New Factory Report: Elim, SA (Guatemala)

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To:WRC Affiliate Universities and Colleges
From:Tara Mathur and Ben Hensler
Date:April 6, 2021
Re:New Factory Report: Elim, SA (Guatemala)

Please find here a new report from the WRC on Elim, SA, a garment factory in Guatemala that closed at the end of last year. Since the factory’s closure was announced in December 2020, the WRC has worked with the factory’s former buyers, including the university licensees, Outerstuff (which produced collegiate goods at the factory) and New Era (which produced non-collegiate goods there) to ensure payment of nearly $900,000 in terminal compensation and back pay, the equivalent of more than six months’ wages, legally owed to its nearly 400 workers. The final portion of these funds is currently being distributed to workers in Guatemala. 

Securing full payment of these funds was particularly important in this case, not only in light of the economic hardship the factory’s closure poses to workers and their families, but also because the WRC had found that the factory owners’ decision to close was motivated, in part, by retaliatory animus against their workers’ exercise of associational rights. As our report details, the WRC’s investigation of labor rights violations at the Elim factory, which began in September 2020, found numerous, serious violations of university licensing standards at Elim, including multiple death threats by managers against one worker and an unlawful mass termination of approximately two dozen other employees, all in retaliation for forming a union at the factory and for refusing to accede to unlawful demands by the management for pay cuts and unpaid overtime. Significantly, the WRC also documented that company managers issued repeated threats to workers that the factory would be closed if workers persisted in organizing.

The WRC shared the findings of our investigation with Outerstuff, New Era, and the factory’s other buyers, who made clear to the factory’s owners that the violations of worker rights must cease and be fully remedied. Instead of agreeing to do this, however, Elim’s management announced that they would close the factory permanently. While, like many other garment factories, Elim had seen a decline in orders over the past year, the WRC found that the decision to close was motivated, at least in part, by anti-union animus and thereby represented a further violation of workers’ rights. Since the impending closure meant that the company’s violations of workers’ associational rights could not be fully remedied, the WRC requested that the buyers commit to refraining from doing business going forward with Elim’s owners at any other garment factory they might own or operate. To their credit, the buyers made this commitment.

The WRC and the factory’s buyers also worked together to ensure that the former employees receive all of the $896,000 in compensation owed to them at the time of the factory’s closure, which represents more than six months’ wages per worker. Although, when the factory closed in December, it paid its workers approximately $564,000 toward this compensation, this meant that more than one-third of the total owed to workers remained outstanding. Therefore, the factory’s buyers agreed to place into escrow the remaining $332,000 so that these funds could be used to ensure that each worker received the full amount of compensation they were owed. These funds are currently in the process of being distributed to workers.

It is extremely unfortunate that Elim’s management, rather than remedying the violations of workers’ freedom of association it had committed, instead, chose to exacerbate these violations by closing the factory. The WRC recognizes, however, that the factory’s buyers, including the university licensees, Outerstuff and New Era, responded responsibly by committing to refrain from doing business with Elim’s former owners going forward and by ensuring that workers received all of their legally owed compensation. These funds will be crucial in enabling the Elim workers and their families to weather the loss of income caused by the factory management’s decision to close the facility and protect these employees from yet a further violation of their rights.

As always, we are available to discuss the report and answer any questions you may have.