. While the proposed language states that Nike will keep its standards consistent with university standards, this assurance is qualified by language stating that Nike’s code may “differ in approach.” Since Nike’s “approach” to licensee obligations concerning labor rights is very different, in a number of key areas, from the approach universities have maintained, the effect of this language would be to shift ultimate control over standard-setting from the universities to Nike. For example, many universities recognize an obligation for licensees to ensure that workers are paid the wages they are legally owed, when a factory owner fails to pay them. In the Rio Garment case, on which we just reported, this university requirement led Tailgate, the licensee, to take steps that saved 500 workers in Honduras from losing an average of nearly a year of owed wages. Nike’s code does not recognize any such requirement. Nor, as another example, does Nike’s code recognize the obligation of licensees to take active steps to protect workers from repression of fundamental freedoms in countries like China and Vietnam where human rights are severely restricted, another important feature of university codes.
➢ Universities’ Right to Choose Who Monitors the Factories Where Their Logo Goods Are Made: Currently, universities have the right to choose their own monitors, including the WRC, to verify compliance with their standards, and licensees must cooperate with those monitors. This obligation to cooperate applies whether or not the licensee likes the monitor the university chooses. Nike’s language would take away this right from universities. Instead, Nike would be able to veto, and decline to cooperate with, any university-selected monitor it does not like. Nike’s veto power would apply to the WRC and to any other monitor a university might decide to use in the future. Nike lists several monitors it intends to use, beyond the FLA, which include Sumerra, a for-profit firm that works under contract to Nike and other apparel brands, and the International Labor Organization (ILO), by which we presume Nike means the ILO’s Better Work Program. It is important to note that the Better Work Program monitored Hansae Vietnam for many years, but failed to identify major violations of workers’ rights at the factory.
The extent to which the licensee, and not the university, would be in the driver’s seat on factory monitoring is reflected in the way Nike’s proposed language deals with investigation of alleged labor rights violations. The language states that Nike would run the investigation in such cases and would be obligated only to “consult” with the university and any monitor involved. Universities could still ask the WRC to investigate, and we would certainly try, but Nike would not have any obligation to cooperate. It is unclear what a Nike-led investigation would mean in practice (for example, how would this work in a case where there is an FLA complaint?), but assigning the prime investigative role to the licensee, in cases where the licensee is alleged to have violated the standards, is a major departure from the model of independent monitoring that universities have utilized over the last two decades.
➢ Universities’ Right to Require Remediation When Workers Producing Collegiate Apparel Are Harmed: Currently, when worker rights violations occur at a collegiate factory, the licensee is required to ensure that the violations are remedied in a manner the university considers adequate. This is implicit in the code language utilized by many universities, which prohibits conduct that violates the standards and therefore requires that such conduct be remedied. Nike’s proposal contains specific language on remediation that sharply limits Nike’s obligations. Under this language, when violations have harmed workers at a factory making a university’s logo goods, Nike’s sole obligation would be to make “an effort to reach agreement” with the university on corrective action. If Nike did not want to implement the corrective actions a university felt were needed, Nike could simply refuse. In the end, it is Nike that would decide how much corrective action the factory would be asked to take. This would be true even in cases where workers are suffering severe harm and where the university’s reputation is at risk. With universities having relinquished the right to compel remediation, harm to workers could end up unaddressed.
We hope this analysis is useful. It is, of course, up to each university to decide, according to its own criteria, what language should be in a particular licensing agreement. The WRC does not issue recommendations about whether to accept or reject proposed language. We do recognize an obligation to assist universities in assessing the impact that proposed contract language would have on their labor rights efforts.
As always, please contact us with any questions.
Worker Rights Consortium