WRC Case Summary re Closure of Kwangduk Langgeng

To:Primary Contacts at WRC Affiliate Colleges and Universities
From:Ben Hensler
Date:March 23, 2011
Re:WRC Case Summary re Closure of Kwangduk Langgeng

At the following link, please find an update on the WRC’s work in 2009 and 2010 concerning the closure of the Kwangduk Langgeng apparel factory in Jakarta, Indonesia. Under its former name, Kolon Langgeng, this factory produced collegiate licensed apparel for Nike, and was the subject of a WRC investigation that resulted in substantial improvements to its employees’ working conditions.

In subsequent years, a number of the factory’s customers, including Nike, ceased placing orders with the company, although the factory continued to make Nike-branded non-collegiate apparel under subcontracts from nearby factories. Although the company managed to acquire some new customers, Kwangduk Langgeng’s business continued to decline, and the factory ultimately closed in January 2010.

This update discusses the WRC’s successful efforts to protect the rights of employees during this closure – a highly contentious process which involved attempts by factory management to avoid severance payments to employees, lock-out workers who resisted these moves by the company, and to blacklist employee union representatives. The dispute began in September 2009 when the company’s management, claiming economic necessity, tried to illegally convert the factory’s workforce to temporary employment status and, thereby, pressure workers to accept severance payments which were less than their legal due.

After workers resisted these moves by the company, the situation rapidly escalated. The company unlawfully locked-out 300 of the employees in an attempt to strong-arm them into forgoing statutory severance benefits. When some of the locked-out workers picketed the plant, hired thugs and security personnel were sent to intimidate them.

In response to requests from the WRC, the factory’s remaining buyers – J.C. Penney and European retailers s.Oliver and Inditex (“Zara”) – took steps to intervene, and, as a result, factory management and employee representatives entered negotiations over severance benefits. These talks broke down, however, when it was learned that the company had taken steps to blacklist employee union leaders with other local area employers.

Fortunately, the WRC was able to restart negotiations between the workers and the factory by contacting the company’s former owner, with whom the WRC previously had extensive prior dealings, and who was still involved in Kwangduk Langgeng’s business decisions. The former owner confirmed to the WRC that the company was filing for bankruptcy.

In December 2009, a final settlement was reached whereby the workers received 1.25 times the severance benefits normally payable when an employer is bankrupt, and the blacklist of the union’s leaders was withdrawn. In January 2010, the factory finally shut its doors.

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