Update on Remediation of Labor Rights Violations at Hansae Vietnam (Nike)

Home » Communications to Affiliates

letterhead

Summary

This memo provides an update on the status of remediation of violations of university labor standards at Hansae Vietnam (“Hansae”), an apparel manufacturing facility in southern Vietnam that produces university licensed goods for Nike and employs nearly 8,500 workers. In December 2016, WRC released a comprehensive report on the results of our year-long investigation of the extensive labor rights violations at this factory, which included conditions that seriously endanger workers’ health and practices that violated basic human rights.

While some remedial measures have been enacted – in particular, with respect to correction of certain safety hazards and employees’ working hours –  I regret to report to you that overall progress has fallen well short of what we hoped to see and what university codes require. A number of the most serious worker rights violations at Hansae have not been remedied and are not on track to be adequately corrected – and Nike has not fulfilled its commitments to require meaningful remediation by Hansae in these key areas.

Illustrative of this problem, Nike committed to require Hansae to provide back pay to workers for what the WRC (and the FLA) determined to be a chronic and widespread problem of uncompensated off-the-clock overtime, involving from dozens to hundreds of unpaid hours per worker. Hansae’s ‘remedy,’ however, was to give each worker 30 minutes of pay – about 40 cents – and declare the problem solved. To our surprise and dismay, Nike has treated this token sum as a legitimate remedy, giving Hansae no incentive to change its position and provide meaningful back pay.

Background: Nike’s Commitments

At the time the WRC released its full investigative report on Hansae, Nike acknowledged the seriousness of the violations and committed to require Hansae to implement the corrective actions the WRC (and the FLA) identified as necessary to comply with university codes – including back pay to compensate for off-the-clock work, equipment upgrades to protect worker safety, reversal of unjust firings, and an end to management domination of the factory’s labor union, among other remedies.

Crucially, as part of this process, the WRC asked Nike to require Hansae to provide issue-specific implementation plans for several important, technically complex and expensive areas of remediation, so that these could be reviewed in advance, by all parties, to ensure their adequacy before Hansae moved to actual implementation. Nike agreed to require Hansae to provide these advance plans. The purpose of this was twofold: 1) to make sure all parties had a clear understanding of the exact steps Hansae was expected to take, so as to avoid confusion down the road, and 2) to make sure Hansae did not waste money on remedial measures that were inadequate and would have to be redone.

The specific issues involved are these:

  • Back pay for off-the-clock work – the purpose of the advance plan approval was to make sure Hansae’s estimates of money owed were reasonable.
  • The installation of cooling systems to bring the temperature in the factory buildings down to the legal maximum – the purpose of the advance plan approval was to make sure Hansae did not start spending money on systems that won’t be adequate to the task.
  • The purchase of proper seating for thousands of sewing operators, who have been sitting on backless benches – the purpose of the advance plan approval was to make sure Hansae did not invest in chairs that fail to meet safety standards.

Unfortunately, Nike failed to provide these plans, despite multiple efforts by the WRC to obtain them, via phone conversations, emails and in a face-to-face meeting with Nike personnel.

Nike’s Unfulfilled Commitments and Acceptance of Inadequate Remedies

With the agreed process for pre-approval never materializing, Hansae simply went ahead with inadequate remedies. This includes installation of evaporative cooling systems that are very unlikely to bring temperatures down to the legal maximum (indeed, workers continue to report very high heat levels) and the decision to provide every worker with the token sum of 40 cents instead of meaningful back pay for unpaid labor. Also, Nike reports that Hansae has moved forward to buy seating, without sharing the technical specifications for the equipment being purchased, creating the risk that money will be wasted on improper chairs.

Nike has also accepted inadequate corrective measures with respect to other serious violations:

  • Illegal recruitment fees – although extortion of such fees from workers by managers was a widespread and longstanding practice within the factory, only one worker reportedly has been repaid.  
  • Illegal terminations of workers, including employees who were fired for being pregnant –none of these workers have been reinstated and Nike has accepted a process for addressing the issue that relies on Hansae having kept accurate written records of its workers’ pregnancies, which is a doubtful proposition.
  • Management domination of the factory’s labor union – Nike has accepted a bogus union election, organized by Hansae, in which the very same senior factory managers who were running the union at the time of the WRC’s original investigation have now been re-elected. Nike has defended this, making the peculiar assertion that it is consistent with Nike’s standards, and ILO standards, to have senior managers holding union offices, as long as these managers don’t report directly to the factory’s general manager. Despite several requests from the WRC, Nike has not provided citations to the language in the Nike code of conduct that forms the basis for this claim. In any case, whatever Nike’s standard may be, having senior managers run the union is not consistent with university labor standards on freedom of association.

Some Cause for Optimism at Hansae

Despite Nike’s current position on these outstanding issues, we do see some reason for optimism at Hansae going forward, due to other factors. Through the WRC’s efforts, other brands sourcing from Hansae have agreed to become engaged, have met with Hansae, and are pushing for stronger remedial measures. Meanwhile, the WRC has established a separate avenue of communications with Hansae’s parent corporation in Korea, not involving Nike, and these communications indicate that the company may be reconsidering its overall course of action.

We understand that Hansae’s senior executives, in response to concerns about the inadequacy of remedial measures that the WRC has conveyed to them through an intermediary, and in response to the concerns of other buyers, are now working on a revised corrective action plan. It is our hope that this plan will prove adequate. As we have explained before, Hansae is a large corporation with the financial resources to correct all of the problems at the facility – if it chooses to do so. Nike may be willing to accept inadequate remedies, but we are still hopeful that other buyers, and the WRC itself, can convince Hansae to meaningfully address the outstanding issues at the factory.

Nike’s Obligations

Regardless of what actions Hansae may be willing to take at the behest of other parties, it is important to emphasize that Nike is bound, under current university labor standards, to achieve full remediation of the labor rights violations at Hansae. The positions it has taken with respect to back pay, management domination of the labor union, reinstatement of workers fired for being pregnant and other issues noted above are not consistent with this obligation. We will continue to urge Nike to reevaluate its position.

An Additional Concern

A complicating factor with respect to Nike’s remedial obligations is that, after the WRC first reported on violations of university labor standards at the factory, Nike decided unilaterally to cut its orders at Hansae by two thirds. While we understand that Nike wanted to send a message to Hansae, reducing orders as a first resort is not a course of action the WRC normally advises – rather, cutting orders should be a last resort. In this case, because Nike cut orders so quickly, and because, to our knowledge, Nike has not committed to restore these orders in exchange for full remediation, we are concerned that Nike’s actions will prove counterproductive. We are also concerned that the reduction of orders has resulted in a substantial loss of income for some Hansae workers. Nike needs to insist on genuine remediation of outstanding labor rights violations – and should also make clear to Hansae that if full remediation is achieved, Nike will restore orders to their original levels.

We will continue to communicate with Nike, with other buyers, and with Hansae and will keep you informed as to further developments.

Scott Nova
Executive Director
[email protected]