India wage theft shows ‘failure’ of supply chain policing programs – Sourcing Journal
The “worst case” of wage theft seen by garment industry activists is heading to a hard-earned conclusion.
Nearly 210,000 workers have managed to recover $23.1 million of the $30.7 million owed to them by 21 of the biggest garment makers in India’s southern state of Karnataka, where a pay rise minimum imposed by the government has been ignored and unpaid for nearly two years, the Worker Rights Consortium (WRC) told the Sourcing Journal on Thursday.
All 21, the workers’ rights group said, have pledged to pay current and former employees their full arrears. They also promised to distribute the current minimum wage, which includes a higher variable dearness allowance calculated according to the rate of inflation, in the future.
For the first time, the WRC is able to report data on confirmed payments to workers on a vendor-by-vendor basis, said Scott Nova, executive director of the Washington, DC organization. As of this month, 16 of 21 suppliers have fully compensated all current employees, and four have made partial payments, according to its tracker. The WRC was unable to confirm payments in only one case: C&A and supplier Matalan Creative Factory. So far, all 21 suppliers have fulfilled their commitment to pay the correct minimum wage.
Earlier this month, the Karnataka Department of Labor issued a notice withdrawing a 2020 order allowing employers in the state to defer payment of variable dearness allowance. With this, the High Court will be able to close an ongoing case over the status of the postponement, which previous hearings had ruled unlawful but which the makers claimed was still disputed.
“Factories kept saying, ‘Well, they’re still in court, so we don’t have to do anything,'” Nova said. these months. Now that the factory owners have given up and [are being] forced to pay the money they legally owe people, the government finally ended his trial and rescinded his proclamation, so he’s just putting a nice political end to the whole story.
Nova credits the efforts of the Garment And Textile Workers Union, which represents more than 5,000 workers in the state, with taking the case to court and winning the “powerful” original verdict around which the WRC built his work.
The case for the workers was also so flawless that the brands could not “find a legal justification for non-payment”, he said. “And so once we were able to document that and force the issue with the brands, they weren’t able to credibly defend their suppliers and had to acknowledge that the money was owed.”
For Nova, the tipping point came when Gap Inc. and PVH Corp, through aggressive engagement, convinced Shahi Exports to pay its 80,000 workers the correct minimum wage, plus $10 million in arrears.
“We knew it would be crucial because they are the biggest exporter and others would follow their lead,” he said. “Until the moment Shahi finally agreed under brand pressure, their position was adamant that they owed nothing, they wouldn’t pay, they would never pay, the court case was still pending. Classes. And once Shahi decided to pay, the others decided to pay.
Yet brands were so reluctant to act at first because they blindly accepted manufacturers’ legal claims, demonstrating a “fundamental weakness” in surveillance systems, Nova said.
“A proper monitoring system would immediately identify such claims as specious and trigger the obligation for suppliers to comply with the law,” he said. “But instead, what we’re seeing are brands accepting these flimsy claims without applying scrutiny. And it’s happened enough in our experience to make it clear that it’s not an anomaly – it’s a built-in flaw in the system.
Nova said the brands remained on the sidelines even after union members wrote to them. It wasn’t until the WRC pressed on that they “finally looked at the matter seriously and then had to admit, yes, you’re right, they owe that money”, he said. “So the question is, why haven’t brands recognized that [before]? They massively failed.
Ensuring everyone gets paid continues to have its challenges. The WRC does not have the operational capacity to track payments from smaller vendors, although anecdotal evidence suggests they are also taking responsibility for arrears of around $27 million that they owed at the start of the year. Overall, Nova expects not every penny, but “well over” 90% of the $55 million originally owed, to go to the workers.
Another difficulty is to compensate workers who are no longer employed in the factories. Working with Gap Inc. and PVH Corp, the WRC developed a method to calculate these backlogs, including severance and other benefits, and contact workers, which it disseminated to other brands. The organization was able to confirm payments to former employees of eight of the top 21 suppliers, although it does not yet have sufficient data to report specific amounts. It is now working to confirm the backlog status of the other 13 manufacturers.
“The reason we wanted there to be a very clear formula is that we were concerned that employers would pay nickel and diminish workers when they paid – paying wages but not benefits,” Nova said. “We wanted to be very explicit because it’s much harder for employers to game the system.”
One thing the Karnataka case highlights, he said, is that brands are failing to conduct the meaningful labor rights supply chain monitoring they tell their customers. that they take seriously.
“It wasn’t a few bad apples,” Nova said. “It wasn’t a few brands with less sophisticated systems, it was everyone. All brands missed this, just like all brands failed to do meaningful fire safety inspections in Bangladesh until 2014 after the Tazreen fire and the Rana Plaza collapse. The fundamental fact is that the purpose of real-world brand surveillance programs is not to protect workers; it is to protect the reputation of brands.
Nova, however, hopes Karnataka will serve as a turning point in how brands perform true due diligence, which is expensive, labor intensive and almost always requires conflict with suppliers.
“If brands can’t even grasp something as fundamental and important as this, then the systems themselves will lose credibility with the public. And for these systems to create a realistic appearance of due diligence, they must be credible,” he said.
It is true that brands have their work cut out for them. The Covid-19 pandemic has not only increased the incentive for wage theft, but the ensuing chaos has also made it easier to carry out “with impunity”, Nova said. The volatility stemming from spiraling inflation is not helping either.
Amid all this, Karnataka remains a positive story now that the rule of law has been upheld and money stolen from workers is finally being returned, he said. “I think we’ll see more pressure on brands and their monitors to do a better job in these kinds of settings in the future as a result of this case.”