WRC Factory Investigation

PT Kahoindah Citragarment Tambun-Bekasi

Factory: PT Kahoindah Citragarment Tambun-Bekasi

Key Buyers: Fanatics, Gap, Nike, Under Armour

Last Updated: 2019

Case Summary

The WRC conducted an investigation of the PT Kahoindah Citragarment Tambun-Bekasi factory, which was owned and operated by Hojeon Ltd. (Hojeon), a South Korea-based factory conglomerate. The investigation was undertaken in response to complaints from workers received by the WRC after the factory announced its intention to close on July 2, 2018.

From 2009 until the factory’s closure on October 12, 2018, Nike and its collegiate business partner, Branded Custom Sportswear (BCS), disclosed PT Kahoindah Bekasi as a supplier of university logo apparel. According to US Customs data, PT Kahoindah Bekasi also shipped non-collegiate garments to Fanatics, Stance, Paramount Apparel, and Design Resources.

The WRC’s investigation found that PT Kahoindah Bekasi violated Indonesian law, and by extension university labor standards, by failing to pay workers a substantial portion of their legally mandated terminal compensation. Specifically, in the months leading up to its cessation of operations, PT Kahoindah Bekasi unlawfully used coercion and false representations to convince workers to resign from the factory. As a result, workers received only half of the severance to which they would have been legally entitled had they remained in the factory’s employ and been terminated upon its closure. The average financial loss to each worker, as a result of being compelled or misled to resign, was seven months’ wages.

Upon completing its investigation and sharing its findings with Hojeon, the WRC contacted key brands sourcing from Hojeon’s Indonesian facilities regarding the content of the investigation. Fanatics, Gap, and Under Armour, each of which sourced directly from PT Kahoindah Bekasi or a related facility in Cakung, led the way in engaging with Hojeon to ensure that they understood their obligation to adequately compensate workers.

These brand communications ultimately led Hojeon’s management to reach out to the WRC to discuss remediation of outstanding violations concerning severance. After sharing relevant employment and financial information with the WRC, Hojeon agreed to pay 2,001 former employees an additional US$4.5 million to account for unpaid severance. This represents what the WRC believes to be the largest amount workers have won in a single case of illegally denied severance.

After a WRC-led worker outreach effort in August 2019, more than 99% of the eligible workers visited a designated meeting place near the location of the closed factory to sign documents confirming their acceptance of the planned payments. The payment of the additional severance amount was made in two installments, the first at the end of August 2019 and the second in November 2019 (a timetable to which the WRC agreed, after consultation with worker representatives). The WRC has reviewed payroll data from Hojeon, and compared it to information provided by workers, in order to confirm that the amount Hojeon plans to pay to each worker is the amount that is legally due to them. The WRC also interviewed a sample of workers subsequent to the distribution to verify any irregularities, and the WRC engaged successfully with Hojeon to correct any individual cases in which errors were made.

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