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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 reviewed and analyzed the supply chains of City contractors and subcontractors that produce apparel, footwear and accessories for the City. The WRC s analysis was conducted based on factory disclosure data submitted to the WRC by subcontractors on the Galls/Long Beach Uniform contract and non-galls contractors. As of the writing of this report, there are two Galls subcontractors and two non-galls contractors that have not yet provided factory disclosure information. The WRC will update this analysis as needed when factory data is supplied by the remaining four companies. A total of 162 facilities in 22 countries were disclosed as producers of apparel, footwear and accessories for the City. Of these 162 factories, 62 are located in the United States, 29 in China, 21 in Central America and the Caribbean (including Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, and Nicaragua), 14 each in Mexico and Southeast Asia (including Cambodia, Indonesia, and Vietnam), ten in South Asia (including Bangladesh and Pakistan), nine in East Asia (including Japan, Korea, and Taiwan), two in Europe (including Germany and the Netherlands), and one in Canada. Appendix 1 of this report includes a table with the number of facilities in each country and the percentage of factories per country. This report includes details about labor rights compliance in the following countries and regions: Bangladesh, Cambodia, Canada, Central America and the Caribbean, China, Germany, Haiti, Indonesia, Japan, Korea, Mexico, the Netherlands, Pakistan, Taiwan, the United States, and Vietnam. For each country or region, the report provides the number and general distribution of factories, data on conditions for workers, a review of monitoring priorities, minimum wage levels, and other sources of 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 5 Thomas Circle NW Fifth Floor Washington, DC (202) Fax: (202) wrc@workersrights.org

2 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 six factories in Bangladesh that have been reported as suppliers of product to the City. Two of these facilities are disclosed by 5.11 Tactical, a Galls subcontractor, including one that is also disclosed by Bates, another Galls subcontractor. One factory each is disclosed by Edwards Garment and Helmet House, both Galls subcontractors, as well as by Bob Barker, a non-galls contractor. Three of the facilities are located in Chittagong, a major garment producing hub and the country s largest seaport. Two of the factories are located in Dhaka, the capital city, and one is located in Comilla, a city midway between Dhaka and Chittagong. Bangladesh produces approximately 6% of all US apparel imports and is the third largest source of clothing for the US. Over the past year, there has been a slight shift in orders from Bangladesh to countries like India, Vietnam, Indonesia and Cambodia because of concerns about worker safety, higher wages and political uncertainty. Bangladesh has dropped from the second largest US apparel manufacturer to third, behind China and Vietnam. However, despite the recent decline in US exports, the Bangladesh garment industry remains lucrative. Bangladesh is home to more than 4,500 factories and more than three million apparel workers. After a series of deadly disasters, including the fire at Tazreen Fashions in November 2012, which claimed the lives of 112 workers, and the disastrous April 2013 Rana Plaza building collapse, that killed 1,138 workers and injured more than 2,500, there was a renewed call for improved safety measures and higher salaries for workers, resulting in the formation of the Accord on Fire and Building Safety. 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 between brands and retailers and global and Bangladeshi trade unions designed to make garment factories in Bangladesh safe. The Accord provides for thorough, independent fire safety and structural inspections, with full public reports; requires factories to undergo all necessary renovations and requires brands and retailers to ensure factories can afford to do so; and requires brands and retailers to end 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

3 rights organizations participating as witness signatories. The Accord, whose governing body is chaired by the International Labor Organization, covers an estimated 1,800 factories and more than two million workers, which means that more than half of the entire Bangladeshi garment workforce will come under the protections provided by the agreement. At the end of September 2014, the Accord announced it had completed all initial inspections, identifying more than 80,000 safety issues at 1,106 inspected factories. Over the past year, there has been a significant increase in the number of registered unions in Bangladesh due to a labor law passed July 2013 which allows workers to form labor unions without the approval for factory owners, tremendous pressure on the Bangladesh government in the wake of the Rana Plaza collapse and the decision of the US to impose trade sanctions. There are now more than 200 registered garment trade unions, up from only three in However, factory owners are now beginning to respond to this wave of organizing by using violence to discourage workers and organizers from proceeding. In recent months, there has been a series of violent assaults on union leaders and organizers at more than 15 factories. Such attacks have a chilling effect on freedom of association. 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. Despite this significant increase, Bangladesh remains the lowest wage country in the world for garment workers. Given the well-documented prevalence of serious labor rights violations in Bangladesh s garment sector and given 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 factories producing for the City in Bangladesh are failing to comply with the Ordinance. This country will be a priority for the WRC s monitoring and outreach efforts. U.S. Department of State Country Reports on Human Rights Practices: Bangladesh (2013). 8 The Accord on Fire and Building Safety in Bangladesh. Analysis: Bangladesh lags as Vietnam lead US import growth, Just Style, June 5, 2014.

4 CAMBODIA There are two City suppliers located in Cambodia, one of which is disclosed by 5.11 Tactical and the other by Magnum, both Galls subcontractors. Both factories are located in Phnom Penh, the capital of Cambodia, where most of the country s garment production takes place. I-Cheng, the factory disclosed by Magnum, was the subject of a full investigation by the WRC, which has engaged with both the factory and the buyer in an effort to correct the worker rights abuses uncovered by the WRC. Approximately 4% of the US s apparel imports come from Cambodia and the country is the sixth largest source of clothing for the US. Serious labor rights violations are prevalent in the Cambodian garment industry, including violations of freedom of association, wages and benefits, and excessive overtime hour. In January 2014, workers took to the streets calling for a higher wage of the then-minimum $100/month, which was below both the state-defined poverty level of $120 and the living wage of $160. Four workers died and dozens more were injured after military police opened fire on protestors with assault rifles. Several union leaders were detained for weeks without trial. Garment workers rallied again in September 2014, demanding a minimum wage increase to $177/month, but later settled on $140/month as their lowest acceptable offer. Unions had hoped that the backlash against last year s brutal anti-union crackdowns would bring major reforms; however, in November 2014, the government announced its decision to raise the minimum wage to $128/month for 2015, well short of the unions $140 proposal. Since the shootings in January 2014, repression by the government and factory owners of Cambodian garment workers fundamental human and labor rights of assembly, association and free speech has continued with little respite. Union leaders arrested and accused of criminal activity during the crackdown are now under judicial supervision, banned from meeting with other union leaders or joining public gatherings until they are put on trial. Employers continue to suppression of unions through the misuse of temporary employment contracts. Factories often employ their regular, fulltime workforce almost exclusively on consecutive short-term contracts (known in Cambodia as fixed duration contracts or FDCs ), exacerbating workers rights abuses in the country, including violations of freedom of association and denial of legally mandated benefits, among them, maternity benefits for female workers. Health and safety conditions are also poor. Cambodian garment workers are often forced to work in overcrowded, poorly ventilated factories with low safety standards and high exposure to chemicals, a factor that has been linked to dozens of episodes of mass

5 fainting in apparel plants over the past several years, which have affected several thousand workers. 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. Given the well-documented prevalence of significant labor rights violations in Cambodia s garment industry and given 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 Cambodia are failing to comply with the Ordinance. Although there are only two City suppliers in Cambodia, the WRC will continue to prioritize factories here with respect to monitoring and outreach efforts. U.S. Department of State Country Reports on Human Rights Practices: Cambodia (2013). 5 Crackdown in Cambodia: Workers Seeking Higher Meet Violent Repression, WRC, March %20Crackdown%20in%20Cambodia% pdf CANADA There is one factory in Canada that has been reported as a supplier to the City. Nordica Plastics produces items for the City through Fox 40, a Galls subcontractor. The factory is located in Mississauga, in the province of Ontario. Canada continues to remain in compliance with national laws and international labor standards. Workers have the rights to organize a union, engage in collective bargaining and to strike; punishments for violating these rights is legally enforced by the Canadian government. 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. Reports of workplace violence, both verbal and physical, and wage theft are generally low in Canada.

6 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. There is a low risk of serious labor rights violations at garment factories in Canada and this country will not be a high priority for the WRC. U.S. Department of State Country Reports on Human Rights Practices: Canada (2013). 6 CENTRAL AMERICA AND THE CARIBBEAN (COLOMBIA, COSTA RICA, DOMINICAN REPUBLIC, EL SALVADOR, GUATEMALA, HONDURAS, AND NICARAGUA) There are 19 factories in the Central American and Caribbean region. Nine of these factories are located in Honduras, four in the Dominican Republic, two in El Salvador, and one each in Colombia, Costa Rica, Guatemala and Nicaragua. The Galls subcontractors that have disclosed factories in this region are Atlanco, Dickies, Edwards Garment, Fechheimer, Hatch, Leventhal, Lion Apparel, Propper and Red Kap; the non- Galls contractors that have done so are Ameripride, BUI and Hot Shots. Workplace conditions and labor rights abuses in the garment sector are quite similar among these countries and so the WRC considers them a region for the purposes of this analysis. Approximately 12% of US apparel imports come from Central America and the Caribbean. Labor laws in the Central America and Caribbean region are weak and poorly enforced. Workers in the region have continued to see violations of their rights to freedom of association and collective bargaining, including dismissal, suspension, blacklisting, and violence. Employers often enlist members of violent street gangs to physically intimidate and threaten workers attempting to form independent unions. Furthermore, there is a disturbing pattern within Central America and the Caribbean region of employer collusion with illegitimate, corrupt and even violent private entities to repress workers exercise of associational rights. In many cases, employers created company unions or colluded with corrupt union federations to restrict workers exercise of associational rights. Often times, employers require membership in its favored labor organization as a

7 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, with Colombia and Guatemala having the highest numbers of reported anti-union related crimes worldwide. Other widespread violations in Central America and the Caribbean include forced overtime; non-compliance with minimum wage laws; non-payment of legally mandated benefits, including maternity leave; non-payment of severance; forced pregnancy tests; 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 lack of safety equipment, improper labeling and handling of harsh chemical, and heavy physical workloads. Workers often report respiratory conditions and lower back complication related to long hours standing without adequate rest periods. Weak health and safety standards are further exacerbated by the limited number of health and safety inspectors, whom are often refused access to factories preventing them from carrying out their work. Furthermore, employers often refuse workers medical care and compensation for work-related injuries. 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 wages in each country: in Colombia, the minimum wage is $1.65 per hour; in Costa Rica, the minimum wage ranges from $ $6.09 an hour depending on the industry; in the Dominican Republic, the minimum wage is $0.86 per hour in the free trade zones, where most apparel factories are located; in El Salvador, the minimum wage is $0.85 an hour for apparel assembly workers; in Guatemala, the minimum wage is $1.20 per hour for workers in the export-sector; in Honduras, the minimum wage ranges from $ $1.71 an hour for workers in retail trade depending on the company size; and in Nicaragua, the average minimum wage is $0.68 per hour for workers in the manufacturing sector. Given the well-documented prevalence of serious labor rights violations in this region s apparel sector and given 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 factories producing for the City in Central America and the Caribbean are failing to comply with the Ordinance. As a result, and because such a large number of City suppliers are located here, Central America and the Caribbean will be a high priority for the WRC s enforcement work.

8 U.S. Department of State Country Reports on Human Rights Practices: Colombia (2013). 1 U.S. Department of State Country Reports on Human Rights Practices: Costa Rica (2013). 2 U.S. Department of State Country Reports on Human Rights Practices: Dominican Republic (2013). 9 U.S. Department of State Country Reports on Human Rights Practices: El Salvador (2013). 2 U.S. Department of State Country Reports on Human Rights Practices: Guatemala (2013). 7 U.S. Department of State Country Reports on Human Rights Practices: Honduras (2013). 3 U.S. Department of State Country Reports on Human Rights Practices: Nicaragua (2013). 8 Unholy Alliances: How Employers in El Salvador s Garment Industry Collude with a Corrupt Labor Federation, Company Unions and Violent Gangs to Suppress Workers Rights, WRC and the Center for Global Workers Rights at Penn State University, January %20January% pdf CHINA There are 29 factories in China that manufacture apparel, footwear and accessories for the City. Regarding the Galls subcontractors, Magnum has disclosed seven facilities, Helmet House has disclosed five, Bates, Neese and 5.11 Tactical have disclosed two facilities

9 each, and Everest, Galls, Hatch, LaCrosse, Lion Apparel, M.L. Kishigo, Otto Caps, Patch Supply, Tact Squad and Thorogood have each disclosed one Tactical and Bates share one facility. BUI is the only non-galls contractor sourcing from China and has disclosed two factories there. Approximately one-third of City suppliers are located in the province of Guangdong, a major center of garment production for the country. 42% of all US apparel imports come from China, the single largest source of garments for the US market. Freedom of association and collective bargaining are virtually nonexistent in China. No trade union can be established outside the All-China Federation of Trade Unions (ACFTU), a mass organization used by the Communist Party, designed to facilitate and support government policies within enterprises and to ensure the continued control of workers, often times directly restraining protesting workers. The ACFTU has no genuine impact on working conditions as worker representatives are generally appointed rather than elected by workers themselves. Any union established must be registered under the ACFTU. Workers who seek to organize to defend their rights outside of the ACFTU structure often face repression from the government. Overtime largely exceeded the maximum overtime work allowed: workers usually work 60 hours and up to 80 hours a week, while Chinese labor law provides for a maximum of 40 hours a week and 36 hours overtime per month. Workers also report overtime is often under- or un-compensated. In spite of recent wage increases, wages remain low in view of soaring prices, explaining to a large extend why workers accept to work such long hours. Most garment workers in China are paid on a piece rate system. The system of paying by piece rate for certain tasks is also problematic as the targets do not necessarily correspond to what most workers are able to deliver. Calculation methods for piece rate work are known by management only. Failure to supply workers with copies of their labor contracts has also been reported. Optional health and/or retirement insurance has also been reported in several factories although the social security law makes it compulsory. Workers in China are often subjected to unsafe working conditions. There is a high number of reported occupational diseases and injuries throughout the country, particularly in labor-intensive manufacturing fields, such as the production of leather goods and footwear, where workers are exposed to toxic and hazardous materials, often without proper protective equipment; and to dangerous noise levels from heavy machinery; and to excessive heat generated by the process of forming the soles. In factories using dangerous substances in their production process, workers are generally not informed about the nature of substances or its impact on their health. As a consequence, workers often find it very difficult if not impossible to demonstrate the cause of occupational disease. 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 within factories. Furthermore, workers who suffer work-related injuries and illnesses find it

10 difficult to receive the compensation they are legally owed by their employers and/or the government. China s minimum wage is established by the provinces, with municipal governments determining rates according to local conditions and adhering to a mandatory nation-wide increase every two years. Monthly minimum wages varied greatly with Guangdong Province being the highest at $2.66 per hour and towns in remote Guangxi Province the lowest at $1.21 per hour. Given the well-documented prevalence of serious labor rights violations in China s apparel industry and given 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 factories producing for the City in China are failing to comply with the Ordinance. Unfortunately, the restrictions on civil society organizations in China make it challenging for the WRC to conduct its normal monitoring and outreach efforts here. In order to monitor and enforce the City s Ordinance, the WRC relies on information gathered during offsite worker interviews arranged through local non-governmental groups that workers trust. Such organizations also play a role in teaching workers about their rights under the City s Ordinance. However, the government of China has imposed restrictions on civil society organizations that inhibit the ability of such groups to operate freely and this in turn makes it more difficult for the WRC to carry out its normal monitoring and outreach here. Despite these challenges, the WRC will continue to make factories in China a priority, given the large number of suppliers here and the high risk of abuses. U.S. Department of State Country Reports on Human Rights Practices: China (2013). 6 GERMANY There is one City supplier located in Germany. Haix Schube Produktions and Vertiebs GMBH is disclosed as a supplier to Allstare Fire Equipment, a non-galls contractor. The facility is located in the town of Mainburg in central Germany. Germany effectively enforces its labor standards. Workers, with the exception of public servants and workers engaged in essential services, have the legal right to organize,

11 engage in collective bargaining, and carry out strikes. The law makes it illegal for employers to discriminate against workers who are involved in unionizing activities; violations of this law are generally rare. German legislation prohibits the use of forced or compulsory labor; however, forced labor has been reported in the agricultural and housekeeping sectors and abuse of workers in the construction industry. According to federal statutes, the legal workday is eight hours per day and the legal workweek cannot exceed 48 hours. However, collective bargaining agreements may establish a lower maximum and in 2013, the average maximum workweek was 37.7 hours. Approximately 80% of the workforce is covered either directly or indirectly by an agreement limiting the hours of their workweek. Germany has high standards of occupational health and safety in the workplace, which is administered through the Federal Ministry of Labor and Social Affairs and other government labor inspection authorities at the state and federal level. Locally, professional and trade associations directed jointly by employers and unions are required by law to provide training to supervisors and employees on measure to prevent occupational diseases, accidents, and work-related injuries and the provision of first aid. Germany does not have a federal minimum wage except for the following industries, which account for approximately 8% of the workforce: certain construction jobs, waste management, large-scale laundry and cleaning, nursing care, security guards, special mining services, and temporary employment firms. Otherwise, minimum wages are established by collective bargaining agreements that can be legally-enforced. Minimum wage in the country ranges from $10 per hour to $18.50 per hour. In Germany, the risk of serious violations of the City s Ordinance is low. As a result, this country will not be a high priority for the WRC s enforcement efforts. U.S. Department of State Country Reports on Human Rights Practices: Germany (2013). 3 HAITI There are two City suppliers factories located in Haiti. Global Manufacturing Contractors, also known as GMC, is located in the capital city of Port-au-Prince and is disclosed by Hot Shots, a non-galls contractor. BKI, S.A. is located in Ounaminthe, in

12 the northern part of the country near the border with the Dominican Republic, and is reported by Propper, a Galls subcontractor. BKI, S.A. was the subject of a WRC investigation during the previous contract year and although a number of serious Ordinance violations were identified, Propper has refused to implement the necessary corrective actions. For the purposes of this analysis, the WRC is reporting on Haiti separately from the rest of the Caribbean region, because conditions for garment workers in this country are significantly different from the rest of the region. Employers in the apparel industry have not been paying the minimum wage for piece-rate workers. According to various NGO reports, including a WRC report released in October 2013, all 24 of Haiti s apparel factories are underpaying workers by approximately onethird of the established wage rate. Factory owners were setting piece rates so high that workers were unable to earn the minimum wage in an eight-hour workday. In response, workers are asking for a rise of the minimum wage from 200/300 Gourdes per day to a living wage of 500 Gourdes per day ($1.45 an hour/$11.63 a day). The minimum wage issue has increased tension between workers, factory owners and the government. International and local NGOs are actively involved in the minimum wage debate on workers behalf. Additionally, reports show significant amounts of overtime hours are off-the-clock and are not being recorded and paid, which 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) instead of being paid at the premium rate of 150%, as the law instructs. Workers reported an average workweek that was more than 58 hours long, but reported being paid for these hours less than the legal minimum wage for a 48 hour week. Although Haitian labor laws protect the rights of workers to freedom of association and collective bargaining and prohibit anti-union discrimination by employers, dozens of union leaders and activists have recently been terminated for their union-related activity: at least 36 employees in the apparel industry have been terminated in response to their protest in December 2013 asking for higher wages. 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 court s decisions. Other violations include forced overtime, discrimination, and sexual harassment. Haiti has a two-tier minimum wage. The minimum wage for production and piece rate workers slightly increased in May 2014 to $7.61 per day, and the lower minimum wage

13 for trainees, job transferees and non-piece rate workers is $5.71 per day. As detailed in the section of this report, evidence suggests there is widespread noncompliance with the minimum wage rates. Given the well-documented prevalence of serious labor rights violations, including noncompliance with the minimum wage, in Haiti s garment sector and given 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 factories producing for the City in Haiti are failing to comply with the Ordinance. The WRC has uncovered significant Ordinance violations at the BKI facility, which remain unresolved due to Propper s refusal to cooperate with the WRC. The WRC will prioritize monitoring and outreach efforts at the other City supplier in this country. U.S. Department of State Country Reports on Human Rights Practices: Haiti (2013). 1 Better Work Haiti: 6th Biannual Report Under the HOPE II Legislation. Stealing from the Poor: Wage Theft in the Haitian Apparel Industry, WRC, October t%2010%2015%2013.pdf "Minimum Wage in Haiti, FLA, August INDONESIA There is one City supplier factory reported in Indonesia. This factory, DYI, is disclosed as a supplier to Helmet House, a Galls subcontractor, and is located in West Java, on the western part of the island of Java. Indonesia accounts for 5% of all US apparel imports and is the fourth largest supplier of clothing to the US. Indonesian law grants workers the right to organize, conduct legal strikes and engage in collective bargaining. However, the law imposes some limitations on freedom of

14 association for public sector workers whereas private sector workers enjoy greater protections for these rights. Under the law, any group of at least 10 employees can register a union with the Ministry of Manpower and Transmigration. One or more unions representing over half of all employees have the legal right to negotiate a collective bargaining agreement which covers all employees at the facility. Although the law allows workers the right to strike, the law also limits workers ability to exercise this right freely. Before workers may strike, there must first be written records documenting the breakdown of negotiations on an outstanding matter followed by an often lengthy mediation. In addition, workers must give at least seven working days written notice to the government in order for a strike to be deemed legal. The government is able to exercise substantial discretion in deciding to declare a strike illegal. Government enforcement of laws protecting workers associational rights in Indonesia is very limited. Even where unions have successfully negotiated collective bargaining agreements, employers will still ignore worker entitlements under labor law and/or blatantly repudiate the terms of the agreements. 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. Furthermore, union officials in Indonesia are often subjected to disparate workloads that are designed to prevent them from conducting union activities at lunch or after work. The law mandates a 40 hour work week, with a 30 minute break for every four hours of work and at least one day off per week. Most employers require workers to work a 5.5 or 6 day workweek. The law limits overtime to no more than three hours per day and a maximum of 14 hours per week. However, workers are frequently forced to work in excess of 100 hours overtime per month. Employers often lock factory doors until production targets are reached. Another factor contributing to the poor working condition in Indonesia is the use of shortterm contracts. 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 the factories in 83 sportswear factories in Indonesia are employed on short term contracts or on a temporary basis. A common practice in Indonesian garment factories has been to hire workers from one agency, and then abruptly fire these workers and re-hire workers from another agency in order to avoid providing benefits to workers. Under the Indonesian Labor Code, workers on short-term contracts workers are not treated as permanent workers; as such, they are not protected from discrimination and are not entitled to benefits such as severance payments. The minimum wage in Indonesia is set by the provincial governments and varies by sector. The minimum wage ranges from $90.53 per month in the province of Central Java to $ per month in Jakarta.

15 Given the well-documented prevalence of significant worker rights abuses in Indonesia s apparel sector and given 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 factories producing for the City in Indonesia are failing to comply with the Ordinance. Although there is only one City supplier in this country, the WRC considers it a high priority for monitoring and enforcement efforts. U.S. Department of State Country Reports on Human Rights Practices: Indonesia (2013). 6 JAPAN There are two City suppliers located in Japan. Both of these factories, Shoei Japan Ibaraki and Shoei Japan Iwate, were reported by Helmet House, a Galls subcontractor. Japan supplies less than 1% of US apparel imports. In comparison to other countries where City suppliers are located, workplace conditions in Japan are better overall. The right of workers in the private sector to form independent unions and engage in collective bargaining is protected by law. Private sector workers are also permitted to conduct strikes without prior authorization. Some public sectors workers have the right to strike and engage in collective bargaining and the freedom to organize is protected. Although some employers do attempt to undermine workers associational rights through various tactics, the Japanese government plays an active role in enforcing the law. Under Japanese law, employers are prohibited from using forced labor. Unfortunately, workers who travel to Japan without proper immigration status or work visas are at risk for abuses including restrictions on their movement, confiscation by the employer of their travel documents, and minimum wage violations. Other reported abuses include workplace injuries, failure to pay overtime compensation, and crowded and unsanitary living conditions. In Japan, the minimum wage is between $6.72 and $8.80 an hour and varies by location.

16 There is a low risk of significant labor rights abuses occurring at factories in Japan. This country will not be a high priority for the WRC s enforcement work. U.S. Department of State Country Reports on Human Rights Practices: Japan (2013). KOREA There are two facilities in Korea that have been disclosed as suppliers to the City. One factory is reported by Elbeco and is located in Seoul, the capital of Korea and the other is disclosed by Helmet House and located in Yongin in the Seoul Capital Area. Both Elbeco and Helmet House are Galls subcontractors. Korea accounts for less than 1% of all US apparel imports. Over the last couple of decades, Korea has made significant strides in terms of the recognition of unionizing rights in law and practice, 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 a way for employers to avoid the formation of a union within the factory. There have also been noted cases of the government failing to recognize newly-formed unions. Under Korean law, unions have the right to strike. Before declaring a strike or lockout, unions and employers must first undergo mediation and arbitration procedures, conducted by the Labor Relations Commission, aimed at resolving the dispute. Additionally, strikes must also take place with support from a majority of the workforce; must specifically pertain to labor conditions, wages, benefits, or working hours; and must take place peacefully off-premises; otherwise they are not considered legal. The law prohibits employers for taking action against workers who strike. Since inception of the Korea Occupational Safety and Health Agency in the 1980s, there have been great improvements in the prevention of occupational hazards, accidents and diseases. In 2013, there were 15,449,228 workers in 1,977,057 facilities covered by the Industrial Accident Compensation Insurance Act. Strong punishments for violations of health and safety standards have been put in place; penalties for violations include up to seven years in prison and fines up to $94,100. The government conducted labor inspections both proactively, according to regulations, and reactively, within a month after an accident occurred. Currently, there are over 300 national full-time industrial

17 accident prevention inspectors and over 1,000 working conditions inspectors working in over 40 local offices countrywide. 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 $4.57 per hour, relatively high when compared with other apparel-producing countries supplying products to the City. There is a relatively low risk of serious violations taking place at City suppliers in Korea. Because there are only two factories here sourcing to the City, Korea will be a low priority for the WRC. U.S. Department of State Country Reports on Human Rights Practices: Republic of Korea (2013). 4 Korea Occupational Safety and Health Agency MEXICO There are 14 factories in Mexico disclosed as suppliers to the City. Regarding the Galls subcontractors, Dickies, Edwards Garment, Elbeco and Red Kap have each reported two factories, while A+ Career Apparel, Blauer, Hatch, Philadelphia Rapid Transit and Workrite have each disclosed one. For the non-galls contractors, Ameripride has reported two factories while Bob Barker has disclosed one. Ameripride and Red Kap share two of these plants. Eight of these facilities are located in the northern states of Chihuahua, Coahuila and Baja; three are located in the central states of Aguqascalientes, Queretaro and Hidalgo, and three are in the southern states of Puebla, Michoacán and Yucatan. Mexico accounts for 4% of all US apparel imports.

18 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 over 50%. There were 750,000 workers in 2000 and 320,000 workers in Labor rights laws are poorly enforced by the Mexican government. Mexican garment workers are often faced with harsh working conditions, including low 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. Mexico is the only country in the Central America region where the minimum wage is significantly below the poverty line. According to a 2013 study by the WRC, released by the Center for American Progress, the gap between the prevailing wages and living wage for Mexican garment workers grew from 2001 to 2011; wages declined in real terms by 28.9%. Employers sometimes use the illegal hours bank approach requiring long hours when the workload is heavy and cutting hours when it is light to avoid compensating workers for overtime. Workers in Mexico are often denied the opportunity to exercise their right to freedom of association and collective bargaining. One of the biggest obstacles to freedom of association for workers in Mexico is the prevalence of protection contracts, simulated collective agreements signed by employers and official unions or corrupt lawyers, which prevent creation of truly representative unions. Protection contracts are negotiated without the knowledge and/or consent of workers and are often in place in a factory before workers are hired. 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. In Mexico, there are numerous levels of health and safety commissions. 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.

19 Mexico s National Commission on Minimum approved a 3.9% increase in the minimum wage, effective January 1, The minimum daily wage is $5.18 in Zone A, which comprises all of Mexico s major cities and entry ports, and $4.91 in Zone B, which covers all other municipalities. There is a risk of worker rights abuses occurring at City factories in Mexico. However, the risk of serious violations is lower than other countries in Latin America and Mexico will therefore be a mid-level priority for the WRC. U.S. Department of State Country Reports on Human Rights Practices: Mexico (2013). 7 Global Wage Trends for Apparel Workers, , WRC, July 11, Retailers Descend on Mexico, The Wall Street Journal, May 29, THE NETHERLANDS There is one City supplier located in the Netherlands. The facility, Pinlock Systems Group B.V., is disclosed by Helmet House, a Galls subcontractor. The Netherlands accounts for less than 1% of all US apparel imports. The Netherlands has relatively better working conditions than other countries where City suppliers are located. Public and private sector employees have the legal right to form independent unions and conduct collective bargaining without undue restrictions. The right to strike is recognized by law, but often unduly restricted in law and practice in some public services. By international standards, the frequency of strikes in the Netherlands traditionally is very low. The government actively and effectively enforces laws related to workers associational rights and employer interference in union activities is limited. According to law, the maximum workweek is 60 hours per week (12 hours per day). On average, collective bargaining agreements contain a hour workweek. By international standards, the average workweek in the Netherlands is very short. The law also states that during any four week period, a worker may not work more than an

20 average of 55 hours per week and workers are entitled to a 30 minute break if they work more than 5.5 hours per day. Workers are also legally entitled to four times the number of days worked per week in annual paid vacation. Conditions governing overtime are established in individual employment contracts or collective bargaining agreements. The minimum wage in the Netherlands is $1,995 per month. There is a relatively low risk of significant labor abuses occurring at the City supplier factory in the Netherlands. This country will not be a high priority for the WRC s enforcement efforts. U.S. Department of State Country Reports on Human Rights Practices: Netherlands (2013). 5 PAKISTAN There are four City suppliers located in Pakistan. For the non-galls contractors, two of the factories are disclosed by Ameripride and one is reported by Bob Barker. Regarding the Galls subcontractors, one factory is disclosed by Helmet House. Both of the factories disclosed by Ameripride are located in the city of Karachi, the largest city in Pakistan and the country s main seaport. The other two facilities are located in Lahore, the second largest city in the country and Sialkot, in the northeastern region of Pakistan. The country accounts for approximately 2% of all US apparel imports. Conditions for workers in the Pakistan garment industry are generally very poor. Labor laws are usually enacted by the Ministry of Labor and then provinces can issue regulations in accordance with their specific conditions and needs. Therefore, often the provincial laws fail to provide for freedom of association rights for workers in several different sectors. Under provincial law, the workforce must employ 50 or more workers for unionization. Employers often subdivide their workforces into false subsidiaries, while maintaining them all within one factory, in order to evade compliance with the law. Furthermore, the role of the federal government in labor issues is unclear. It lacked a strong coordination role and provided no minimum standards for acceptable labor practices. The provinces lack both capacity and commitment to adequately enforce labor laws.