Nike, the WRC and University Labor Codes

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December 7, 2015

Dear Colleagues,

Nike has made a number of statements, in recent communications to the university community, concerning the role of the WRC in relation to university labor codes and university licensees. Here, in essence, is what Nike has asserted: a) that the WRC’s role is to merely alert licensees when workers report abuses, so that licensees can investigate them, rather than for the WRC to conduct assessments of factories itself; b) that Nike has never permitted the WRC to have access to Nike supplier factories; and c) that only organizations approved by Nike, itself, are entitled to assess the labor practices of its supplier factories, including those producing collegiate licensed apparel. 

These assertions reflect both a misunderstanding of university codes and a mischaracterization of the WRC’s role in assessing licensees’ compliance with them. Because a number of WRC affiliate universities have asked us to reply, I want to take this opportunity to provide some corrective information. 

The WRC’s Role as Fact-Finder 

The first mischaracterization in Nike’s communication is its suggestion that the WRC’s role is limited to “alerting” Nike and other licensees to workers’ concerns about factories, rather than conducting our own investigations. This is a rather baffling claim. Since the WRC’s founding in 2000, we have conducted labor rights assessments of collegiate supplier factories, which consistently include all of the following: first, conducting in-depth fact-finding on labor practices; next, based on these findings, determining if university codes have been violated; then, where we find violations, making recommendations for remedial action; and, finally, promoting and monitoring implementation of these recommendations.

It is true that the WRC encounters some cases where a full investigation of the factory is either not warranted or is not feasible and where we, therefore, act on preliminary information in order to try to resolve issues with the licensee and the factory. These cases, however, are in addition to our regular factory assessment work and, even in these cases, the WRC conducts substantial fact-finding, along with follow-up research to assess licensees’ follow-through.

Nike has always been well aware of the WRC’s role – since, during the WRC’s factory investigations, we often engage extensively with licensees, including Nike, both for reasons of efficiency and effectiveness, as well as fairness to the licensees. We do this, however, as one step in our investigation, not as its conclusion – and certainly not as a substitute for doing our own independent assessment for universities of a factory’s compliance with university codes.

In fact, every report that the WRC has ever published concerning a Nike collegiate supplier factory has included a full discussion of: the evidence the WRC gathered in its investigation; the findings the WRC reached based on this evidence; the recommendations the WRC made to address these findings; and the factory and/or Nike’s responses to these recommendations. Some examples include our reports on Nike collegiate suppliers PT Kolon Langgeng (Indonesia)Mexmode (Mexico)Thai Garment Export (Thailand)Yue Yuen (China) and BJ&B (Dominican Republic) – as well as our compliance assessments of factories producing for numerous other university licensees and brands, all of which are publicly available on our website.

The Relationship between Nike and the WRC

Nike also mischaracterizes the relationship between the WRC and Nike. In justifying its recent refusal to grant the WRC access to factories, Nike states that the WRC is not “accredited to conduct factory audits for Nike” and that the WRC has “never been approved to audit Nike factories.” Nike seems to be suggesting that universities’ efforts, through their monitoring agents, to verify labor conditions at collegiate factories is a voluntary process for the licensees and is subject to the licensees’ approval.

Of course, as a university monitoring agent, the WRC does not assess factories “for” Nike (or other licensees)The WRC assesses factories for universities and colleges, to determine whether they arein compliance with universities’ licensing standards. The WRC’s involvement in compliance assessments is based on our status as a monitoring agent of universities, not on approval or accreditation by Nike or any other licensee. That is why the WRC has never sought (and would never seek) approval or accreditation from Nike to audit Nike’s suppliers.

It is important to note, in this regard, that university codes of conduct typically give the university – not the licensee – the contractual right to choose which organization(s) will be the university’s monitor(s) of the licensee’s factories. To cite one example, the CLC Special Agreement on Labor Codes of Conduct, which is incorporated by reference in one of the most common retail licensing agreements for collegiate apparel, explicitly states:  
“Licensee shall cooperate with CLC, the Collegiate Institutions and/or their agents or representatives in periodic inspections of Licensee’s factory sites to ensure that Licensee is in compliance with such Code of Conduct requirements. Licensee’s failure to comply with Code of Conduct requirements for a Collegiate Institution shall be considered a breach of the License Agreement regarding the applicable Collegiate Institution.” (emphasis added)

Under this language, whether universities choose the WRC, the FLA, or both organizations as their monitoring agents, the contractual responsibility of the licensee is to cooperate with the university’s choice of factory monitors. Where a university has adopted these contractual requirements in its trademark licensing arrangements with Nike, the company is legally bound by this obligation. And contractual issues aside, Nike surely understands that the monitoring of collegiate factories by an entity such as the WRC, which is entirely independent from licensees in terms of funding and control, has been a foundational principle of university anti-sweatshop work for the past 15 years and is a crucial underpinning of the credibility of this work. 

WRC Access to Nike Factories

Nike also states that not permitting the WRC to access its factories has always been its practice, and that its position on this issue, therefore, has not changed. In fact, the WRC has had access to Nike supplier factories on multiple occasions over many years. Indeed, in the very first investigation the WRC conducted, at Mexmode in Mexico, Nike arranged access to the factory for the WRC assessment team. Other Nike supplier factories producing university logo goods where the WRC has conducted on-site assessment and/or remediation work include BJ&B (Dominican Republic), PT Kolon Langgeng (Indonesia), Pinehurst (Honduras)Eagle Speed Marketing/ESP (Thailand)Dada Dhaka (Bangladesh), Gildan Villanueva (Honduras), and Thai Garment Export (Thailand). It should be noted that Nike did not arrange access in all of these cases. The WRC was sometimes able to gain access through direct requests to factory management or was assisted by another licensee; but Nike was aware, at least in most cases, of the WRC’s presence. At Pinehurst in Honduras, Nike staff even drove the WRC’s investigator to the factory.

At ESP in Thailand, a factory which produced only non-collegiate goods for Nike, but supplied collegiate goods to VF, Nike still assisted the WRC with access. A Nike compliance staff member wrote to ESP’s factory management, stating: “Please note that WRC [are] creditable third parties who work with Nike on compliance area so we are strongly encouraging ESP to open the door for this investigation.”

At PT Kolon Langgeng, where the WRC had repeated and extensive access, some of our investigative work was even conducted during a joint visit to the facility with Nike representatives. As these examples amply demonstrate, Nike’s assertion that its practice has always been to deny the WRC access to its supplier factories is simply incorrect.

It is also important to note that other licensees also facilitate access for the WRC to their supplier factories. The list of such factories is far too long to include here, but a few recent examples are: Industrias de Exportacion in Honduras (a factory whose buyers include the licensees Gear for Sports, adidas, Under Armour, Knights Apparel and VF); Multiwear, Premium and SISA in Haiti (factories where the WRC has conducted joint auditing of payroll records with Russell and Hanesbrands); Uni Gears in Bangladesh (a factory supplying the licensee Outerstuff); Zongtex in Cambodia (a factory supplying the licensee Fine World/E5); and, of course, Alta Gracia in the Dominican Republic, where the WRC routinely conducts onsite assessments. Another notable recent example is the Optimum Fashion factory, in Bangladesh, where the licensee, VF, first agreed to grant access, then balked in following through until multiple universities reminded VF of its obligation to cooperate with the WRC, at which point access was provided (leading to documentation by the WRC of numerous grave fire hazards).

The WRC’s Record in Uncovering Labor Rights Violations at Nike Factories

Nike also charges that the WRC is not “equipped” to inspect its collegiate factories. The record shows that this claim is also patently incorrect. Ironically, the clearest proof of this is the long list of violations the WRC has identified at Nike factories – violations that Nike’s own auditors failed to detect or address. Examples include physical abuse of workers, forced overtime and failure to pay legally mandated compensation (among other abuses) at PT Kolon Langgeng; discriminatory firings of pregnant workers at Hong Seng Knitting (Thailand); acts or threats of physical violence against workers at Mexmode, BJ&B, Dada Dhaka and other factories; illegal blacklisting at Chi Fung (El Salvador); punishment of workers by physical confinement (among other issues) at ESP; creation of a company-controlled union by management at Pinehurst and the illegal firings of independent worker leaders; unlawful assignment of physically dangerous tasks to pregnant workers (and other violations) at Thai Garment Export; and many other examples. In most of the cases listed, significant corrective action was achieved as a result of the WRC’s work.

The WRC’s competence as an assessor of labor rights compliance is also reflected in the list of major government entities, in addition to universities and colleges, that have had the WRC perform work in this area on their behalf. These entities include the US Department of State, the US Department of Labor, the City of Los Angeles, the City of San Francisco, the purchasing consortium that buys apparel for most university stores in the United Kingdom, the California State Division of Labor Standards Enforcement, the public school system of the Province of Ontario, Canada, and the Ethics Council of the Norwegian Government Pension Fund (the world’s largest sovereign wealth fund).

Nike’s View of Binding Labor Codes and Independent Enforcement

Nike also makes a point of mislabeling the WRC as an “activist” organization. As you know, the WRC is deeply committed to seeing that all licensees, including Nike, comply with university codes, and we are admittedly passionate about ensuring that these codes protect workers from abusive treatment, unsafe factory conditions and theft of their usually-meager wages. That is, after all, the reason why the WRC, and why university codes, exist.

There is, however, a vast difference between the efforts of the WRC to investigate and secure remediation of labor rights abuses and the work of activist groups. The WRC is an organization that researches and reports on labor rights violations and seeks corrective action where needed.

The WRC is not an organization that does anti-sweatshop “activism” – as laudable as we may feel such activism, by other groups, often is in raising public awareness. The WRC does not organize protests. We do not host online petitions or send mass emails. We do not participate in demonstrations. We do not call for the resignation of corporations’ CEOs.

What differentiates the WRC from other monitors with which Nike works is not “activism,” but the WRC’s independence, in terms of both finances and governance, from Nike and other licensees. This independence allows the WRC to publish reports of labor rights violations that name both the factory and the licensee involved, and to take a strong position on the need for full and timely corrective action by both parties.

The organizations that Nike has approved to “audit” its factories, by contrast, generally do not issue public reports that identify by name specific Nike suppliers and report labor rights violations in those specific factories. With respect to Vietnam, where the WRC has most recently sought factory access from Nike, it must be noted that neither of Nike’s “approved” monitors (i.e., the FLA and Better Work) has ever published a labor rights report that identifies a factory by name.  

These organizations also are rarely publicly critical of a particular licensee or other brand. The approach these organizations take to monitoring can still be valuable, particularly when combined with the independent and transparent work of an organization like the WRC, which is why many universities have chosen to affiliate with both the WRC and the FLA. However, Nike’s view, apparently, is the opposite: that any monitoring organization must be “activist” or “biased” unless Nike, itself, funds and/or has a say in that organization’s work.

Indeed, the fact that universities chose to impose labor standards on Nike, as a matter of contractual obligation, rather than merely relying on Nike’s own voluntary monitoring program, was a source of great consternation to Nike when university codes were first created. Nike’s objections were not limited to the role of the WRC: Nike objected to binding university codes in general and also objected to public factory disclosure. Though Nike has accommodated itself to the universities’ enforcement model, it is a model Nike has tolerated, rather than embraced. As an example, Nike recently decided, unilaterally, that it will no longer provide university-specific factory disclosure information to universities and their licensing agents, even though university codes generally require this. Instead, Nike provides a list of collegiate factories on its own website that does not differentiate by schools. To our knowledge, Nike is the only licensee that does not provide university-specific factory disclosure.

Despite Differences, the WRC and Nike Have Worked Together Constructively in the Past

However, despite Nike’s lack of enthusiasm for contractual binding labor standards and independent monitoring, and despite the very different views the WRC and Nike have on many labor rights issues, we have managed to work together reasonably well throughout most of the 15 years that university labor codes have been in effect. When WRC factory investigations have uncovered labor rights violations among its suppliers, Nike has usually been willing to take corrective action – and when Nike has done so, the WRC has credited the company’s role in the progress achieved.

This is why Nike’s recent announcement that it will not allow the WRC to inspect its factories is both surprising and concerning. Universities still face daunting challenges in achieving compliance with their labor codes, on issues like workplace safety, wages, freedom of association and the treatment of women workers. Apparel production is increasingly concentrated in countries with poor (and sometimes deteriorating) labor rights records and with major defects in national law relative to university code requirements. As the WRC has long reported, the manner in which licensees organize production in their supply chains itself poses large obstacles to progress. In other words: we already have our work cut out for us.

Given this reality, reigniting disputes that were settled long ago – when universities, over the objections of Nike and other major licensees, first decided to adopt labor codes, incorporate them into licensing agreements, and affiliate with the WRC and/or FLA – does not seem like a productive use of anyone’s time and effort. Not the WRC’s, not our affiliate universities’, not students’, and not Nike’s.

We Hope that Nike Will Reconsider Its Position so that We Can Focus Our Attention on Addressing Labor Rights Problems

We hope that Nike will reconsider its position. We do not see any great obstacles to the company doing so. Indeed, it is important to note that the WRC’s requests for physical access to Nike factories are, in fact, fairly rare. This is because the WRC’s approach is to concentrate our resources on conducting a limited number of very in-depth investigations, because physical access to factories is not required in a significant number of these investigations (for example, cases involving compensation owed to workers at factories that are already closed), and because only a small percentage of factories in the overall collegiate apparel supply chain produce for Nike. As a result, the WRC has never sought broad access to large numbers of Nike factories. While it is conceivable that circumstances could prove different in the future, we consider this unlikely.

When we do seek access, however, it is because we have determined that access is essential in order to properly investigate and address alleged labor rights violations – and it is important that Nike, like other licensees, accommodate these requests. This will enable us to continue to work constructively with Nike to monitor the labor practices of its collegiate suppliers and correct violations of university standards where they exist.

I hope you find the information in this communication useful. Please let me know if you have any questions or would like to discuss the issue further.

Best,

Scott

Scott Nova 
Worker Rights Consortium 
5 Thomas Circle NW, 5th Floor
Washington, DC 20005 
ph 202 387 4884 
fax 202 387 3292 
nova@workersrights.org 
www.workersrights.org