Nike Relents on Thai Wage Theft Case, Albeit With ‘Deficiencies’ in Plan
For five years, Nike has insisted that workers who were furloughed at one of its Thai supplier factories during the Covid-19 pandemic had been paid in accordance with local law and its own code of conduct. Now the sportswear giant says it wants to collaborate with those involved to “bring resolution to this case,” albeit without admitting to missteps on its part and despite what some labor campaigners have called “deficiencies in its plan.”
Whether inadvertently or not, the case’s unearthing has also exposed fault lines within the labor advocacy space. It also continues to raise an existential question: Just who is responsible when workers get the short shrift?
Nike’s implementation plan, published in February by the Fair Labor Association, a multi-stakeholder organization of which the Swoosh is a founding member, had largely gone unnoticed until the Worker Rights Consortium, a labor watchdog group, sent a memo last week providing its university affiliates with an update. The plan broadly hews to recommendations made by FLA, which published a report in December after a university-affiliated member of its board of directors pressed for an investigation in May last year.
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While Scott Nova, WRC’s executive director, wrote that Nike’s decision to facilitate—if not personally pay out–remedies was “good news for the workers,” the move has led to fresh calls by the Clean Clothes Campaign, the garment industry’s largest conglomerate of trade groups and worker rights organizations, to “remove and rectify” the report, which it said justified “blatant worker rights violations” and set “dangerous precedents for employers’ and brands’ dealing with worker organizations.”
By the time FLA made the unusual move of publicly hitting back at CCC for “recycling inaccurate claims” last Tuesday, it was difficult to tell who was supposed to be on the same side.
At the center of it are some 3,300 workers who were employed by Hong Seng Knitting in Bangkok from May through October 2020. It’s on the basis of three principal claims that their case revolves: They were pressured by management into signing forms falsely stating that they wished to take voluntary unpaid leave during a period of work suspension. They were subsequently owed sums that added up to an average of $172, or two weeks’ worth of wages, per person. At least two workers who refused to accept the unpaid leave faced retaliation in the form of a police report filing, which led the employee to flee to his native Myanmar, in one instance, and job termination in the other.
Nike, which commissioned a third-party investigation and legal review in response to complaints by WRC, CCC and others, has maintained through the years that the furlough program was “consensual and voluntary and was consistent with local law and labor guidelines.” It also no longer sources from Hong Seng Knitting, though it continues to have a relationship with Ramatex, a joint venture partner of the factory in Cassia Garment, which is a Nike supplier. Hong Seng Group, which owns Hong Seng Knitting, did not respond to a request for comment.
WRC, which published an investigation into Hong Seng Knitting in 2021, has long looked askance at Nike’s position. The Just Do It firm, Nova said in an interview, has refused to present the 2020 audit report by Elevate, now part of LQRA. It was only through the FLA report that he saw that while Elevate had found the practice of unpaid leave compliant with Thai law, it had also suggested that the factory compensate all workers for the unpaid leave “from a risk management perspective and in the interest of fairness.”
WRC would go on to conduct its own investigation, releasing a report in 2021 that said it found “convincing evidence” that Hong Seng Knitting coerced workers to sign documents acknowledging that their leave would be unpaid and that management’s actions were unlawful. LQRA did not respond to a request for comment.
FLA has stated that it considers the WRC report—on which it says CCC’s claims are based—“incomplete” because pandemic-era constraints had limited in-person worker engagement and access to payroll records. Its own investigation, it said, was more robust, though it also took into consideration WRC’s findings.
Writing in the WRC memo, Nova said that the organization had expressed concerns about FLA’s methodology, findings and recommendations. The report had concluded, for instance, that Hong Seng Knitting had complied with Thai law and that there was no evidence of systematic coercion, at least in the legal sense. It said that Hong Seng Knitting had the right to report one of its employees to the police and that that employee’s decision to leave for Myanmar did not amount to dismissal, so no outstanding pay is due. Because the fired worker did not file a claim under Thai Labor Relations Law in time, it added, he can no longer follow up with the Labor Court.
Even so, FLA’s recommendations allowed for more nuance, citing prevailing factors such as inadequate communication and the absence of worker representation or a proper complaint mechanism.
The investigator proposed that Hong Seng Knitting and Nike provide partial compensation to the affected workers, amounting to roughly $142,800, for the time during which they were supposed to be on leave without pay. It also suggested that Hong Seng Knitting “intensify” efforts to address and eliminate any form of verbal violence, such as yelling, screaming and demanding. For the two workers who had claimed retaliation, FLA suggested that they be compensated for some (in the case of the worker who is now in Myanmar) or all (in the second case) of the damages they said they suffered.
Nova said that FLA later made “major changes” to its public statement on the findings after WRC expressed its concerns, adding that they now “go significantly beyond those in its investigator’s report.” This, he added, was a positive development, since the two organizations are now more closely aligned with the view that Hong Seng Knitting’s unpaid leave scheme was a violation of workers’ rights and that the police complaint, legality aside, was unacceptable retaliation.
“However, when it made these changes to its statement of findings, FLA did not also update its recommendations. It is good, then, that Nike decided to provide workers twice as much back pay as FLA has proposed,” he said. “Unfortunately, Nike did not go beyond the FLA recommendation on the other key issue: compensation for the worker-leader whom the factory forced to flee the country [that is] no more than the standard amount a worker in Thailand already receives at the end of their contract—a worker whose employment ends normally, whose rights are not violated and who is free to seek new employment in that country.”
Stacy Hope, FLA’s senior vice president of communications, said, however, that its findings remained the same. It only updated the summary of the investigation after multiple inquiries “indicated people were not reading the full investigation report or that people misunderstood the report’s contents,” she said.
According to Nike’s plan, Hong Seng and Cassia Garment will be providing the furloughed workers with compensation—in both cash and paid leave days—that is the equivalent value of roughly $211,000. The former employee who left for Myanmar will be given $1,746, and the worker who was fired will receive $1,261. Hope said that FLA is working separately with local partners to determine if additional compensation might be appropriate for the worker who is now in Myanmar.
Nova’s feelings are mixed. Though Nike has committed to “substantial back wages,” he noted some “deficiencies” in its scheme. “Workers will receive no interest on their back pay, even though it is five years overdue,” he wrote. “Some workers will get paid leave instead of cash, and most importantly, the compensation amount for the worker who had to flee the country to escape the factory’s persecution only addresses a fraction of the harm he and his family suffered.”
“What message does this send, in particular, to Burmese migrant workers in Thailand, who face all sorts of labor rights problems and who need to stand up for their rights?” he later told Sourcing Journal. “What message is FLA and by extension Nike sending to migrant workers in the garment sector in Thailand about what happens to you if you stand up for your rights? This is the central question.”
Nike continues to field widespread criticism from labor campaigners about its conduct toward the people in its supply chain. The Hong Seng Knitting case aside, the “Fight the Heist” campaign and others have been lobbying for the restitution of former employees of the Ramatex-owned Violet Apparel in Cambodia, which they say suddenly shuttered in 2020 without providing legally owed severance. The Air Jordan maker has maintained that it hasn’t sourced products from Violet Apparel since 2006, though CCC and others have disputed this.
Through a spokesperson, Nike said that it commends Cassia Garment and Hong Seng Knitting “who have decided to exceed the FLA investigator’s recommendation and provide affected employees 100 percent of claimed leave.”
“Nike has followed a thorough due diligence process throughout this case, including promptly working with a third-party investigator and legal counsel when first approached in 2020; followed by a joint legal opinion with a WRC-member university in 2022; and most recently participating in the FLA’s third-party complaint investigation,” it added. “Each phase of the process has confirmed that worker furloughs were consensual and consistent with local law and labor guidelines.”
