Severance Pay Violations at Tailgate Supplier (Honduras)

To:WRC Affiliate Universities and Colleges
From:Scott Nova and Jessica Champagne
Date:November 28, 2016
Re:Severance Pay Violations at Tailgate Supplier (Honduras)

Rio Garment, a supplier of university licensed apparel located in San Pedro Sula, Honduras, has closed down operations without providing its workers legally required severance pay, final wages, and other required compensation. The factory, which employed 530 workers, owed its workers approximately $1.5 million dollars when it closed on August 12. Not only did the factory fail to pay compensation at the time of closure but, for approximately five months prior to closure, it deducted funds from workers’ paychecks for contributions to the Honduran health care system and for payments to a savings and loan cooperative, but pocketed these funds rather than depositing them.

You may have received an email regarding this factory closure from Tailgate Clothing Company, the university licensee producing collegiate apparel at this factory. For the past three months, since the closure, the WRC has been engaging with Tailgate, as well as the factory’s other buyers, Gildan and Gap. As part of our investigation into this case, the WRC has obtained information from the Honduran Ministry of Labor, from workers, and from records at the plant. We have used this information to prepare a detailed calculation of the amount owed to workers, and have been pressing the factory’s buyers to ensure that workers receive the compensation that they have been denied. In coordination with the WRC, Tailgate and the other key buyers have unsuccessfully pressed the factory owner to provide additional funds to workers.

The WRC first contacted Tailgate on August 24 regarding this case. Tailgate initially reported that David Gren, the owner of the factory, had informed them that workers had been paid in full; it quickly became clear that Gren’s claim was false. The WRC has made clear to Tailgate that, as the university licensee sourcing from this factory, it bears responsibility under university codes for ensuring that the violation of university codes – failure to pay legally required compensation – is corrected. Until the workers receive the full amount that they are owed, Tailgate will be in violation of university codes.

As you may have seen in Tailgate’s communication to schools regarding this case, Tailgate has made an initial commitment to provide limited funds to the workers. We appreciate Tailgate’s engagement on this case and its recognition of the need for licensees to take the steps necessary to correct university code violations, including providing funds to pay workers when the direct employer cannot be compelled to do so.

However, Tailgate’s proposal is insufficient to correct the violations of university labor standards at Rio Garment. The figure the company proposes is significant, but it is only a small fraction of the amount owed to workers. The WRC will continue to engage with the other buyers from the factory, but these buyers are not university licensees. It is clear that a larger contribution from Tailgate will be required to make workers whole.  

Tailgate is owned by a major global apparel brand, American Eagle Outfitters, a Fortune 1000 corporation with $3.5 billion in revenue during its 2016 fiscal year. Fulfilling its obligation to universities in this case will not create an insupportable financial burden for Tailgate and its parent company.

The Fair Labor Association has requested a briefing from the WRC on this case, which we will be providing this week.

We will keep you updated on our engagement with Tailgate and our efforts to ensure that the workers at Rio Garment receive all of the compensation they legally earned.

Please feel free to contact us if you have any questions about this case.

Scott Nova 
Executive Director
[email protected]