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Alleged non-compliance issues with respect to health and safety, and excessive hours of work at the factory. These violations include: hours of work and overtime; wages and benefits; health and safety; child labor; and forced labor.
On February 17, 2006, the Fair Labor Association (FLA) received a Third Party Complaint filed by an individual who requested anonymity regarding Higher Jack Inc. ("Higher Jack"), a factory producing resin products located in Bai Yun District of Guangzhou, China; the factory also operated under the names Hua Hsin Crafts & Arts Products Co. Ltd. and Huaxin Crafts & Arts Products Co. Ltd. The complaint alleged noncompliance issues with respect to health and safety and excessive hours of work at the factory where, among other products, university-logoed goods were being produced for university licensee MBI Inc. ("MBI"), an FLA Category B licensee since 2003. Due to the seriousness of the situation, (which included the purported death of an employee, allegedly because of long hours of work) the FLA immediately moved the complaint to Step 2 of the FLA Third Party Complaint Procedure and notified MBI. On February 21, 2006, MBI requested that the process go immediately to Step 3 of the FLA Third Party Complaint Procedure.
Assessment by FLA
The FLA engaged Impactt Ltd., a FLA-accredited monitor in China, together with Hong Kong Workers' Health Centre (HKWHC), a non-profit, non-governmental organization with a 20-year history in protecting workers' health with service centers located in Hong Kong and Mainland China, to conduct an Independent External Monitoring (IEM) visit at Higher Jack.
Part of Impactt and HKWHC’s monitoring process included inspection of factory documents and records, separate interviews with workers and factory management. The findings from the IEM include the following:
Hours of Work and Overtime. Overtime was compulsory and workers were fined if they did not work overtime. Overtime was not accurately recorded and overtime wage for hourly workers were below the legal requirements.
Wages and Benefits. Worker interviews uncovered that workers were being paid less than legal minimum wage; most migrant workers were not provided social insurance; wages were being paid one month in arrears; and overtime records were being hidden by managers.
Health and Safety. Not all chemicals were labeled and workers did not know about the hazards of the chemicals; no special precautions were made for women; the factory did not have the proper Occupational Health and Safety forms, including missing Material Safety Data Sheets for chemicals used in production.
Child Labor. There were obvious discrepancies between workers' ID cards and information that appeared in their personnel records. The factory did not seem to have an adequate system to verify workers' real ages and to check that the ID cards were authentic.
Forced Labor. Worker interviews illustrated the difficulty for workers to get approval for resignation, ultimately forcing workers to continue to work at the factory or leave without receiving the last 1-2 month's earned wages.
Code Awareness. MBI did not communicate to the factory managers about the FLA or FLA's Code of Conduct and its policies of unannounced IEMs.
Corrective Action Plan
Based on the April 2006 audit, the FLA consulted with MBI, its agent Ceramasters, and a non-FLA affiliated company doing business at Higher Jack to develop a corrective action plan (CAP). The FLA recommended a strategic three-phase approach to remediation at Higher Jack. On October 26, 2007, MBI provided a summary report outlining its activities and the progress of remediation at Higher Jack, and concluding that "The factory's compliance efforts over the past 18 months have been token, at best. Even with a change in attitude, their capacity to improve has diminished with the ongoing decline of their business. MBI's influence with Higher Jack has also waned as our business together has dried up."
The MBI report describes MBI's attempts to discuss compliance issues at the factory and clearly sets out Higher Jack's lack of cooperation in implementing the CAP. As an affiliate of the FLA, MBI bears ultimate responsibility for the implementation of the remediation plan. MBI lacked experience in monitoring and remedying issues in its supply chain and relied heavily on its agent, Ceramasters, and on the good will of the factory manager and owner. The remediation efforts did not yield adequate responses to the issues raised in the IEM and revealed that MBI was not sufficiently equipped to handle labor compliance risks in its contract supply chain as outlined in the FLA obligations of companies. The problems at Higher Jack were compounded by the lack of factory management commitment and decreasing orders at the factory. By the end of 2007, MBI reported having no more orders at Higher Jack.
In order to avoid a repetition of the situation at Higher Jack in the future the FLA developed the following list of recommendations that MBI agreed to fulfill and report on progress to the FLA.
Review the MBI annual progress report governing participation in the FLA and provide the FLA with a revised report that indicates how it plans to avoid the recurrence of the Higher Jack situation.
Ensure that the revised report includes an agent accountability policy and plan which requires agents to conduct pre-sourcing labor compliance audits and involve MBI in the factory selection process.
Attend FLA's trainings on labor compliance being offered to Category B Licensees and ensure that its agents also receive such training.
Increase from one to two the number of FLA IEMs conducted in 2009 and 2010 and work closely with factories to implement appropriate remediation, keeping the FLA informed of remediation activities and results.
Summary of Outcome
Even after extensive efforts by FLA, MBI, and Ceramasters, very few positive results were achieved. in December 2008, the FLA was notified that Higher Jack no longer operated in the location or within the industrial zone where the factory was located when monitoring was conducted. It can be surmised that the factory closed, although it may have moved to some other location in the Guangzhou area or to another location in China.
Notwithstanding the results in this particular instance, FLA has developed reccomendations which MBI has agreed to follow in the future, in order that a similar ocurrence might be prevented in the future.