Protecting Migrant Workers in the Supply Chain

Protecting Migrant Workers in the Supply Chain Mallory McConnell, Contributing Author Andrew Savini, Contributing Author An Intertek Supplier Management Publication

BACKGROUND: Regardless of the product, most brands and retailers are likely to find migrant labour somewhere in their value chain. The migrant worker faces unique risks to their working conditions often not seen by direct employees. Although seemingly an insurmountable challenge, below outlines first an overview and understanding of the challenges and risks posed to migrant workers and furthermore outlines recommendations and guidance for managing suppliers and any potential risks imposed in the supply chain. THE CHALLENGE: Although there may be numerous definitions, the term Migrant Worker generally refers to a person who is engaged or has been engaged in remunerated activity in a State of which he or she is not a national (UN International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families) 1. The distinguishing feature in this definition is the term not a national, meaning that the worker is working in a country where they are not a citizen. There is also high concern and risks associated with internal migration, which is witnessed on a massive scale in China. Migrant workers may also be referred to as foreign workers or even foreign contract workers (FWC informally). Generally migrant workers can either be directly employed by the facility where they are working even though they may have been recruited by a labour agency, or they may be employed by a third party agency. The direct or indirect employment trend may be different depending upon the country or region where the employee is working. For example, in Singapore, even if workers are recruited by a third party agency, it is common for them to be officially employed by the facility. However, in the Philippines, it is more common to find migrant workers employed by a separate third party agency rather than the factory themselves. In general, workers employed by separate third party agencies are more vulnerable to labour issues than those who are employed directly by the factory. This is attributed to communication channels and benefits afforded to direct employees in whom they can communicate directly with superiors to get any work related issues addressed, as opposed to the migrant worker who has no such venue. There are generally two main drivers for labour migration; labour shortages in receiving countries, and labour surpluses in countries with high unemployment or high underemployment. Countries with labour shortages include United Arab Emirates, Jordan, Bahrain, Singapore, Taiwan and Malaysia. 2 In Southeast Asia, the Philippines has the highest unemployment rate at 7.1%. The benefits of this migration include the ability to retain businesses in-country for the receiving countries, availability of skilled workers for employers, jobs availability and skill development for workers, and foreign remittances earned by sending countries. One unintended outcome of labour migration is the growth of the labour broker industry and the trend towards extracting payment of placement fees from jobseekers rather than employers. There are numerous points during the labour migration process that offer opportunities for workers to be burdened by costs associated with their employment. Some of these costs occur during recruitment & selection, on-site conditions, as well as return or reintegration. Commitment or reservation fees may be charged, which may include the direct costs of migrating (transportation costs, for example). There may also be on-site fees that only migrant workers are responsible for, such as foreign worker levy fees. 1 http://www2.ohchr.org/english/bodies/cmw/cmw.htm 2 http://globalnation.inquirer.net/103286/ph-has-highest-asean-unemployment-rate-ilo-report 2

One of the high risk processes associated with migrant labour is the pre-deployment process. There are a variety of labour migration processes, most of which generally start with recruitment actors or methods. In addition to labour agencies in sending countries as well as receiving countries, there may also be a complex layer of middle men, or sub-agents which are sometimes called uncles. These subagents generally facilitate the gathering of potential workers on behalf of the agencies. Subagents gather potential migrant labourers and present them to the labour agencies in the sending countries, which will process the documentation and present the workers to the labour agencies in the receiving countries. It creates a high degree of complexity, exacerbated by the fact that some scenarios have found to have additional layers of intermediaries and agents. In turn, the recruitment process become more expensive, and the costs are often born by workers. Such costs include recruitment fees, selection process fees, hiring/contracting fees, application fees, and visa fees; all of which are asked to be paid by the worker. To begin the migration process, workers often have to gather a large lump sum of money for the initial placement fee. If they do not have savings or a personal source for this money, they may borrow the money from lenders, often at a very high interest rate. There may be cases where questionable relationships exist between the lenders and the labour agencies, creates a strong network between the lenders, labour agencies in the sending countries, and even the labour agencies in the receiving countries, making it very difficult for workers to break their employment contract should they feel wish to discontinue their employment. Because the lenders are generally in the local community of the workers, they may have relationships or knowledge about the workers personal life, including their family, and this may create a sense of fear of reprisal, making workers afraid to terminate their employment, even if the working conditions are substandard. Aside from the initial costs paid to the local recruiters by the workers while still within the sending countries, many workers must bear many other fees during the pre-deployment phase, some of which they may not have been aware of initially. These fees may include fees paid to the labour agencies in both the sending and receiving countries, accommodation and lodging fees, such as food and housing, and also forced savings and interest fees. Forced savings, which are also known as runaway fee s, are fees which are automatically taken out of a worker s pay and placed into a bank account which the worker does not have access to until the time their employment contract is up. These fees can be as much as 10% of their total wage, and are kept by the employer should an employee choose to leave prior to their contract end date. Another major risk associated with migrant labour which generally occurs during the initial start of employment by a worker is contract issues. There may be a variety of issues surrounding labour contracts for migrant workers, including non-existent or unsigned contracts, contracts which are not presented in the native language of the worker, discrepancies between what is promised at departure and what is provided once an employee arrives, incomplete terms, and debt bondage situations. Due to the rise in awareness and education in many facilities, there has been an observed decrease in the complete lack of labour contracts over the years. However, there is often inconsistency between the contract which was presented to the worker in their home country (in their native language) and the final contract they are bound to in the receiving country. There have been situations where workers may be presented with additional contracts by the facility once they arrive, and often these contracts are in the language of the receiving country, rather than the native language of the migrant worker. The workers may not even be aware that they are signing a new contract, and there will be many discrepancies between the final contract signed at the facility and the original contract presented in their home country. This creates a situation of debt bondage where they may be promised a certain amount of income in their original contract, but in the end they are receiving a lower 3

amount which makes it so difficult to pay back all the parties involved that the worker would have been better off not taking the job in the first place. Many international standards have minimum requirements for a contract, which would be verified during in a typical CSR or social compliance audit for all employees, including migrant labourers, verified by documentation review as well as employee interviews. Contracts should comply with local labour law, and also at minimum include standard working hours and wages, overtime requests and conditions, rest day and holiday allowances, job description, length of employment, any probationary period information, and termination conditions. Any information regarding deductions and a summary of living conditions should also be included in contracts for migrant workers. Freedom of movement is another problem migrant workers face, and although there are many issues associated with this risk, one of the more omnipresent of issues occurring in a number of countries is passport or identification retention. A typical situation begins when a worker arrives in the factory and their passport is retained, which the management touts as a safety measure for the worker. However, keeping a worker s passport is illegal in most countries, with the exception of Saudi Arabia. One of the aspects of passport and ID retention which is often discussed and debated in many social compliance programs is the concept of possession versus control. Possession indicates that the workers physically retain the documents themselves, while control indicates that even though the workers may not physically retain the documents, they have control of them, meaning they can access them at all times. There are different approaches in the way many social compliance programs address passport/id retention. One common approach is for a client program to allow a facility to hold a workers passport, as long as there are certain safeguards in place which allow a worker to control their passports (i.e. written permission from workers to management to keep the passport, access to the documents within 24 hours, etc.). In some cases, workers elect a representative and this representative has access to or key to unlock the passport. Other programs take a more hard-line approach to their interpretation of the legal language, and do not allow retention of workers passports/ids under any circumstances. A best practice approach is to have a secure location available to workers to lock their passports/ids (such as a safe or lock box), which allows them to have access to the documents at all time, and not worry about keeping them in the dorms. The final and most notable risk associated with migrant labour is human trafficking and forced labour. This paper will not discuss human trafficking in depth, as there are many robust resources available on the topic, however it would be remiss to not highlight the issue as a definite risk for migrant labourers. Over the past few years we ve seen increased international interest and scrutiny of human trafficking, most recently in the fishing industry within Thailand. In many situations workers are promised very different conditions during the pre-deployment stage, and arrive in the country to find them forced into labour conditions inconsistent with what was agreed to in their home country. HOW TO BE PART OF THE SOLUTION: Many supplier risk management and/or social compliance programs are evolving to address the risks associated with migrant workers within the supply chain. Below are some guidance based facets of a recommended complete solution that brands and retailers can consider adopting into their own respective programs in order to ensure that workers are protected. To start at a high level, the first part of our guidance is to consider reviewing your code of conduct to ensure that foreign worker vulnerabilities are sufficiently addressed. Specifically, you need to ensure labour and 4

labour or recruitment agencies are included as an entity that is bound by the code of conduct. Your code should specify that workers need to have access or control over their documents. Expectations regarding fees that foreign workers must pay should be defined and clearly detailed within the code of conduct. The most progressive programs to date specify that the workers should not pay any fees as a term of employment. The code of conduct should specify that contracts must be presented to workers in their native language and outline the employment relationship. Reference to human trafficking should also be made, if it is not addressed already. A second component of a complete solution is to measure your migrant worker and agency footprint. If you do not have a clear idea of how many migrant workers and agencies are in your supply chain, you cannot solve advocate for these workers and your brand is at risk. In order to do this, you should measure migrant worker numbers as well as labour/recruitment agencies utilized. This can be done through questionnaires or profiling exercises through systems like Intertek s Global Supplier Management (www.globalsuppliermanagement.com) as well as the on-site audit process by including a migrant/foreign worker question the general facility profile, as well as questions regarding the use of labour/recruitment agencies. Once these numbers are collected, they should be reviewed on a periodic basis to ensure that you fully understand what your global footprint is as it relates to foreign workers. After you have a clear idea and measurement of the number of migrant workers within your supply chain, a third facet of a complete solution should also consider verifying on-site that migrant worker related items expressed in your code of conduct are meeting your expectations. You can do this verification in a couple of ways, the simplest way being to include additional questions relating to migrant workers as a part of your current audit protocol and checklist, which many auditing protocols have included in past years including Intertek s Workplace Conditions Assessment ( WCA ). These questions should relate to the risks discussed above including passport/id retention, clear understanding of contracts, fees and expenses, discrimination, and management systems. As a next step or fourth recommendation, you may consider the use of a more specific and detailed assessment for better understanding and insight. A more robust assessment may not be feasible for every facility, but could be applicable to major suppliers using major labour agencies to fully understand how they recruit employees. This type of assessment may follow some of the traditional parameters of a social compliance audit, but take a deeper dive on understanding the pre-deployment process and the agencies involved along the way, including the costs and fees involved. It should also review the managements systems of the labour agencies as it relates to recruitment, as well as the contractual relationship between the agency and the factory. Additionally, it should include employee s interviews at the deployment site to ensure that their understanding and expectations of the working conditions match the realities at the employment site. Our fifth recommendation is that training plays a key role in a successful mitigation approach, which can be done in three key ways. First, brands and retailers can provide awareness training to suppliers on their expectations regarding migrant workers. Aside from setting expectations, this type of training may also help to build capacity and understanding at the factory level of risks involved with using labour agencies that employ migrant workers. Many facilities do not hire contract workers directly, but rather go through agencies. Therefore they may not have a clear understanding of all of the risks associated with the indirect employment of migrant workers and may not have systems in place to protect he worker. 5

Second, suppliers/facilities can also provide training to educate migrant workers on the terms of their employment upon arrival. This helps to ensure that migrant workers are fully aware of the facilities expectations, and what the terms of their employment are. A best practice may be for facilities to provide cultural norm trainings for migrant workers to help them understand what is culturally acceptable and non-acceptable, as well as general day-to-day know how (such as how to wire money home). This helps to address many of the issues and conflicts that may arise between migrant workers and local labourers. Finally, labour/recruitment agencies can provide training during the recruitment process to educate workers on the conditions associated with their employment to ensure that everyone is fully aware of the agreement. Our final and sixth recommendation is to consider partnering with local and global resources. There are a variety of organisations that you can consider partnering with, and one of the best ways is through the multistakeholder initiatives or forums that your organisation may already be involved with. Some industry organisations, like the Electronics Industry Citizenship Coalition for example, have been extremely proactive on the issues related to migrant labour. We recommend galvanizing the organisations that your company associates with to fully examine this issue, so that collectively, the global industry can continue to highlight and address this topic. There are also a few topic specific organisations that you can consider partnering with. Verite has a rich history of working in this field, and has conducted many migrant labour assessments in the field. Another fresh organisation out of Southeast Asia is the Fair Hiring Initiative. The Fair Hiring Initiative is looking at innovative models regarding transferring recruitment fees from the worker to the Employer. Another group to partner with is ethical recruitment/labour agencies. It is clear that within the current system, someone must pay the cost of recruitment. If these costs are not going to be paid by the worker, than they will have to be paid by the Employer. IN CONCLUSION: Ultimately, the risks are real, and while our vast globalized supply chains may seem insurmountable to manage, there are real, practical steps that organisations can take to protect migrant workers. We applaud the efforts of a variety of organisations who are collectively working to prevent the worst forms of labour abuse to those often marginalized in society. Each year since 2000, Intertek has hosted our Ethical Sourcing Forum conference in March in New York City. Consider joining this community and Be Part of the Solution as a component of your efforts to be informed and stay abreast of market-leading efforts to reduce risks for migrant workers and find solutions for managing suppliers who directly or indirectly employ them. To learn more about the aforementioned services such as Global Supplier Management, the Ethical Sourcing Forum or the Workplace Conditions Assessment, contact us at www.intertek.com 6

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