Update on Misuse of Temporary Employment Contracts in Cambodia

To:WRC Affiliate Universities and Colleges
From:Scott Nova and Ben Hensler
Date:April 11, 2014
Re:Update on Misuse of Temporary Employment Contracts in Cambodia

Last month, the WRC released an in-depth report onthe recent deadly crackdown by that country’s armed forces – acting at the behest of garment factory owners – on worker protests calling for higher pay, in a country whose wages are the second-lowest among the world’s major apparel-producing countries. The report linked the tendency by garment factory owners and the Cambodian government to choose repression of worker protests over negotiations with worker representatives to fears that any significant increase in wage levels will endanger the Cambodian garment industry’s ability to meet the price demands of Western brands and retailers.

Linked here you can find an update on another key factor contributing to the Cambodian garment industry’s troubled labor relations: the widespread practice of factories employing their regular, fulltime workforce almost exclusively on consecutive short-term contracts (known in Cambodia as fixed duration contracts or “FDCs”). In August 2011, Yale Law School’s Allard K. Lowenstein International Human Rights Clinic released a report, prepared at the request of the WRC, thatdetailed how this practice was seriously undermining compliance with university and buyer codes of conduct – and belying Cambodia’s already frayed reputation as a purported role model for other developing countries in protecting worker rights in export-apparel manufacturing. 

The 2011 report documented how the Cambodian garment industry’s extensive use of short-term contracts was exacerbating worker rights abuses in the country, including violations of freedom of association and denial of legally mandated benefits, among them, maternity benefits for women workers. Unfortunately, international buyers, for the most part, have failed to heed the report’s recommendations for reforming industry practices in this area – most importantly, to require supplier factories to use short-term contracts only to employ workers who are truly “temporary workers,” i.e., employees hired solely to work during a particular season or to fill another short-term need, and not for workers who make up factories’ regular labor force.

As the need to end the Cambodian’s garment industry’s cycle of insecurity, unrest and repression has become even more urgent, these recommendations are timelier than ever. Yet, over the past three years, as on so many other labor rights issues, Cambodian factory owners have taken an entirely contrary and counterproductive approach. As discussed in the linked update, their industry association has attempted to undermine the country’s leading industrial dispute resolution body and to sabotage efforts to improve labor relations in the garment sector, simply in order to overturn existing legal jurisprudence on use of short-term contracts – and thereby remove the only currently existing restrictions on their misuse. And, as a recent survey by the WRC of 127 Cambodian garment factories indicates, the industry has pursued these tactics despite the fact that most factory owners in Cambodia already employ most or all of their workforces under such temporary agreements.

Unfortunately, nearly all of the leading apparel buyers doing business in Cambodia – including companies like Gap and Walmart, that are among the top apparel exporters from the country, as well as leading collegiate licensees like adidas and Nike – have remained publicly silent on this issue, while still benefiting from the lower labor costs that the abuse of short-term contracts allows their supplier factories to obtain. As discussed below, data collected by the WRC suggests that in the case of not only these firms, but also nearly every other major brand and retailer that purchases garments from Cambodia, the majority of their suppliers in the country are factories that employ most or all of their workers on short-term contracts.

The document linked here details the responses of Cambodian garment factory owners and international brands and retailers to the findings and recommendations in the Yale Law School report, since its publication three years ago; and provides an update on the misuse of short-term contracts (“FDCs”) in the Cambodian garment sector. It also offers the WRC’s continuing recommendations to university licensees and other brands and retailers doing business in Cambodia for remedying this ongoing obstacle to labor rights compliance, including:

  • Requiring supplier factories to abide by current two-year legal limit on the length of time workers can be employed under FDCs, by issuing long-term contracts (known in Cambodia as “Undetermined Duration Contracts” or “UDCs”) to all workers with more than two years’ cumulative service;
  • Requiring suppliers to limit issuance of any new FDCs to workers whose employment is legitimately seasonal and/or temporary in nature, and issue UDCs to all workers currently employed or newly hired as part of factories’ regular year round workforces; and
  • Urging factory owners to renounce efforts to remove existing statutory restrictions on, or to reverse legal precedents setting two years as the maximum total length of FDCs.

The WRC looks forward to collaboration with university licensees and other stakeholders to address this continuing obstacle to progress in Cambodia’s labor rights environment. As always, please feel free to contact us if you have any questions or concerns.

Scott Nova 
Worker Rights Consortium 
5 Thomas Circle NW, 5th Floor 
Washington DC 20005 
ph  202 387 4884 
fax 202 387 3292