China Risks Apple’s Reputation by Letting Factories Flout Employment Law

Discussion in 'Apple, Inc and Tech Industry' started by Sampadan, Jul 14, 2009.

  1. Sampadan macrumors newbie


    May 23, 2008
    Interesting article on Bloomberg:

    China Risks Apple’s Reputation by Letting Factories Flout Law

    By Bloomberg News

    July 14 (Bloomberg) -- Jiang Bo says he drove a cement truck for China’s Shenzhen Antuoshan Investment & Development Co. 12 hours every day for seven years without overtime pay.

    A national labor contract law implemented Jan. 1, 2008, was supposed to limit work hours and ensure severance pay. A week later, the concrete company asked Jiang to sign a contract setting his base salary at 810 yuan ($119) a month, 45 percent less than he usually earned, to avoid additional overtime costs, he says. Jiang refused and was let go without compensation.

    “China’s law is supposed to protect migrant workers and the weak, but this is not the case,” said Jiang, an Anhui province native who was awarded 19,620 yuan by an arbitration panel and settled after a second court appeal got him 2,000 yuan more. “The broth is changed; the medicine isn’t.”

    Employers ignoring a law designed to mute labor discontent prompted Chinese workers to file double the number of claims last year with courts and arbiters, the government says. The trend leaves international manufacturers open to potential consumer backlash that may stem from any abuses. U.S. companies such as Wal-Mart Stores Inc. and Nike Inc., which makes about one in every three of its shoes in China, said they’re training suppliers on the rules and inspecting them for compliance.

    Beaverton, Oregon-based Nike held workshops with contract factories after the law took effect to ensure they understood its ramifications and Nike’s expectations, said Kate Meyers, a spokeswoman for the sportswear company.

    Apple Suppliers

    Apple Inc., which relies on Chinese manufacturers for its iPhones and iPod music players, found 45 of the 83 factories it audited last year didn’t pay proper overtime and 23 provided less than minimum wage, according to its 2009 progress report on supplier responsibility. The Cupertino, California-based company required them to adjust practices to ensure correct payments, it said in the report.

    Apple has been auditing how its suppliers treat their workforce since 2007, spokesman Steve Dowling said. It has taken steps to improve the situation for migrant and contract workers, he said.

    Companies such as Dell Inc. and Hewlett-Packard Co. buy computer keyboards and other components from the Meitai Plastics & Electronics factory in Dongguan city. The plant made employees work 81-hour weeks and also failed to pay overtime, a February report by the Pittsburgh-based National Labor Committee said.

    “Conditions are sliding backward because of the worldwide recession,” said Charles Kernaghan, NLC director.

    Little Incentive

    The Electronic Industry Citizenship Coalition, whose members include several Meitai contractors, said in an April 3 statement that corrective actions were to be taken. The plant is making improvements, Meitai spokeswoman Catherine Lien said.

    Meitai is not a direct supplier for Round Rock, Texas-based Dell or Palo Alto, California-based Hewlett-Packard, spokeswomen for each company said. Both companies asked their direct suppliers to do an investigation and changes are being implemented, they said.

    Suppliers have little incentive to abide by the rules, said Bama Athreya, executive director of the International Labor Rights Fund in Washington.

    “The brand-name companies are not putting more money on the table to make sure that suppliers have incentive to obey labor laws,” she said. “In fact, every year they come back and say, ‘Do it for less.’”

    ‘90s Backlash

    Worker rights abuses have long been an issue for U.S. and European companies that turn to developing nations for cheap labor, slashing prices for consumers. They have attempted to protect themselves by setting codes of conduct for suppliers and instituting audits to measure compliance.

    In the 1990s, protests were mounted against Nike after reports claiming its sneakers were being produced by mistreated workers in emerging markets such as Vietnam. Gap Inc., Abercrombie & Fitch Co. and more than 20 other garment makers and retailers were accused in a 2000 lawsuit of running sweatshops that used slave labor in foreign-owned factories in the U.S. territory of Saipan.

    The case was settled for $20 million, and an independent monitoring system was established on the island, said Dan Newman, a spokesman for Coughlin Stoia Geller Rudman & Robbins LLP, which represented a class of the 30,000 workers who sued.

    Disney Supplier

    In April, a factory worker was crushed to death by a machine he was operating at a Guangdong province supplier of cards and other paper goods for Walt Disney Co. and its licensees, the Burbank, California, company said. The New York Times reported on the incident in a June 22 article, which said investigators found labor and safety violations at the plant.

    Disney works with 23,000 factories globally and accounted for 5 percent to 15 percent of production at the Guangdong facility, spokesman Jonathan Friedland said.

    China’s new legislation was meant to improve the lot of its 140 million migrant workers, who together would form the eighth- most populous country. People leaving the countryside for urban factory jobs form the backbone of the nation’s export industry.

    As China’s export economy boomed, fueled by some of the world’s lowest labor costs, working conditions came under the scrutiny of the United Nations, the U.S. government and human rights groups. The abuses included paying employees once a year and hiring “criminal elements” to harass and intimidate them, the U.S. State Department said in its 2008 Human Rights Report.

    The new law required businesses to recognize, in writing, workers’ rights to fair compensation and benefits, including minimum wages and overtime pay, said Yang Qianwu of the Shenzhen-based Deheng Law Firm, who represented Jiang. The law gave workers the right to sue for damages in civil court.

    ‘Enforcement Concerns’

    The U.S. State Department “is aware of the enforcement concerns specifically related to China’s new labor laws,” spokesman Andrew Laine said.

    “We will also continue to engage with a range of stakeholders to ensure that the global financial crisis is not used as a pretext to weaken labor rights or other human rights,” Laine wrote in an e-mailed response to questions.

    China is protecting the rights of laborers, although “we are still lagging behind developed countries” in providing them with benefits, Foreign Ministry spokesman Qin Gang said when asked about the State Department comments at a regular press briefing in Beijing on June 16.

    The U.S. position “sounds plausible and reasonable, but here I would like to remind you to think, which country initiated this financial crisis?” Qin said. “If you make mistakes, at least stop pointing fingers at others.”

    The new rules took effect as the global financial crisis curbed demand for exports.

    Delaying the Law

    On Nov. 20, China Minister of Human Resources and Social Security Yin Weimin said local authorities could delay certain provisions “in the immediate term” to forestall job cuts. They could put off increases in minimum pay and reduce business premiums for medical and unemployment insurance, according to a transcript on the government’s Web site.

    Yin didn’t specify how long the moratorium would last. The ministry press office didn’t respond to a fax seeking comment.

    Dong Zhanli endured 16-hour days in a Dongguan factory, assembling DVD players for export, she said. The 21-year-old toiled weekends and holidays, lost wages after drilling a screw into her finger and was screamed at by her foreman -- all for about 1,200 yuan a month, she said.

    Worker Protests

    The factory, owned by Hong Kong-based Ngai Lik Industrial Holdings Ltd., was known for underpaying employees, said Dong and former colleague Lu Weijun. She and more than 100 co-workers marched several kilometers to the county labor board last fall after the company asked them to accept lower pay when the factory relocated nearby.

    They weren’t allowed into the office and no one came out to speak to them. Several hours later, they turned around and went back to the factory, Dong said during a series of interviews.

    The factory wouldn’t compromise, so some employees quit, forfeiting their last month’s wages, Dong and Lu said.

    “The government may have regulations that require employers to pay, but it may not be able to police every employer,” Dong said in Lu’s one-room apartment, squinting to watch a kung fu movie on TV.

    “Here the mountains are high and the emperor is far away,” she added, referring to a folk saying.

    The secretary for Ngai Lik’s operations director, Lam Man Chung, said he wasn’t available to answer three telephone calls seeking comment. He also didn’t respond to a faxed request.

    There has been a “huge surge in labor-related sudden incidents” since the financial crisis began, according to the 2009 Blue Book of China’s Society.

    Threats to Party

    The prospect of more public displays of dissatisfaction threatens the Communist Party’s goal of maintaining social stability and ensuring its one-party rule over the world’s most populous country, said Fu Hualing, head of the law department at Hong Kong University.

    “The government knows it’s contagious,” Fu said. “That is what scares the Chinese government.”

    June 4 marked the 20th anniversary of a military crackdown in Tiananmen Square, where thousands gathered to rally for democracy and against corruption. On July 8, President Hu Jintao cut short a trip to the Group of Eight summit in Italy as ethnic violence that killed at least 156 people continued in Xinjiang province’s capital, Urumqi.

    “The government kept saying they are going to be strong on the contract law,” said Dominique Muller, executive director of IHLO, the Hong Kong Liaison Office for international trade unions. “In reality, they are turning a blind eye.”

    Only Economy Growing

    China is the only one of the world’s 10 biggest economies still growing. It expanded by 6.1 percent in the first quarter as the U.S. economy shrank 2.5 percent. The increase was the weakest for China since 1999, after the output of goods and services rose an average of 9.9 percent a year since 1978.

    Net exports in June fell by 21.4 percent from a year earlier, according to government data.

    Before the 2008 law, government agencies were responsible for ensuring employers signed legal contracts with workers. That requirement wasn’t strictly enforced, so many businesses, including Antuoshan, didn’t have formal contracts, said Wei Shiqiang, the Shenzhen-based company’s vice general manager.

    “The labor contract law was an awakening moment for the country’s workers,” Yang said.

    Jiang joined Antuoshan in 2000 at a base salary of 1,480 yuan a month, though he earned as much as 3,000 yuan with extra payments for each truckload of concrete he delivered, he said. The law mandated that he be paid time-and-a-half for working more than eight hours a day. He said he wasn’t.

    Seeking Overtime Pay

    He and four other drivers filed a complaint on Feb. 1, 2008, with Shenzhen’s labor arbitration board. Jiang asked for about 800,000 yuan, including overtime and severance. In September, the committee awarded him 19,620 yuan because of errors in Antuoshan’s adjusted formula in computing salaries. The other four got from 14,005 yuan to 20,282 yuan.

    Wei said the drivers’ salaries already included weekend, holiday and overtime pay. Jiang wasn’t paid severance because he didn’t sign the employment contract, Wei said.

    “Jiang Bo’s salary didn’t change for eight years,” Wei said. “Why suddenly should we change to double his pay?”

    Antuoshan changed the pay formula in 2006 unbeknownst to employees, Yang said. “They didn’t know their rights or what they were agreeing to until the contract was actually brought to them,” he said.

    The workers appealed to a municipal district court, which upheld the decision. All but one then went on March 31 to the Shenzhen Intermediate People’s Court, which recommended paying an additional 2,000 yuan in a bid to get them to agree to the settlement, Yang said.

    “These laws have no meaning to us workers,” Jiang said with a twang common to the home province he shares with Chinese President Hu Jintao. “They use the financial crisis as an excuse. We migrant workers just have to accept that we are damned.”

    Last Updated: July 13, 2009 18:00 EDT

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