Deterioration of Mattel’s Labor Conditions: An Investigation of Four Factories

Table of Contents

I. Introduction

As attention is focused on the sweatshops of Apple, Foxconn, and the electronics industry, the toy industry is facing a deterioration of labor conditions, and workers in this industry are facing serious violations of their rights.

Mattel, the world’s largest toy company, had revenues of $6.3 billion and profits of $768 million in 2011. Given its profits, it would seem reasonable to assume that such a large corporation as Mattel would treat well the workers who make its products. Unfortunately, that is not the case, and this report stands as testimony to the empty promise that is Mattel’s corporate social responsibility.

This report has four parts. First, we examine Mattel’s Corporate Social Responsibility (CSR) profile. Second, we introduce the main findings of China Labor Watch’s latest investigative report, based on October and November investigations of four factories producing Mattel toys. Third, we provide measures that Mattel must take to rectify the myriad violations in these factories. Finally, we provide the individual investigative reports for each of the four factories.

II. Empty promises: Mattel’s CSR

15 years ago, Mattel was one of the first brand companies to establish Global Manufacturing Principles. For five years up to 2012, the company has been named one of Fortune Magazine’s 100 Best Companies to Work For, and for years it has been named one the 100 Best Corporate Citizen by Corporate Responsibility Magazine.

Its consecutive years of honors make Mattel out to be a leader in CSR, and Mattel certainly promotes such a view. But when we take a closer look at Mattel’s annual reports from 2009 to 2011, we discover that not one of the 120 pages is committed to CSR. And nowhere on its website or in its Global Citizenship reports does Mattel provide information on the CSR compliance of its supplier factories. This emptiness is a persistent feature of Mattel’s CSR profile.

On the Corporate Responsibility portion of its website, Mattel promises that it will conduct unannounced audits at all directly-operated and supplier factories overseas. Mattel also cooperates with the International Council of Toy Industries (ICTI) to conduct annual audits in all of its factories as part of the ICTI Care Process (ICP). Mattel promises a “zero-tolerance” policy for those factories discovered to be using child labor, forced labor, or human trafficking, and the company promises that immediate corrective action plans will be demanded of those factories found to be breaking other laws or regulations.

Unfortunately, such action plans are superficial. In the same section on their website, Mattel publishes the results of ICP audits from 2009 to 2011. The format and results of these audit reports should concern us.

Mattel has seven directly-owned foreign factories, four of which are in China. The independent reports, including action measures, are about two pages each, and the 2011 ICP annual report is nothing more than a simple table, summarizing the conditions of all seven factories in half a page. Only one factory was reported as having had time recording irregularities, and all factories were granted a seal of compliance by ICP.

But the problems in the individual reports are far worse than time recording irregularities. Indeed, the audits discovered that the overtime hours of workers at all Chinese factories, from 80 to 120 hours, were far in excess of Chinese legal standards. In fact, this is a violation of Mattel’s own esteemed Global Manufacturing Principles: “Working hours must be in compliance with country and Mattel requirements” (article 2a).

And despite the illegality and contradiction evident in the work time violations at all Chinese factories, all factories were certified as compliant, and only one audit report even mentioned working hours in the “corrective actions” section. Even then, the action was meaningless; the plan was to “seek to ensure” legality in working hours.

Mattel began using ICP in 2009. Before that, Mattel audits were carried out by a nonprofit organization called the Sethi International Center for Corporate Accountability (SICCA). On its website, we can read SICCA’s very detailed 2008 reports on Mattel’s directly-owned and supplier factories, which are 30 and 40 pages long, respectively. Each report detailed the situation at each factory, separated into sections by topic—e.g., hiring, recording, safety, etc.

Most importantly, SICCA cites many specific problems at the majority of Mattel plants, citing so many, in fact, that SICCA takes a frustrated tone in the conclusion section of the supplier factory report: “SICCA is not satisfied with the integrity of its audit and the outcomes reported by its findings.” After having conducted three years of audits at these factories, SICCA observed no significant improvement:

“Having undertaken three formal audits during the course of three years, when the normal schedule is one formal audit every three years, SICCA feels that any recommendations for corrective action would be unlikely to yield meaningful changes without specific commitments from Mattel and the company’s insistence that the plant must implement these recommendations.”

It should also be noted that SICCA consistently pointed out excessive overtime hours in each one of its Mattel reports over the course of eight years, from 2001 to 2008. Despite this, the situation never improved.

Instead, in 2009, Mattel joined the ICTI CARE Process, and Mattel’s entire CSR system took a step backwards. ICP audit reports are short, lack in detail, and only examine the conditions at Mattel’s seven directly-controlled factories. Since 2008, Mattel has published no information on the labor conditions at its supplier factories despite the company promising in its 2012 Global Citizenship report to share information “the overall performance of our major vendors”.

CSR at Mattel has slowly collapsed over the past ten years. Whereas the company once had SICCA carrying out robust audits on dozens of directly-owned and supplier factories with detailed reporting, it now only published superficial two-page reports of seven factories produced by ICP.

It seems that Mattel ended its relationship with SICCA on a bad note, SICCA perhaps no longer willing to continue conducting audits whose recommendations it felt “would be unlikely to yield meaningful changes”. Or perhaps Mattel found SICCA too restrictive in its ethical demands on Mattel. In this way, Mattel might have found a more appropriate partner in ICTI.

Regardless of the reasons for the deterioration of its CSR system, it is clear that Mattel’s promise is now empty. And there is a question of whether or not Mattel ever truly intended to live up to its promise “to ensure that our toys are manufactured in a responsible manner”.

III. CLW’s new investigation and Mattel’s labor violations

This following introduces the results of CLW’s investigation into four factories in Guangdong Province that produce Mattel toys, one of which is a factory directly controlled by Mattel. The investigations were carried out in October and November 2012. Together employing about 10,000 workers, these factories include

  • Foshan City Nanhai Mattel Diecast Co., Ltd. (hereafter FNMD),
  • Winty Industries Corporation (Shenzhen) Co., Ltd. (WICS),
  • Dongguan Dong Yao Toys Corp., Ltd. (DDYT),
  • Shenzhen Wei Lee Fung Plastic Product Co., Ltd. (SWLF).

FNMD is the only factory directly controlled by Mattel, and it only manufacturers Mattel products. The other factories, in addition to producing for Mattel, also supply toys for companies like Disney, McDonald’s, and Hasbro.

In all factories except SWLF, investigators entered the factories as workers for a period of days or weeks to get a firsthand account of labor treatment at the given factory. At SWLF, the factory was not hiring workers at the time that the investigation was initiated, so our investigator examined labor conditions there by utilizing interviews with numerous workers outside the factory.

Despite each of the four factories receiving a “seal of compliance” from Mattel’s auditor, all of the factories were riddled with legal and ethical violations. Altogether, CLW uncovered at least 15 violations:

1. Illegal overtime pay. At WICS, formal workers were only paid 10 RMB ($1.6) per hour of overtime work on weekdays. Dispatch workers were only paid 7.5 RMB ($1.19) for overtime, regardless whether or not the overtime was on the weekend. Based on minimum wage laws in Shenzhenxz, this overtime pay should be 12.8 RMB ($2.05) per hour on weekdays, and 17 RMB ($2.73) per hour on weekends. The implications of this violation are grave. This factory could be responsible for millions of dollars in wage arrears to workers.

2. Excessive overtime. All four factories maintained monthly overtime hours two to six times in excess of the 36-hour legal limit. Many workers are only able to rest one day every two weeks. The worst violator was DDYT, which, during peak season, has workers doing 180 to 210 hours of overtime. Moreover, in order to have workers continue working overtime on Sundays, DDYT will not record employees’ working hours; instead, workers are given cash payments for their Sunday work that are significantly below the legal regulations for overtime pay. China’s Labor Law requires workers’ hours to be recorded.

3. Forced labor. At FNMD, the company regulations state that all overtime is voluntary. But in reality, workers are never granted permission by management to get off work after just eight hours; workers must continue working overtime.

4. Worker safety concerns. Every factory had at least one major safety violation in its production facilities. In fact, a lack of safety gear in high-risk positions is more common than not. For example, FNMD and DDYT spray paint workers did not wear masks, and molding workers at WICS and SWLF did not wear masks or sound reducing earmuffs. At FNMD, management would not allow the investigator to wear gloves while spraying toys because gloves might reduce workers’ efficiency. It seems that production efficiency takes precedence over employee safety at factories producing Mattel products.

5. Lack of safety training. Our investigators reported that FNMD, WICS, and DDYT either have perfunctory pre-work employee training for a few hours or have no training at all. Despite being in the toy industry, where occupational injury risks are higher than in other industry due to chemicals involved in production, safety training is almost nonexistent at these factories. Article 14 of the Provisions on Safety Training of Production and Operation Entities requires all production entities to provide new employees with three levels of safety training. Article 15 requires these entities to train new employees for no less than 24 hours before they begin working.

6. Lack of physical examinations. WICS and DDYT did not carry out physical examinations either before or after workers are employed by them despite the fact that workers’ health could be adversely affected by chemicals involved in the manufacturing process of toys.

7. Workers unable to resign. At WICS and DDYT, the resignation process might take up to two months; some workers’ applications for resignation are consistently denied. Many workers thus simply leave, resulting in a loss of unpaid wages. According to China’s Labor Law, workers only have to apply for resignation one month in advance of their planned date of resignation.

8. Blank contracts. WICS had employees sign contracts in which many specific details, like wage or employment dates, were left unwritten.

9. Unpaid work. At DDYT, workers must attend morning and evening meetings for a combined 15 minutes every day, but this time is not calculated into the workers’ hours. Assuming workers work 26 days per month, this is about 40 hours of unpaid work time every six months.

10. Lack of social insurance. Social Insurance Law of the People’s Republic of China mandates employers to buy five types of social insurance for all employees, including medical, worker injury, retirement, unemployment, and maternity insurance. However, at DDYT and SWLF, the factory lets workers approach management and express willingness to buy insurance before the factory will provide it. This results in many workers simply going without insurance that could aid them in a time of need.

11. Abuse of dispatch workers. WICS and DDYT both employ large numbers of so-called “temp workers” from labor dispatch companies. Often, these workers have differing treatment and have no effective contract with the factory for which they work. For example, dispatch workers at DDYT are only paid for their work at the factory after finishing their stint there, at which point they are paid in cash by the dispatch company. Because temp workers lack contracts with the factory, the factory feels that it can shirk responsibility for the workers. For example, temp workers often do not have insurance because the factory does not have to provide insurance for temporary workers.

12. Lack of a living wage. All four factories in this investigation are located in large, developed cities. Life in these cities is expensive. Earning only 2000-3000 RMB ($320-481) per month, the workers making Mattel’s products are scraping by. In order to even survive, workers must live with many people in group apartments or dormitories. With such low wages given by factories, workers’ long-term development and opportunities are severely limited. And to even earn the pittance they earn now, workers have to work at least 10 or 11 hours per day, 6 or 7 days per week. This is why many workers are willing to work overtime. But this type of labor is neither legal, healthy, nor fair.

13. Poor living conditions. Worker dormitories fit up to 12 people per room. Night and day shift workers may be arranged to live in the same room, causing one group of workers to be disturbed by the other group while they are sleeping. Hygiene in some cafeterias is a major problem. For example, at DDYT, there is only one water basin provided for workers to wash their bowls and chopsticks, and the water is usually dirty and full of food bits as workers attempt to wash their things.

14. Unreasonable rules. At FNMD, if a worker forgets their card used to clock-in, they will be considered absent on that day, which influences the worker’s wages. At DDYT, management tells workers that if they report to anyone that they have been working after 9:30 PM in the production facility, then the management will fire them.

15. Lack of effective grievance channels. Except for SWLF, none of the factories have groups that legitimately represent workers in pushing for better treatment. SWLF has a so-called worker representation committee, but issues raised by workers in the committee are consistently suppressed by supervisors and, thus, go unresolved.

IV. What Must Be Done

CLW calls on Mattel to ensure that the legal and ethical violations referenced above are quickly corrected. In addition, in order to ensure that future abuse is prevented, Mattel should take further steps to strengthen labor rights protection throughout its entire supply chain, including in both directly-owned and supplier factories:

1. Reduce dependence on audits. Rid of the dependence on audits in managing labor conditions at factories. Sometimes containing corruption, being carried out during low seasons at factories, and often abiding by low standards, audits are cannot be the only facet of a responsible manufacturing system.

2. Reform buying and just-in-time practices. Mattel pays supplier factories too little and demands that these factories deliver products in very short periods of time. The result is long hours and low pay for the workers making Mattel’s toys. Mattel should reform these practices to allow for less pressure on workers.

3. Production transparency. Mattel should publish a list of all supplier factories as well as put the names of these factories on its products. This way, Mattel’s supply chain will be more transparent.

4. Establish third-party hotlines. Independent third party actors, such as an NGO, can act as mediators of labor disputes. Workers are given a direct channel by which to contact this NGO and express their grievances. In turn, this NGO can then communicate the grievances to the factory and discuss potential solutions.

5. Convene round-table discussions. Mattel can organize semi-annual discussion events which bring in worker, factory, brand, and NGO representatives. Round-table events should allow all sides to hold open discussions on factory rules, labor treatment, and other issues relevant to workers as determined by workers themselves. These events should emphasize equality among the various parties, ensuring that there are an equal (or greater) number of worker representatives as corporate and factory representatives. Worker representatives should be directly chosen by the workers themselves.

6. Worker committees. Each factory should have an independent worker committee that is led by workers selected directly by the worker population at the factory. The candidates for committee leadership should also be nominated solely by workers, not by factory management. The worker committee would represent workers in discussions with management about any aspect of work or living conditions that workers deem important.

As mentioned above, Mattel has annual profits surpassing $700 million, and it is a global leader in the toy industry. Perhaps more than any other corporation, Mattel has the ability to positively influence labor standards in the toy industry. CLW calls on Mattel to begin this work immediately.

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