Wage Theft at Indonesian Factory

To:WRC Affiliate Universities and Colleges
From:Scott Nova and Jessica Champagne
Date:December 21, 2015
Re:Wage Theft at Indonesian Factory

The Indonesian firm PT Jaba Garmindo has ceased production without paying legally required severance benefits and final wages to its employees. The approximately 4,000 workers at Jaba Garmindo are owed US$10.8 million in unpaid wages, legally required bonuses, and legally required severance payments. More information on the case is available in a new WRC report here.

At the time that the WRC launched its investigation of alleged violations at Jaba Garmindo, the factory was disclosed through the Licensing Resource Group (now Learfield Licensing Partners) as a producer of university logo apparel. The WRC subsequently learned that the disclosure was in error, a mistake that was the responsibility of Learfield, not the licensee. Because the WRC, in response to a complaint from workers, and based on the disclosure data, initiated an investigation and remediation process at the factory, we were obligated to see the work through to completion.

Prior to its closure, according to press reports and worker testimony, the factory supplied knitwear and other non-collegiate apparel to a number of brands including UNIQLO and the European brands H&M, s.Oliver, and Jack Wolfskin. Each of these brands has committed, through their own codes of conduct and through multi-stakeholder initiatives, to require that workers producing their apparel receive all legally required compensation

The WRC has contacted the key buyers at the plant to recommend that these buyers take whatever steps are necessary to ensure that the workers are made whole, including, if necessary, directly providing funds to workers themselves. To date, none of the buyers has made this commitment.  

Several buyers suggested that an ongoing bankruptcy process is likely to adequately compensate workers. However, a WRC review of Indonesian bankruptcy law and practice, and the facts of the case, indicates that it is highly unlikely that the process will result in either prompt or full remediation. PT Jaba Garmindo’s most valuable assets were held as collateral by other creditors and have already been sold off to pay those creditors. The pending sale of the remaining assets is unlikely to yield more than a small portion of the amount legally owed to workers. Making matters worse, the extensive delays that plague Indonesia’s justice system mean that the workers will likely have to wait years before seeing any funds the process does generate. The workers at PT Kizone, a collegiate supplier factory in Indonesia on which the WRC has reported extensively, closed in 2011. More than four years later, workers have still not seen a penny from the bankruptcy process. Workers were made whole only because university licensees ultimately agreed to provide the funds.

In the absence of a commitment by the brands sourcing from Jaba Garmindo to ensure that workers receive the compensation they have earned, these workers will never be made whole.

Over the past five years, the WRC has succeeded in achieving remediation in a substantial number of cases in which factories closed without paying employees the wages and severance they were legally owed. A growing number of international brands and retailers have taken steps in these cases to ensure workers are paid the compensation they earned. These include Hanesbrands, Fruit of the Loom, Disney, adidas, and H&M, among others. These buyers either directly provided the funds owed to workers or successfully pressed their supply chain partners (factory owners, buying agents, etc.) to do so.

The WRC is urging UNIQLO, H&M, s.Oliver, Jack Wolfskin, and the other brands and retailers that produced at Jaba Garmindo to ensure that the workers who labored to make their apparel are paid for their labor.

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