5 Thomas Circle NW Fifth Floor Washington, DC (202) Fax: (202)

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1 Worker Rights Consortium Report of Supply Chain Study for the City of Los Angeles Sweat Free Ordinance Independent Monitor Agreement (Agreement No. C ) This is a report of the Supply Chain Study conducted by the Worker Rights Consortium (WRC) pursuant to Section 5.3 of Agreement No. C This report is submitted in fulfillment of the deliverable in Section of the contract. The WRC has assessed the supply chains of City contractors and subcontractors that produce goods for the City, including but not limited to apparel and footwear. The WRC s report is based on disclosure information provided by the subcontractors on the Galls/Long Beach Uniform contract, as well as non-galls contractors. To date, there are two Galls subcontractors that have not yet provided factory disclosure information. The WRC will update this study as needed when additional disclosure is supplied. A total of 175 facilities in 24 countries were disclosed as producers of apparel, footwear and accessories for the City. Of these 175 factories, 68 are located in the United States, 23 in China, 25 in Central America and the Caribbean (including Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua), 16 in Mexico, 15 in Southeast Asia (including Cambodia, Indonesia, and Vietnam), 11 in South Asia (including Bangladesh, Pakistan, and Sri Lanka), 11 in East Asia (including Japan, Korea, and Taiwan), two each in Haiti and Europe (including Germany and the Netherlands), and one each in Canada and North Africa (Egypt). Appendix 1 of this report includes a table with the number of facilities in each country and the percentage of factories per country. Worth noting is the fact that the disclosure list originally included an additional 11 factories, two of which were suppliers for Propper, including BKI in Haiti and Suprema in the Dominican Reepublic, and nine of which were suppliers for Hi-Tech Magnum, including the I-Cheng factory located in Cambodia, a factory in Taiwan, and seven factories in China. On February 2, 2016, the City of Los Angeles informed the WRC that Proper International, Hi-Tech Magnum and Hardwick Clothes were all being removed as subcontractors from the Galls contract. The City informed the WRC that this decision was made as a result of the subcontractors failure to comply with the City of Los Angeles Sweat Free Ordinance, a decision that was effective January 15, Thomas Circle NW Fifth Floor Washington, DC (202) Fax: (202) wrc@workersrights.org

2 The following sections of this report detail labor conditions in the following countries and regions: Bangladesh, Cambodia, Canada, Central America and the Caribbean, China, Egypt, Germany, Haiti, Indonesia, Japan, Korea, Mexico, the Netherlands, Pakistan, Sri Lanka, Taiwan, the United States, and Vietnam. For each country or region, the report provides an overview of the distribution of factories, general labor rights conditions, current minimum wages, and links to additional information. Given the well-documented prevalence of serious labor violations in the export-apparel manufacturing industry in many of the countries where City apparel is produced and given the WRC s prior experience with the overall level of compliance by City vendors whose factories have been assessed by the WRC and in other factories assessed by the WRC, the WRC believes that there is a high likelihood that other factories producing for the City in several countries are failing to comply with the Ordinance. The countries or regions where abuses are most likely to occur are Bangladesh, Cambodia, Central America and the Caribbean, China, Haiti, Indonesia, Pakistan, and Vietnam. The WRC will prioritize factories in these countries and regions for its outreach, education and monitoring efforts. BANGLADESH There are seven factories in Bangladesh that have been disclosed as suppliers of products to the City. Two of the factories were reported by Galls subcontractor 5.11 Tactical. Edwards Garment, Helmet House, Bates and Sanmar, Galls subcontractors, and Bob Barker and BUI (Staton), non- Galls contractors, each reported one factory. Three of the factories are in Dhaka, the capital city, where a majority of the country s garment factories are located. Another three are located in Chittagong, another major production area in the country and one factory is located in Comilla, a city halfway between Dhaka and Chittagong. Bangladesh manufactures nearly 7% of all U.S. apparel imports. Bangladesh is the third largest exporter of apparel to the U.S., behind China and Vietnam. With more than 4,500 factories and over 3.5 million garment manufacturing workers, Bangladesh s apparel sector makes up 80% of the country s economy. With poverty wages that are the lowest of any garment-exporting country, Bangladesh remains a low-cost sourcing location despite the country s well-known safety issues. Since 2005, almost 2,000 apparel workers in Bangladesh have died as result of preventable fire and building disasters, including the collapse of Rana Plaza in April 2013 which claimed the lives of 1,138 workers alone, and injured an additional 2,500 workers plus. Following the Rana Plaza collapse, two major remedial plans, The Accord on Fire and Building Safety (the Accord) Page 2 of 28

3 and the Alliance for Bangladesh Worker Safety emerged to address fire and building safety issues and worker rights. The Accord, created by the IndustriALL Global Union and the UNI Global Union, in collaboration with the WRC and the Clean Clothes Campaign, is a legally binding agreement that requires independent fire, building and electrical safety inspections by certified engineers, public reporting of the engineer s findings, and implementation of all necessary repairs and renovations with financial support from over 200 signatory brand and retailers from over 20 countries. Furthermore, the Accord requires brands and retailers to sever business relationships with any factory that refuses to renovate and operate safely. To date, more than 190 apparel brands and retailers from over 20 countries are now signatories, along with two global union federations, eight Bangladeshi garment workers unions and union bodies, and four international labor rights organizations participating as witness signatories. The Accord, whose governing body is chaired by the International Labour Organization, covers an estimated 1,660 factories and more than two million workers. To date, there has not been a worker fatality in any Accord factory post inspection. As the number of registered unions in Bangladesh continues to increase, violence against workers also rises. As previously reported, numerous physical assaults against union leaders in retaliation for their organizing efforts have been reported. According to the International Trade Union Confederation, IndustriAll and UNI Global Union, there have been more than 100 reports of anti-union discrimination in factories with newly formed trade unions. The unions have also criticized the Bangladeshi government for its lack of response to protect workers and punish perpetrators. According to the Solidarity Center, the Bangladesh Ministry of Labor and Employment only investigated 11 of 32 cases of anti-union discrimination that were filed with this office. Furthermore, the Bangladeshi government reportedly has recently been refusing to recognize unions in factories that have met the membership threshold; the WRC is working with various labor rights and advocacy groups to push the government to cease denying legitimate union registrations. In January 2016, the Bangladesh Garment Manufacture and Exporters Association (BGMEA) announced it would be collaborating with the Chittagong City Corporation (CCC) to build an apparel zone at Kalurghat in Chittagonong. The project will include 11 expansive seven-story factories with 20,000 square feet on each floor. This expansion is part of Bangladesh s efforts to double exports by Effective December 1, 2013, the government raised the minimum wage by 77%, from $0.18 per hour or $37.50 per month to $0.31 per hour or $66.25 per month. are significantly lower than the living wage for a Bangladeshi garment worker, which the Center for Policy Dialogue reports as $84 per month. Page 3 of 28

4 The likelihood of serious violations at City supplier factories in Bangladesh is very high. Even though a relatively small percentage of City factories are located in Bangladesh, this country will be among the WRC s top priorities for worker outreach and ongoing monitoring. U.S. Department of State Country Reports on Human Rights Practices: Bangladesh (2014). The Accord on Fire and Building Safety in Bangladesh. Unions Criticise Bangladesh Government of EU Compact, Just Style, January 27, Bangladesh Signs MoU for Chittagong Apparel Zone, Just Style, January 13, CAMBODIA The City disclosed two factories in Cambodia, both of which are located in the capital of Phnom Penh. However, on February 2, 2016, the City informed the WRC that it had removed from the supplier list the Galls subcontractor, Hi-Tech Magnum. The Magnum Supplier, I-Cheng, was the subject of a full WRC investigation during the previous contract pursuant to the WRC s contractual obligations as the City s independent monitor of City apparel vendors compliance with the Ordinance. The second factory was disclosed by 5.11 Tactical. Cambodia represents almost 4% of all apparel exports to the U.S. Cambodian workers in the garment industry continue to face serious labor rights violations. Labor code of conduct and Cambodian law violations are particularly prevalent in the areas of minimum wage and benefits, working hours and overtime, harassment and abuse, and freedom of association. In , large scales of workers protested through the streets, demanding a higher wage, which was well below the living wage. These protests led to violence, at the behest of government officials, and to the arrest and detainment of workers and union leaders. Since the recent wage protests, the Cambodian government has continued to repress labor and human rights advocacy at the behest of factory owners through baseless and retaliatory criminal prosecution of leading garment work union leaders, who have been place under judicial supervision banned until their trials, which remain unscheduled, from attending public gatherings or even entering factory districts. The organization Human Rights Watch has called the criminal charges trumped-up and politically motivated. Page 4 of 28

5 Another prevalent problem in Cambodia is the illegal use of short-term contracts (known in Cambodia as fixed duration contracts or FDCs ). Factories often employ their regular, fulltime workforce almost exclusively on FDCs, impairing the rights of workers to freedom of association and legally mandated benefits, including maternity benefits for female workers. Furthermore, workers continue to suffer from poor health and safety conditions. Cambodian garment workers are often forced to work in overcrowded, poorly ventilated factories with low safety standards and high exposure to chemicals. As a result, over the past several years, thousands of workers have reported fainting in garment factories across the country, with more than 100 workers collapsing on one day alone at factories producing for U.S. apparel brands. Garment workers in Cambodia earn very low wages, even in comparison to the cost of living in the country. The current minimum is $128 per month. There is a very high probability of labor rights abuses occurring at factories in Cambodia. Although there are only three City supplier factories in the country, Cambodia will continue to be a high priority for the WRC s outreach and monitoring efforts, because the active civil society organizations in the country create greater capacity for long-term, sustainable remediation. U.S. Department of State Country Reports on Human Rights Practices: Cambodia (2013). Crackdown in Cambodia: Workers Seeking Higher Meet Violent Repression, WRC, March %20Crackdown%20in%20Cambodia% pdf CANADA There is one factory disclosed in Canada, Nordica Plastics, which has been disclosed as a supplier to the City by Fox 40, a Galls subcontractor, and by Galls itself. Nordica Plastics is located in the province of Ontario. Canada continues to generally meet national law and international labor standards. Canadian workers have the legal right to organize a union, engage in collective bargaining and to strike; the Canadian government generally respects that right and enforces violations of that right. Page 5 of 28

6 Health and safety standards are effectively regulated by the Canadian Centre for Occupational Health and Safety. Joint health and safety committees, designed for employers and workers to recognize and address workplace hazards, are common, in addition to education, training, and prevention programs. There are few reports of workplace violence, both verbal and physical, and wage theft in Canada. Minimum wage rates in Canada range from $10.00 to $11.00 per hour. Although these wage rates are below what is needed for a worker to support themselves and a family, wages in Canada are much higher than most other countries producing items for the City. Canada is a low priority for the WRC due to its high compliance with national and international labor standards and its low occurrence of serious worker rights violations. U.S. Department of State Country Reports on Human Rights Practices: Canada (2014). CENTRAL AMERICA AND THE CARIBBEAN (COLOMBIA, COSTA RICA, DOMINICAN REPUBLIC, EL SALVADOR, GUATEMALA, HONDURAS, and NICARAGUA) There are a total of 27 factories located in this region that are supplying products to the City: 15 in Honduras, three in the Dominican Republic, three in El Salvador, three in Nicaragua, one in Colombia, one in Costa Rica, and one in Guatemala. For the purposes of this analysis, the WRC is considering these countries as a region, because the working conditions and labor rights violations are similar throughout the region. Latin America and the Caribbean account for approximately 11% of all apparel imports into the U.S. A similar pattern of labor rights violations occurs in countries throughout the Central America and Caribbean region. While existing labor standards are generally strong in the region, the governments regularly fail to effectively enforce their own laws. Workers are often subjected to violations of their rights to freedom of association and collective bargaining, including dismissal, suspension, blacklisting, and violence. Union leaders and members and workers attempting to form a union, are often the targets of verbal and physical assault by violent street gangs, working at the behest of factory owners. In addition, there is a widespread prevalence within the Central America and Caribbean region of corrupt unions and violent employer-sponsored organizations Page 6 of 28

7 to repress workers exercise of associational rights. Often times, employers require membership in its favored labor organization as a condition of employment, or of workers eligibility for certain employer-provided benefits. Central America is the most dangerous place in the world for trade unionists. Colombia and Guatemala reportedly have some of the highest levels of antiunion related crimes worldwide. In Guatemala alone, according to the International Trade Union Conference, 53 trade unionists were killed between 2007 and Other serious violations in Central America and the Caribbean include wage theft, forced and unpaid overtime; denial of statutory benefits, including maternity leave, medical leave, and vacation; non-compliance with the minimum wage; denial of severance; gender discrimination; and verbal and sexual harassment. Employers frequently owe workers substantial amounts in back wages and unpaid benefits. Workers in the Central America and Caribbean region face numerous problems in the area of occupational health and safety including exposure to harsh chemicals due to improper labeling and lack of protective equipment. Respiratory conditions and lower back complication related to long hours sitting or standing without adequate rest periods and improper handling and lifting of heavy items are common problems reported by workers. Employers often deny workers representation on factory health and safety committees. This is further complicated by the limited number of health and safety inspectors, whom are often refused access to factories preventing them from carrying out their work. Furthermore, workers are often denied necessary medical care and compensation for employment-related injuries and illnesses. Minimum wages within the region fall far below living wages. In comparison to wages in apparel-producing countries in Asia, minimum wages in Central America and the Caribbean are higher, but workers in Latin America also have a higher cost of living. The following is a list of minimum wage in each country: in Colombia, the minimum wage is $1.66 per hour; in Costa Rica, the minimum wage ranges from $ $4.45 an hour depending on the industry; in the Dominican Republic, the minimum wage is $0.95 per hour in the free trade zones, where most apparel factories are located; in El Salvador, the minimum wage is $1.15 an hour for apparel assembly workers; in Guatemala, the minimum wage is $1.22 per hour for workers in the exportsector; in Honduras, the minimum wage ranges from $ $1.50 an hour for workers in retail trade depending on the company size; and in Nicaragua, the average minimum wage is $0.82 per hour for workers in the manufacturing sector. The Central America and Caribbean region will be a high priority for the WRC s outreach and monitoring efforts, both because of the high risk of violations occurring here and the high number of City supplier factories in this region. Page 7 of 28

8 U.S. Department of State Country Reports on Human Rights Practices: Colombia (2014). U.S. Department of State Country Reports on Human Rights Practices: Costa Rica (2014). U.S. Department of State Country Reports on Human Rights Practices: Dominican Republic (2014). U.S. Department of State Country Reports on Human Rights Practices: El Salvador (2014). U.S. Department of State Country Reports on Human Rights Practices: Guatemala (2014). U.S. Department of State Country Reports on Human Rights Practices: Honduras (2014). U.S. Department of State Country Reports on Human Rights Practices: Nicaragua (2014). CHINA Initially, there were 30 supplier factories located in China disclosed by the City. Of the Galls subcontractors, Magnum was sourcing from seven of these factories. However, on February 2, 2016, the City informed the WRC that it had removed Hi-Tech Magnum from its approved supplier list for the Galls contract. On February 15, Bates provided disclosure that included two factories, one of which was not already on the list of suppliers for the City of Los Angeles. Of the remaining disclosed factories, Helmet House is sourcing from five factories, Thorogood is sourcing from three factories, 5.11 Tactical and Neese are each sourcing from two factories, and Galls, Hatch, LaCrosse, Lion Apparel, M.L. Kishigo, Otto Caps, Patch Supply, Sanmar, and Tact Squad are sourcing from one factory each. BUI (Spartek) and BUI (Sun Action Textiles), non- Galls contractors, each reported sourcing from one factory. The provinces with the largest number of City supplier factories are Fujian, notable for its manufacturing of electronics along the eastern coast of China, and Guangdong, a major manufacturing hub located in the southern part of the country. Nearly 42% of all U.S. apparel imports come from China and the country is the single largest source of clothing for the U.S. market. Page 8 of 28

9 Under Chinese laws, and contradictive to international labor standards, workers are not allowed to form or join trade union. The PRC Trade Union Law denies workers the right to freedom of association requiring that all union activity be approved by and organized under the All-China Federation of Trade Unions (ACFTU), which is affiliated with the Chinese Communist Party and works at its behest to facilitate and support government policies within enterprises and to ensure the continued control of the workforce, often times by physically restraining striking workers. Local labor NGOs and other civil society actors play a major role in supporting and defending workers rights in China. According to the Human Rights Watch, China has more than 500,000 registered NGOs, though many are reportedly run by the government. NGOs and independent labor organizers provide workers with legal and educational services and often direct support to workers during collective labor disputes with employers. Local sources report that the Chinese government does not look favorably on the work of NGOs and closely monitors the activities of local labor organizations. NGOs are often targets of government intimidation and repression. Excessive overtime continues to be one of the most prominent issues in garment factories in China. Workers report average schedules of hours per week, which is significantly higher than the 40-hour legal workweek. Overtime work is often forced and either under- or uncompensated. Despite the steady increase of wages over the past decade, wages remain low in comparison to rising prices. Most garment works are paid piece rates, however, workers are often unable to meet the high quotas, and, therefore, unable to meet the legal minimum. This excessive overtime has damaging mental and physical effects on workers, including exhaustion and repetitive stress injuries, which occur at a high rate in the export garment sector. Occupational health and safety standards are also under-enforced in China. There is a large number of reported work-related illnesses and injuries, particularly in labor-intensive sectors, such as in factories producing leathers goods and footwear, where workers are exposed to toxic chemicals, often without protective clothing and equipment; and to improper ventilation; and to hazardous noise exposure levels from heavy machinery, which can lead to hearing loss; and to excessive heat generated by the process of forming the soles of shoes. In factories using hazardous materials in their production process, workers are generally not properly trained on the handling of the hazardous materials and on the nature of substances or their impact on workers health. As a result, workers often find it very difficult, if not impossible, to prove that an illness is directly attributable to their occupation. Furthermore, workers are often required to sign training forms, indicating that they have received safety trainings, even if workers have not received the training. Occupational safety committees are usually nonexistent or inactive at Chinese factories. Therefore, workers who suffer work-related injuries and illnesses find it difficult to receive the compensation they are legally owed by their employers and/or the government; workers often lack the means to secure payment for these injuries. Page 9 of 28

10 There is no national minimum wage in China. Minimum wage is set by province, with municipal governments determining rates according to local conditions and adhering to a mandatory nationwide increase every two years. As of September 2015, 27 regions had raised their minimum wages. Monthly minimum wages varied greatly, with Beijing being the highest at $2.90 per hour and towns in remote Guangxi Province the lowest at $1.20 per hour. There is a significant risk of violations occurring at City supplier facilities in China. However, China provides an extremely difficult context in which to conduct independent labor rights monitoring and enforcement given the government ban on independent trade unions and the restrictions placed on NGOs. As discussed in the past, the WRC s methodology for enforcing the City s Ordinance relies heavily on conducting offsite worker interviews arranged with the assistance of local civil society organizations that workers know and trust. These organizations play a key role in educating workers about their rights under Chinese law and the City s Ordinance and in assisting the WRC with arranging interviews with workers at City supplier factories. Unfortunately, workers ability to file complaints and engage in associational activities as a way of improving factory conditions is severely restricted in China, which adds to the difficulty in conducting effective enforcement in this country. Because of the government restrictions, China is the most challenging country in which the WRC conducts its work to effectively monitor labor rights. Although it often takes significantly longer to achieve results here than in other countries that export products to the U.S., given the high number of City supplier factories in this country and the very high risk of serious violations, China will be a key focus of the WRC s outreach and ongoing monitoring work. U.S. Department of State Country Reports on Human Rights Practices: China (2014). EGYPT There is one factory is Egypt that has been disclosed as a City supplier. The facility, Ruby Red Garment SAE, was reported by Edwards Garment, a Galls subcontractor. Garment production for the U.S. has significantly increased in Egypt over the last several years as a result of its low labor costs and duty free exports. More than half of Egypt s ready-made garments are exported to the United States. Egypt s garment sector makes up about one third of the working population. Page 10 of 28

11 Workers in Egypt have the right to freedom of association, collective bargaining, and to strike, with prior approval from the Confederation of Trade Unions. In 2011, a decree was issued by the Minister of Manpower and Migration granting workers the right to complete freedom of association. Prior to this, all unions were forced to affiliate with the government-controlled Egyptian Trade Union Federation. Although Egyptian law forbids the use of child labor or bonded labor, the government often fails to enforce these laws. The use of forced labor is particularly common in the agricultural and domestic sectors. In recent years, Egypt has taken moderate steps to eliminate the use of child labor, including the implementation of programs designed to improve school attendance and the establishment of systematic data collection by the Egyptian government on human trafficking. The minimum wage in Egypt is $168 per month. Overall, Egypt will not be a major focus of monitoring efforts, due to the very small amount of production for the City of Los Angeles in the country and the relatively high level of labor rights compliance. U.S. Department of State Country Reports on Human Rights Practices: Egypt (2014). GERMANY There is one factory in Germany that has been disclosed as a supplier to the City. The facility, Haix Schube Produktions and Vertiebs, was reported by Allstar Fire Equipment, a non-galls contractor, and is located in the city of Mainburg in central Germany. Working conditions in Germany are relatively good and labor standards are adequately enforced. Workers, with the exception of public servants and those engaged in essential services, have the legal right to organize, engage in collective bargaining, and strike. It is illegal for employers to discriminate against workers for their union activities; reported violations of freedom of association are generally low. Federal law stipulates a maximum 48-hour workweek, although some collective bargaining agreements include lower maximums. In 2013, the average employee workweek was 41.7 hours. Page 11 of 28

12 Employees typically receive lunch breaks. Additional benefits including overtime and weekend pay are effectively governed by collective bargaining agreements. Germany has a broad set of laws regarding health and safety standards, which are enforced by worker insurance carriers. Occupational health and safety conditions are also regulated by the Ministry of Labor and Social Affairs. Under German law, workers have the right to decline to carry out unsafe or unhealthy tasks without fear of reprisal. Germany introduced its first statutory countrywide minimum of $10.60 per hour, effective January 1, Given the low risk of serious labor abuses occurring at the City supplier factory in Germany and its relatively high level of compliance with labor standards in the country, Germany will be a low priority for the WRC s monitoring and enforcement work. U.S. Department of State Country Reports on Human Rights Practices: Germany (2014). HAITI Although Haiti shares an island with the Dominican Republic and is geographically considered part of the Caribbean, the WRC has chosen to assess this country separately, since conditions here vary significantly from those in the Latin America and Caribbean region. The City s initial disclosure included two factories in Haiti. On February 2, 2016, the City informed the WRC that it was removing the Galls subcontractor, Propper, from its list of authorized vendors. The Propper supplier factory, BKI, S.A., was the subject of a 2014 assessment conducted by the WRC in its role as the independent monitor for the City, which found violations with the Ordinance s requirements in the areas of wages and hours, abuse and harassment, and occupational health and safety. Currently, only one factory remains in Haiti, which is disclosed by Hot Shots, a non-galls subcontractor. This factory, Global Manufacturing Contractors, is located in the capital city of Port-Au-Prince. Haiti remains the poorest country in the Western Hemisphere and nearly 60% of the population lives below the poverty line. Wage theft continues to be one of the most prominent issues in garment factories in Haiti. According to several NGO reports, including a 2013 report issued by the WRC, workers in Haiti s garment sector are being underpaid by approximately one-third as the result of willful Page 12 of 28

13 misinterpretation of the minimum wage law by employers. The impact of this wage theft on workers lives in Haiti has been quite severe. Factory owners had been setting piece rates so high that workers were unable to earn the minimum wage in an eight-hour workday. In May 2015, an increase in the Haitian minimum wage was announced. The new daily production minimum wage was increased from 300 to 320 Haitian Gourdes (HTG) for production workers and from 225 to 240 HTG for non-production workers. Labor rights organizations, including the WRC, and Haitian NGOs are facilitating trainings for workers to monitor employer compliance with the minimum wage. Workers continue to press for a living wage of 500 gourdes per day. Reports show that workers perform significant overtime hours worked off-the-clock without being recorded or paid. This includes time worked during lunch breaks and before and after regular working hours, resulting in workers being cheated out of an average of seven weeks pay per year. Even when overtime hours are registered and recorded, they are paid at the lower first tier of the minimum wage (the two-tier minimum wage system is detailed in the section of this report) rather than being paid at the premium rate of 150%, as the law instructs. Workers reported that their average workweek that was more than 58 hours and that the wages they earned for this period was less than the legal minimum wage for a 48-hour week. Although Haitian labor laws provides workers the right to freedom of association and collective bargaining, it is common practice in the Haitian export zones for employers to terminate workers for attempting to form or join a union, thus creating a climate of fear among workers to exercise their associational rights. Dozens of union leaders and activists have been terminated since 2013 for union activities. The issue is further exacerbated by weak penalties for violations of the labor law by Haitian labor courts and the government s failure to enforce the courts decisions. Other violations include forced overtime, discrimination, and sexual harassment. Haiti has a two-tier minimum wage. The current minimum daily wage for production and piece rate workers is $7.61 per day. There is also a lower minimum wage for trainees, job transferees and non-piece rate workers of $5.71 per day. As detailed in the section of this report, evidence suggests widespread noncompliance with the minimum wage rates. There is a significant risk of labor rights abuses at City supplier factories in Haiti, especially regarding the payment of the legal minimum wage. Haiti remains a priority for ongoing monitoring and outreach. U.S. Department of State Country Reports on Human Rights Practices: Haiti (2014). Page 13 of 28

14 Better Work Haiti: 6th Biannual Report Under the HOPE II Legislation. Stealing from the Poor: Wage Theft in the Haitian Apparel Industry, WRC, October %2015%2013.pdf Minimum Wage in Haiti, Fair Labor Association, August INDONESIA There are two City supplier facility disclosed in Indonesia. The first factory is disclosed by Helmet House, a Galls subcontractor and is located in the province of Jawa Barat, also known as West Java. The second factory is disclosed by another Galls subcontractor, Hatch, and is located in the Surabaya region, the second largest city in the country. Indonesia is the fourth largest source of clothing to the U.S. market, accounting for approximately 4% of apparel imports. Workers in Indonesia have the right to join independent unions, bargain collectively, and, except for public sector workers, engage in strikes, provided that employers are informed in advance of the intention to strike. Public sector workers are able to organize, but are more closely regulated. Under Indonesian law, at least 10 workers are required to form a union. Unions must register with the Ministry of Manpower and Transmigration. To procure a collective bargaining agreement, the union must represent a majority of workers in the factory. Even after the establishment of a union, many employers refuse to negotiate in good faith with the union. As a result, many unionized factories do not have a signed collective bargaining agreement with the employer. Existing agreements are usually weak and frequently violated by employers. As mentioned, the law allows workers the right to strike, however, there are a number of obstacles that make it difficult for workers to exercise this right. Before workers may legally strike, there must first be written records documenting the deadlock or breakdown of negotiations on an outstanding matter followed by what is often a lengthy mediation. In addition, workers must provide written notice to the employer and the government, issued seven days in advance, in order for a strike to be deemed legal. The government is able to exercise substantial discretion in deciding to declare a strike illegal. Furthermore, Indonesia s labor law fails to protect workers in practice because the law does not distinguish strike actions to enforce labor law or contract rights from strikes solely involving the economic interests of workers. In addition, employers often retaliate against strike leaders through court arbitration or termination of employment. Page 14 of 28

15 Another serious violation that persists in Indonesia is the abuse of short-term contracts. Many employers in the Indonesian garment sector employ workers on consecutive short-term contracts or quickly replace workers on short-term contracts to avoid providing benefits and severance payments to workers. In 2012, the International Textile, Garment and Leather Workers Federation (ITGLWF) released a report, An Overview of Working Conditions in Sportswear Factories in Indonesia, Sri Lanka & the Philippines, which found that up to 85% of employees in 83 sportswear factories in Indonesia were employed on short-term contracts or on a temporary basis. Under the Indonesian Labor Code, workers on short-term contracts are not treated as permanent workers and, as such, they are not protected from discrimination or entitled to benefits such as severance payments. Furthermore, short term contracts discourage freedom of association since, often times, workers on short term contracts fear that their contracts will not be renewed if they choose join a union. The minimum wage in Indonesia is set by the provincial governments and varies by sector. The minimum wage ranges from $79.60 per month in the province of Central Java to $210 per month in Jakarta. Although there are only two City supplier factory located in Indonesia, the risk of labor violations in this country is high. Indonesia will be a priority for the WRC s enforcement work. U.S. Department of State Country Reports on Human Rights Practices: Indonesia (2013). JAPAN There are two factories in Japan reported as suppliers to the City. Both of these facilities, Shoei Japan Ibarak and Shoei Japan Iwate, were disclosed by Helmet House, a Galls subcontractor. Labor rights compliance in Japan is high when compared with other countries where products for the City are manufactured. Workers in Japan s private sector have the legal right to form independent unions, bargain collectively, and engage in strikes without government authorization or undue restrictions. Some, though not all, public sector workers have the right to strike and engage in collective bargaining and the law prohibits employers from discriminating against workers for engaging in union activities. The Japanese government has been actively engaged in enforcing the country s labor Page 15 of 28

16 laws, although some employers have used tactics such as employing workers on short-term contracts or changing their business structure to undermine workers associational rights. Although Japanese law forbids the use of forced labor, there are reports of employers violating this regulation. Workers who migrated to Japan without obtaining the proper immigration status or who come as part of the country s guest worker program have been particularly vulnerable to abuses, including restrictions on workers movement, withholding of workers travel documents, and nonpayment or underpayment of wages. There have also been reports that guest workers have experienced workplace injuries due to the use of unsafe equipment and lack of training, lack of proper overtime compensation, and poor living conditions. The minimum wage ranges from $6.40 to $8.40 per hour, depending on location. The risk of serious violations of the Ordinance occurring at City suppliers in Japan is low and this country will not be a high priority for the WRC to carry out monitoring and outreach efforts. U.S. Department of State Country Reports on Human Rights Practices: Japan (2014). KOREA There are three factories that have been disclosed in Korea: the first by Elbeco and the second by Helmet House, both of which are Galls subcontractors, and the third by Triangle Sports, a non- Galls subcontractor. The first of the factories, Pang Rim, is located in Seoul, the capital of Korea, the second, HJC Company Ltd., is located in Yongin in the Seoul Capital Area, and the third, Hwang Bo Co. Ltd., is located in Busan, the second largest city in the country. Korea has made major improvements in recent decades to reform labor standards, including the recognition of multiple unions within the workplace. However, only a single negotiation channel with management may exist unless the employer agrees to more than one negotiation channel, which threatens the rights of minority unions. Legal migrant workers employed in the Employee Permit System can form or join a union; however, the law prohibited temporary or irregular workers from joining unions. Subcontracting is often used as a way for employers to avoid the formation of a union within the factory. There have also been reported cases of the government failing to recognize newly-formed unions. Page 16 of 28

17 Under Korean law, unions are permitted to engage in a strike but must first request mediation via the Labor Relations Commission. The Labor Relations Commission is an independent administrative agency that has the authority and ability to resolve labor disputes. Additionally, strikes must take place with support from at least 50 percent of the workforce; must specifically pertain to labor conditions, wages, benefits, or working hours; and must take place peacefully off-premises. If these conditions are not met, the strike is considered illegal. The law prohibits employers for taking action against workers who strike. Since inception of the Korean Occupational Safety and Health Agency in the 1980s, there have been significant improvements in the prevention of occupational hazards, accidents and diseases. Sanctions to employers for violating health and safety standards have been put in place; penalties for violations include up to seven years in prison and fines up to $95,240. The government now conducts labor inspections both proactively, according to regulations, and reactively, within a month after an accident at the worksite has occurred. Currently, there are 350 national full-time industrial accident prevention inspectors and more than 1,000 working conditions inspectors in nearly 50 local offices around the country. Labor law in Korea generally provides foreign and migrant workers the same legal protections as Korean nationals; however migrant workers in Korea face particularly difficult conditions, including physical abuse and labor exploitation in the workplace. There have also been reports of abuse of women s rights and complaints related to unpaid wages. The current minimum wage in Korea is $4.95 per hour, relatively high when compared with other apparel-producing countries supplying products to the City. The risk of significant violations of the Ordinance occurring at City supplier factories in Korea is low. For this reason, and because there are only three factories in this country producing goods for the City, Korea will be a low priority for the WRC s enforcement efforts. U.S. Department of State Country Reports on Human Rights Practices: Republic of Korea (2014). MEXICO There are 16 City supplier factories in Mexico. Ameripride, a non-galls contractor, and Dickies, Edwards Garment, Elbeco and Red Kap, Galls subcontractors, have each disclosed two factories in the country. A+ Career Apparel, Blauer, Hatch, Philadelphia Rapid Transit and Workrite Page 17 of 28

18 Uniform, Galls subcontractors, and Bob Barker, a non-galls contractor, have each reported one factory in Mexico. In the northern states of Chihuahua, Coahuila, Baja California, there are nine factories; in the central states of Aguascalientes, Queretaro and Hidalgo, there are three facilities; and in the southern states of Puebla, Michoacán and Yucatan, there are four suppliers. Mexico represents 3% of all apparel exports to the U.S. Mexico is the top Latin American supplier of apparel products to the US and the 5 th worldwide exporter after China, Vietnam, Bangladesh, and Indonesia. Due to China s entrance in the World Trade Organization in 2001, Mexico has seen a steady decline in its number of apparel workers by more than 50%. However, during the past year, there has been little change in the number of exports to the U.S. The Mexican government ineffectively enforces labor rights laws. Serious violations persist, including below poverty wages, forced and uncompensated overtime, occupational injuries resulting from excessive production rates and very high quotas, and failure to provide legally mandated benefits due to the pressures of a more competitive, globalized economy. In November 2015, garment workers protested the absence of a promised $.035 raise. There are more than one million Mexicans working in 3,000 export manufacturing factories in Mexico. Discrimination against women workers is common in Mexico. Female workers are routinely subjected to mandatory urine testing and may be forced to resign in the case of pregnancy so that employers can avoid paying legally mandated maternity benefits. Furthermore, employers often inquire about pregnancy status as a pre-existing medical condition to screen out pregnant women from applicant pools. Garment workers in Mexico face many barriers to freedom of association and collective bargaining, including the signing of employer protection contracts, a collective bargaining agreement signed by employers and a company-controlled union that serves to prevent authentic unionization. Protection contracts are negotiated without workers knowledge and/or consent and are often in place prior to the hiring of any workers at a factory. The contracts contain only the minimum conditions with respect to wages and benefits required by Mexican labor laws, as opposed increased benefits won through collective negotiation. Mexican labor rights experts estimate that the vast majority of collective bargaining agreements in the country are protection contracts. In addition, according to several NGOs and unions, many workers continue to face intimidation from other workers, union leaders, hired thugs, or employers favoring a particular union. Practices such as providing very limited notice prior to a union election and allowing management or nonemployees to vote are common. Furthermore, employers sometimes terminate employee union activists in retaliation for their union activities. Page 18 of 28

19 Occupational health and safety is a major concern for workers in Mexico. Workers are often exposed to physical risks such as excessive noise, heat levels and vibrations from machinery, working in ergonomically poor positions, and improper ventilation. Industrial accidents and toxic exposures are common in Mexican facilities. Furthermore, workers are not given sufficient training or provided with adequate safety equipment. The law requires employers to observe occupational safety and health regulations, issued jointly by the Secretariat of Labor and Social Security and the Mexican Institute for Social Security. Legally mandated joint management and labor committees set standards and are responsible for monitoring compliance and supporting government-led investigations and proposing preventive measures within the workplace among other tasks. Individual employees or unions may complain directly to inspectors or safety and health officials. By law, workers may remove themselves from hazardous situations without jeopardizing their employment; however, workers report being unable to do so without risk of termination. Furthermore, workers in export processing plants located on the U.S.-Mexico border experience poor water quality and high air-pollutant levels, including high levels of carbon monoxide. Loosely enforced Mexican environmental laws have led to factories blowing pollutants into the air and dumping chemicals into nearby streams. As studies have shown, this has led to an increase in health problems. Effective January 1, 2015, Mexico s National Commission on Minimum Wage set the minimum daily wage to $5.00 in Zone A, which comprises all of Mexico s major cities and entry ports, and $4.75 in Zone B, which covers all other municipalities. Mexico will be a mid-level priority for the WRC s monitoring efforts. Although there is a risk of labor rights violations occurring at City suppliers in the country, the risk and severity of violations is likely higher in other countries in Latin America. U.S. Department of State Country Reports on Human Rights Practices: Mexico (2014). THE NETHERLANDS There is one factory is the Netherlands that has been disclosed as a City supplier. The facility, Pinlock Systems Group B.V., was reported by Helmet House, a Galls subcontractor. Page 19 of 28