Click Here to download CLW's statement to PUMA's CEO
Click Here to download the letter to the Chancellor of Germany
Click Here to download PUMA's statement
For reference, please click Here for CLW's report on PUMA
On April 19th, 2008, German-based media group Der Spiegel has published an article on Taiway. Click Here to see the article.
CLW's Response Regarding PUMA's Statement
After a thorough investigation by CLW investigators, we are glad to say that we have found that Taiway has remediated and responded to some of the issues brought to their attention regarding workers' safety, food conditions, and resignation procedures. Nevertheless, we are disappointed to see that PUMA and Taiway still fail to acknowledge other abusive conditions that persist in the plant.
We share PUMA's sentiment that an investigation conducted by another, neutral organization would be useful; we, moreover, welcome a third party evaluation our own work. We hope that an investigation carried out by PUMA, Taiway and a third party accredited by the FLA would verify our findings.
The following is our response to PUMA's statement:
Contracts and Recruitment
Based on current Taiway workers' remarks, we suggest that Taiway's recruitment procedures be reformed. For instance, one hired worker claims that she was able to use her younger sibling's personal ID to get hired. An undeniably noteworthy fact is that Taiway has raised its recruiting standards, implementing stronger verification of personal IDs and introducing an ID detector devise. However, one problem presented by the adjusted recruitment procedure is that it only accepts the second generation personal ID.
Legally, although the government has introduced a second generation of personal IDs, unless the ID is expired, it is not prohibited for job applicants to provide a first generation personal ID. We believe Taiway's conduct discriminates against applicants with older IDs and infringes upon their rights. Hence, we request that Taiway's exclusive use of the second generation ID in the recruitment process be terminated.
Wages
Following Taiway management's readjustment on April 1 st , average daily work hours have decreased from 11 and 12 hours to 10 hours, while the number of weekly days-off have raised from one to two days; paid vacation days have been allotted according to existing laws and monthly wages have been adjusted from 690 RMB to 770 RMB in accordance with the local minimum wage requirement.
However, in terms of wage distribution, Taiway distributes wages on the 25 th of each month, effectively withholding 25 days worth of wages from workers. Wages are also directly deposited into each worker's bank account, as opposed to paper currency.
Concerning inadequate overtime payment, we confirm that the issue has received dramatic remediation following Taiway's corrective actions.
PUMA alleged that CLW miscalculated workers' wages. However, in fact, by obligating workers to arrive to work 20 minutes earlier than the stipulated work start time each morning without appropriate compensation, in addition to lunch and dinner breaks (20 minutes + 20 minutes + 20 minutes= 60 minutes or one hour), Taiway workers are forced to work one extra hour a day.
According to PUMA , “A simple calculation will find that if the 690 RMB minimum wage that CLW based its calculation on are divided by 21.75 days and 8 hours, it makes an hourly wage of 3.965 RMB. So in case of CLW's allegation, Taiway would be betraying the workers of 3.965 RMB x 4000 workers = 15,860 RMB per working day.”
Because labor law states that daily work hours exceeding eight hours are considered overtime, workers are entitled to the regular overtime premium of the extra hours, and thus, the hourly wage that workers deserve is 6.64 RMB, instead of 3.965 RMB as suggested by PUMA. We do appreciate PUMA's objective calculation method of incorporating one extra decimal behind the regular hourly premium under its calculations to accommodate our previous calculation result.
Below, please find our calculation details.
1 extra hour x 6.64 RMB (overtime premium) x 21.75 work days a month x 12 Months x 4,000 Taiway workers = 6,932,160 RMB
Putting aside the disagreement regarding the accuracy of the wage calculation, in PUMA's response, PUMA tactfully avoided a serious question that must be raised and addressed: Will Taiway return these cheated wages to its workers?
We ask that Taiway reimburse the hard-earned wages that it cheated over the past five years to its rightful payees.
Work Hours
A worker from the Henan Province remarked, “In the past, extending work hours was very usual. In many cases we have worked from ten extra minutes to 30 minutes with inadequate pay”. Although Taiway no longer obligates overtime after regular hours, workers still work overtime unless advised not to. In some cases, workers would work overtime for a period of time (usually no more than one hour), only to be notified afterwards that overtime is not required and thus no payments will be issued.
Moreover, Taiway's work schedule consists of three shifts. When the two hour overtime does not take place, all three shifts have a unified end time of 4:30 PM. However, for those whose shift was originally scheduled to be off at 6:15 PM, when the two hour overtime does not take place, they should be entitled to get off at 4:15 PM to fulfill the eight work hour stipulation. In this case, workers under such shift have to work 15 extra minutes. In addition, Taiway's current clock in time is from 7:05 AM - 7:20 AM. As work begins at 7:30 AM, workers sacrificed 10 ~ 25 minutes of their time working for free.
According to workers, the resignation procedure was extremely complicated in the past. Taiway would often prevent workers from resigning by persuasion, delay or even outright denial. Though the HR mailbox system described by PUMA in its response was only officially launched on April 21 st , 2008, we acknowledge the effort. Nevertheless, currently, even some Taiway supervisors are uncertain of the mailbox's exact location.
Working Conditions
We concur with Taiway's fair and just wage system in terms of the base wage and bonuses. According to workers, however, many are unaware of the details of the system. During an interview, a worker said, “When I participated in a pre-employment training, the subject of wage and work hours was brought forth, and the training agent explained, ‘Anyhow, you should not randomly ask for days off; don't miss work, be late or leave early.' One day I asked for three days off and when I returned, I found out that not only was my bonus was penalized, my base wage was deducted as well; I had no idea what was going on.”
With regards to the grievance redress system, though a number of complaint boxes are established on site, very few workers choose to file complaints through this channel. According to workers, this method is useless, and they would rather complain to machines than to the hypocritical Taiway management.
On PUMA's statement it is written that a number of employee communication strategies, such as the provision of an employee handbook, have been implemented at Taiway. However, many workers have never seen such a handbook and could care less, as they perceived it to make little difference under the management of Taiway.
Bonus System
We understand that the bonus based on performance rating is (200 RMB/Monthly work days) x accomplishment x rating ratio x number of days in the month. However, only a few workers are able to understand the system. From our investigation, if workers fail to reach a quota or make an error, there is a possibility of bonus deduction, and on many occasions, heavy criticisms from supervisors.
By mutual consent between both parties—workers and management—a dormitory room in good condition leads to a “behavioral bonus.” However, we were also informed that those whose rooms are rated below 75 are penalized by a 10 RMB fine.
When asked about Taiway's bonus system, a female worker, she said, “Only those who have good relations with the building manager can get that bonus. As for me, don't even think about it.” We expect and are eager to see Taiway's bonus system continue to improve and distribute the bonus fairly.
Living and Canteen Conditions
Since April 1 st , 2008, Taiway began using catered contractors to operate its food service. The canteen offers free rice that is better in quality than the rice used in the past, and workers may choose food according to their preferences. However, the cost of food has increased considerably. Using a rough calculation, workers would now need to pay 100 RMB a month more for the food service, despite some continued dissatisfaction with the food quality.
In Puma's response to our report, the company mentioned that theft and petty violence are concerns wherever a large number of people live and work together on a regular basis, and that Taiway has implemented several action plans to prevent further harm to workers.
Taiway established a clinic facility at the factory to provide free clinic service to workers. We hope that the quality of the clinic employees will improve over time, as one worker was once prevented from purchasing more medical supplies from the clinic by the clinic employee.
Other Conditions
Taiway's basic conduct is in compliance with the labor law. However, the majority of workers do not have social insurance. Taiway inform those who wish to have insurance to file an application to Taiway—but only when asked.
Conclusion
In conclusion, having recognized the efforts made by PUMA, we stand firmly behind the belief that there is much in PUMA's social responsibility standard that can be addressed and improved.
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May 20th , 2008
Angela MERKEL, Chancellor
Federal Chancellery
Bundeskanzleramt
Willy Brand Straße 1
10178 Berlin
Germany
Dear Ms. Chancellor,
My name is Li Qiang, and I am the Executive Director of China Labor Watch, a New York-based labor rights organization. China Labor Watch embodies a broad labor activist connection, and our main objectives are: to provide workers legal aid training, assist workers in legal consultation, and conduct investigations of multinational corporations' supplier factories.
We have long endorsed your appraisable guidance in leading Germany of becoming one of the most ethically and humanly sophiscated nations among the world. As the president of the Europe Union and one of the Europe's latest reformers, Your effort in combining forces with China to ensure energy and environmental protection has led to the international recognition and every German proud of their nationality. As we admire your aim in collaborate with China on climate change, energy, environmental protection and recycling economy, we must also emphasize our recommendation to you the significance of workers' work environment and hope that it would gradually influence and encourage some of the companies based in your nation to produce ethically in other nations. Thus, we write to seek your immediate help on urging PUMA, a German based Sportswear Company to refocus its attention on remediation of its audit system and ethical labor practice in China .
For workers working under the bottom of supply chain, their stories of striving to survive were often disregarded. Instead, what we observe in the daily news are how multinational corporations such as PUMA successfully market their products and made remarkable profit, while the workers are sacrificing their youth and self-esteem manufacturing its products day in and day out. I believe that it is safe to refer these workers as the “backbone” of the company. Devastatingly, however, workers did not receive what they deserve.
In our follow up investigation in January 2008 on Taiway, a PUMA's exclusive supplier in China, we have discovered its poor and questionable conditions have remained the same since our initial investigation three years ago; excessive work hours, inadequate overtime pay, poor hiring practice, management's discriminative hiring and bonus practices based on one's provincial origin, constant violence on site and poor living and canteen conditions.
As we are extremely concerned about workers' affairs in Taiway, in March 2008 , we sent an inquiry attached with our findings to PUMA's headquarter hoping that the corporation would engage in corrective action on the factory employing roughly 4,000 workers and relinquish them out of such exploitive conditions. From before publishing the report through Der Spiegel, a German based media group, to after the report was publicized, and over the course of two statements issued by PUMA, it appeared that the company is shifting the blame, showing its inflexibility in recognizing the factory's persist issues and implementing corrective action. Though the investigation is conducted in one manufacturer for PUMA, it could be summarized as the broad conditions existing at PUMA suppliers in China as they are administrated under the same system. To a certain extent, our belief is direct; company simply must obey and execute the standard it set for itself entirely.
This letter is our last resort in hoping that the conditions of these four thousand workers would be heard and alleviated. However, without PUMA's genuine attention on improving the conditions, such objective cannot be achieved, as it has the most direct influence on its supplier. Hence, we hope that by utilizing your influence and status, it would educate and allocate PUMA onto the right track and begin producing ethically and shift away from the manner of merely producing pamphlets praising their annual social sustainability while much improvements can be incorporated.
Please see attached for report on Taiway and statements issued by both CLW and PUMA during the course of interaction.
Sincerely,
Li Qiang
China Labor Watch
Executive Director
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Puma statement regarding the CLW report on Taiway
On April 2, 2008, the US-based non-governmental organization China Labor Watch (CLW) submitted a copy of a report prior to publication to PUMA that described working conditions in one of PUMA's exclusive footwear suppliers in China for our comment. The report made several allegations against this key supplier of PUMA, including non-payment of minimum wages, excessive overtime hours, discrimination, poor food and excessive fines. We responded to the first draft of the report within the allocated time frame, pointing out specific errors such as miscalculation of minimum wages and other items that are legal under the new Chinese Labor Contracts Law. Following the report, we audited the facility and conducted further investigations into these matters to remediated these findings..
After a thorough review of the final version of the CLW report released on April 21, 2008, we noticed that our comments and the additional information we provided had not been sufficiently taken into account. Although we appreciate that the gravest errors made in the initial draft have been removed - particularly the allegations of non-payment of minimum wages - we believe that a number of wrong statements - both in fact and in conclusion - remain in this version of the report and must be addressed. The unfair allegation that Puma is “the worst company in the industry” is untenable. CLW does not take into account our current efforts to effect improvements within our suppliers and our industry through our work in cooperation with the FLA , through brand collaboration or our own auditing, monitoring and remediation practices.
In our view, the report misrepresents the situation in the factory and our own remediation work with the factory management. Following the release of the report, we raised a third-party complaint on Taiway to the FLA. This means that through the FLA , credible third parties will be called upon to investigate the allegations made by CLW.
Below, please find our comments responding to this report.
Withheld wages.
According to Guangdong Wage Payment Ordnance, wages must be paid within 30 days. This means worker's October wage must be paid before 30th November «?????????»???,?????????????,???????????????,?? 10 ????,????? 11 ? 30 ????? . In Taiway, workers are paid on the 25th of each month, which is in compliance with the law .
CLW alleges that subcontracted cafeteria workers are not paid the full minimum wage if they do not work 26 days in a month. This is wrong as our current remediation with the factory management involves ensuring that the cafeteria workers earn MORE than the minimum wage given the longer number of hours that they work compared to regular production workers.
We noted that periodically supervisors asked workers to come in 20 minutes early for meetings and this extra time was not included in the regular hours nor overtime. We had already advised Taiway to make all meetings part of the regular workday schedule and to pay them accordingly. Taiway management announced this to the whole workforce and has committed to provide further training for supervisors on this. We have found no other case of non-payment of overtime hours rendered. The allegation that Taiway forces an extra hour on all workers derives from these extra 20 minutes. In compliance with the law, all mandatory breaks, such as lunch and dinner breaks , is time that workers get paid for. Therefore breaks should not be included to expand the 20 minute period to a full hour.
Another inaccurate allegation CLW made refers to the wage payment by Taiway. According to CLW, based on the legal number of 21.75 working days per month, Taiway betrays its 4000 workers of a total 6,201,360 RMB per year. A simple calculation will find that if the 690 RMB minimum wage that CLW based its calculation on are divided by 21.75 days and 8 hours, it makes an hourly wage of 3.965 RMB. So in case of CLW's allegation, Taiway would be betraying the workers of 3.965 RMB x 4000 workers = 15,860 RMB per working day. However, CLW accuses Taiway of betraying the workers of a total of 6,201,360 RMB per year. Dividing 6,201,360 RMB by 15,862 RMB makes 391 working days per year. The flaw here is that a year has only 365 days, How can CLW come up with 391 days? And if the legal number of working days per month was 21.75, the total number of working days per year would amount to only 261 days?
Contracts and Recruitment
We responded to the following allegations in our letter to CLW. However, these have not been taken into account in the final version of the report.
The use of fake identities during the application process had already been noted by PUMA and Taiway as a serious concern. As such, Taiway only accepts applicants with 2nd generation IDs cards which can be verified by using an ID screening machine. Furthermore, Taiway strongly encourages current workers to obtain a 2nd generation ID card. Also salaries are paid to all employees only through a personal account opened at a contracted China Post Bank. Using the bank's account screening system ensures another layer of scrutiny of the applicant's identity.
According to the new China Labor Law Article 97, contracts signed prior to January 1 st , 2008 are still valid until the contracts are up for renewal. Taiway intends to sign new contracts with these workers upon expiration of their contracts.
Some discriminatory recruitment practices were noted. However this was mostly due to the negligent re-use of old recruitment materials for internal hiring. This practice did not involve the alleged issues, where applicants from specific provinces were allegedly discriminated. Because of the shortages in skilled labor, Taiway continues to hire all qualified applicants regardless of provincial origin. The hiring figures from the identified provinces for 2008 are as follows:
|
January |
February |
March |
Sichuan |
27 |
46 |
39 |
Henan |
53 |
186 |
149 |
All employees and management staff are given clear resignation procedures and these are properly documented in the employee handbook. In addition, every worker can directly send his/her resignation through the HR department mailbox. This channel of direct resignation would bypass their direct supervisors, and workers are guaranteed full rights and proper resignation processing without being influenced. Given the exigencies of peak season manufacturing, most supervisors do attempt to dissuade workers from resigning. Taiway management had been advised to address this through further training of supervisors on proper and constructive worker communication, as well as further worker training on the direct resignation method through the HR mail box system.
Working Hours
Excessive overtime (overtime in excess of the legally allowed limit of 20 hours per week) remains a challenge in Taiway and is an endemic problem throughout the rest of the industry, partly due to shortages of skilled staff in China . Apart from tight peak production schedules, power disruptions meant that work had to be rescheduled to some rest days and nights. We are working with our factories, including Taiway, to enhance productivity and management systems as well as skills to minimize the need for excessive overtime, and overtime in general.
Taiway management responded by introducing a 58-working-hour pilot week in March 2008, which entailed 2 hours of voluntary overtime from Monday to Friday and 8 hours on Saturday, amounting to a total of 18 hours per week. This schedule conforms to our Code of Conduct that allows for a maximum of 60 hours of work per week, including both regular and overtime work. All overtime and rescheduled work still requires the voluntary sign-off from every individual worker - a practice that Taiway management has already been undertaking in compliance with the Code of Conduct.
Working Conditions
A number of allegations made by CLW refer to discrimination of provincial origin, retaliation by supervisors against worker complaints and excessive disciplinary fines. These issues were addressed in our letter to CLW, but were not taken into account. Please find the details below..
The CLW report claimed that workers coming from the same region as their supervisors received higher bonuses. In general, the bonus system of Taiway works in such a way that direct supervisors cannot directly determine the workers' bonuses. Bonus payments are determined on the basis of data administered by an IT database and performance ratings that are linked to specific bonus amounts. Theoretically, it is impossible that bonus payments are affected by discrimination as they are managed by a computer system. However, Taiway management has committed to further monitor the bonus system and ensure everyone is treated equally.
- Retaliation by supervisors
The factory has implemented several grievance channels, including separate complaint boxes for direct supervisors all the way up to the CEO of the Group. Workers are also encouraged to directly complain to their trade union representatives and directly to PUMA S.A.F.E. staff if they feel unfairly treated. PUMA S.A.F.E. had to intermediate on a number of occasions over the past two years, and there has not been a single case of retaliation against any worker who raised a complaint. All complaints about specific people within the factory are addressed to the Workers Disciplinary Committee, which is a worker-elected tribunal, as well as to Taiway senior management.
- Excessive disciplinary fines
Taiway has implemented a behavior bonus system, which pays extra money on top of production and basic wages, in relation to ideal behavior in the factory. This behavior bonus resulted out of brainstorming sessions by PUMA and NGOs, such as the Fair Labor Association (FLA). Instead of fining workers by automatically deducting money from their wages or issuing multiple warnings, the Behavior Bonus is meant to serve as an incentive and reward for workers to fully comply with factory policies and Codes of Conduct. Because of its nature as a behavior bonus, workers that were non-compliant, did not receive the full bonus amount.
To ensure fairness to the workers, worker behavior and any reduction of the bonus amount is audited and reviewed by the Worker Disciplinary Committee which has been in place since 2006. This committee is independently run by the factory workers' union and its committee members elected by the workers.
Investigation of the records of the Worker Disciplinary Committee does not confirm that bonuses were not paid if workers had not folded their bed sheets or as a consequence of other frivolous allegations as claimed in the CLW report. Instead, we found out that several workers' bonus had been reduced because the workers had been smoking inside the dormitory which represents a violation of factory rules and is considered a health & safety hazard. Taiway was advised to strengthen their worker and supervisor training on disciplinary procedures. Taiway management was requested to make clear to workers that behavior bonus payments and other similar incentives and rewards are not part of a guaranteed compensation. In particular, Taiway was advised to implement other means of enforcing compliance to rules and on this front the management is welcoming any constructive suggestions, not just from PUMA, but also from the CLW.
Subcontractor management (cafeteria staff)
The PUMA S.A.F.E. auditors noticed during the last PUMA S.A.F.E. Audit in February 2008 that the subcontracted kitchen staff was not always paid according to legal requirements by the subcontractors. Taiway agreed to strengthen their internal subcontractor monitoring practices, and any shortfalls in wages would be shouldered by Taiway. Taiway management also committed that continued poor performance on the part of the subcontractor would result in a termination of the contract by Taiway.
Living and Canteen Conditions
Prior to 2005 workers had to pay for additional uniforms. This had been raised in subsequent PUMA audits and Taiway has since stopped charging for additional uniforms. As of 2008, uniforms are no longer required in the workstations.
Thefts and petty violence are a concern whenever a large number of people live and work together on a regular basis. Taiway has responded to the security issue by employing an additional nine security staff and the installation of additional monitoring equipment at dormitory entrances.
Taiway's food services operate all day with 4 licensed catered contractors. On average during lunch and dinner time, the Taiway food service offers at least 28 different items of food selection as well as a full service mini-mart to cater to the workers' individual dining preferences. This food service was introduced in 2005 to provide workers dining choices as well as protect workers from unlicensed and unsanitary dining conditions found in external canteens and restaurants. However, based on a recent internal food survey, 10% of factory workers were dissatisfied with the cost of the food supplied in kitchens. Taiway was advised to continue to work closely with their food supply contractors to improve food quality and service at a more affordable price.
Our investigations show that Taiway uses an automatic deduction method to collect meal fees, which goes against workers' choice to dine at the main cafeteria or elsewhere. The management agreed to work together with the workers' union to come up with other measures by which to collect only meal fees that workers choose to avail.
Taiway established a clinic at the factory to provide free clinic service to workers. Taiway merely charges for the medicines used in the treatments - also charged at a subsidized rate and not at market price. Workers are also enrolled in the legally mandated social insurance program after successfully passing the probation of one month. This covers basic medical care, work injury, unemployment and pension. Currently in Dongguan, maternity leave is not still applicable for migrants according to the social insurance regulation in the region.
Other Conditions
Taiway employs a number of employee communication strategies including the provision of an employee handbook, quarterly employee newsletters and several notice boards in prominent points in the living and working areas of the factory. The Puma S.A.F.E. Pocket Guide has since been incorporated in the employee handbook, which we in Puma can confirm. New employee orientation and refresher training on factory policies is also strongly encouraged by Puma S.A.F.E. to reinforce written materials provided to employees. In this area, Taiway management committed to further improve their delivery of worker trainings as well as the distribution of worker education materials.
Conclusion
Based on the clarifications made above, the most critical aspects of the CLW report on Taiway are unfounded or misrepresent the actual situation.
While PUMA has a robust and externally accredited monitoring system for all suppliers worldwide in place, we are also aware of the challenges our suppliers face in the daily implementation of international social standards. Hence, we continue to support the continuous improvement of all our suppliers including Taiway and the Diamond Group, which show a strong commitment to their own corporate responsibility, through capacity building of factory management on compliance-related management systems such as the human resources and health & safety functions.
PUMA's membership in the FLA and the publication of our factory lists and regular sustainability reports ensure the transparent approach regarding supply chain standards that PUMA has chosen. As such, we welcome any constructive input that will contribute to the improvement process of our suppliers as long as this input is based and communicated on accurate facts.
Provided this condition is met by CLW we would welcome the CLW to proactively participate in a joint review of Taiway's progress.
