Puma’s Failure in CSR: Supplier’s Critical Conditions

An investigation carried out by China Labor Watch (CLW) regarding conditions at a major PUMA supplier based in China revealed widespread poor conditions.

The report describes the devastating conditions at Dongguan Surpassing Shoe Co. Ltd., “Surpassing”. The factory employs roughly 6,000 workers in the slow season and up to more than ten thousand workers during the peak season.

The report comes in the aftermath of CLW’s initial report, PUMA Supplier’s unchanged dreadful conditions based on Taiway, an exclusive supplier to PUMA for years.

With the introduction of the report on Taiway, PUMA and CLW have begun a series of dialogues discussing Taiway’s conditions. While CLW acknowledges and appreciates the effort made by PUMA in alleviating its long-time partner’s poor practices, we discovered that similar abuses that once existed in Taiway prior to PUMA’s corrective actions, exist at Surpassing. Though the workers in the two factories dedicated themselves to the same client and are only approximately eight miles apart in distance, they endure contrasting conditions, making questionable PUMA’s commitment to social responsibility.

While workers at Taiway are benefiting from PUMA’s corrective actions and will eventually reclaim the conditions they rightfully deserve, on the other side of the town, workers at Surpassing still suffer under critical conditions day in and day out.

We resent PUMA’s intention of using its effort on a single supplier to portray itself as socially responsible. Poor conditions at Taiway have persisted for years, and it wasn’t until the release of CLW’s report on the factory that reform began to take place. Disappointingly, although the report emphasized that PUMA should not limit its reforms to this one case, PUMA still failed to notice problems at its other suppliers.

Below are some devastating findings at Surpassing

• Excessive Overtime; workers are forced to work overtime, working about 12 hours a day on weekdays, at least 11.5 hours and sometimes even overnight on Saturdays.
• Workers are paid 64 cents an hour for each regular hour
• Excessive fines; workers could be fired and given a 43.35 USD fine if they refuse to work overtime up to three times.
• Poor management; workers have been insulted for filling out contract incorrectly, lectured for asking about payment details.
• Poor dormitory conditions. Garbage can be seen everywhere in the hallway, and at least 80 workers sharing one bathroom and restroom.
• Questionable food conditions; Insects are often mixed with the food.
• High risk work conditions; workshops reeks of an insistent mixture of chemical smell that makes workers feel uncomfortable and disgusted and the factory does not enforce workers to wear safety equipments unless audits are taking place.
• Unethical waste disposal procedure; waste such as paint and glue and etc. are dumped into the sewer.
• Workers have hard to quit; Surpassing rejects a large number of resignation requests and withholds workers’ luggage.

 The problems we found are not only in one or two suppliers to PUMA, it is a reflection of PUMA suppliers’ general conditions. PUMA needs to refocus its priority and remediate its flawed audit system , says Li Qiang, Executive Director of China Labor Watch.

CLW is calling on PUMA to take immediate action in improving the conditions at Surpassing and all of its Chinese suppliers. Because we are a small non profit organization with limited resources, we lack the capacity to monitor every PUMA supplier in China, and we simply cannot and should not “baby sit” the company to ensure good conditions in each and every one of its suppliers. In the end, PUMA is the key to change and has the responsibility to enforce its Code of Conduct and to put an end to the poor conditions of workers.

From our experience with PUMA, we have learned that the company’s tendency in avoiding much of the problems. Hence, in order to verify our findings at Surpassing and emphasize our concern about PUMA suppliers, we welcome and would provide assistance to any reporter that is interested in interviewing its workers as well as workers in other PUMA suppliers in China.

PUMA’s Failure in CSR; Suppliers ‘ critical conditions

Table of Contents

BACKGROUND
DONGGUAN SURPASSING SHOE CO., LTD.
TAIWAY SPORTS LTD. REPORT, PUMA SUPPLIER’S UNCHANGED DREADFUL CONDITIONS
CLW’S RECOMMENDATIONS

I. BACKGROUND

PUMA AG (PUMA) is a German-based company that produces high-end sportswear. According to PUMA’s financial report, in the year 2007, PUMA earned a profit of $510,944,031 excluding taxes. Although the company’s headquarters is in Germany , its main production sites are in China and other developing countries. While the company can afford to invest millions of dollars in advertising, behind the scenes, workers who manufacture its products still earn the bare minimum.

In the last three years, China Labor Watch (CLW) has been monitoring the conditions of PUMA’s suppliers in China. During an investigation on Taiway Sports Ltd., a supplier that “ has enjoyed an “A” ranking for years now” according to PUMA’s 2005/2006 Sustainability Report, CLW has found deplorable conditions. Conveniently, on March 19 th, after CLW notified PUMA about Taiway’s conditions, PUMA said in a statement issued on April 2 nd that Taiway is now only a “B+” factory and stated that many of CLW’s findings on Taiway were either unfounded or largely exaggerated. In order to substantiate the accuracy of the report and emphasize the workers’ poor conditions, CLW contacted Der Spiegel, a German media group, and arranged for them interviews with Taiway workers.

After the interviews, Der Spiegel published articles on April 19 th and the 21 st describing the conditions at Taiway. On May 5 th , PUMA publicly responded to CLW, claiming that CLW has not sufficiently taken into account PUMA’s efforts in improving the factory and stated once again that most of conditions described on CLW’s report were unfounded.

Between May and June, over the course of one month, CLW completed a report on Surpassing Shoe Co. Ltd., another PUMA supplier located only a few miles away from Taiway, after interviewing some of its current and former workers. Gravely concerned about PUMA’s repeated accusation, prior to the release of the Surpassing report, we invited reporters from WirtschaftsWoche – The German Business Weekly to interview a few workers from the Surpassing factory. We firmly believe that only through independent media broadcast would PUMA recognize the problems at its suppliers.

We resent PUMA’s intention of using its efforts in a single supplier to portray itself as socially responsible. Poor conditions at Taiway have persisted for years, and it wasn’t until the release of CLW’s report on the factory that reform began to take place. Disappointingly, although the report on Taiway emphasized that PUMA should not limit its reforms to this one case, PUMA still failed to notice problems at its other suppliers.

The problems we found are not limited to one or two of PUMA’s suppliers, but rather, it is a reflection of poor conditions rampant in PUMA suppliers in general. Hence, we suggest that PUMA not only focus on a single supplier, but commit to fostering improvements in all of its suppliers. PUMA needs to refocus its priorities and remediate its flawed audit system.

II. DONGGUAN SURPASSING SHOE CO., LTD.

Basic Facts

Factory Name Dongguan Surpassing Shoe Co. Ltd., originally as Jian Yi Shoe manufacturer Ltd. (Hereinafter referred to as Surpassing)
Location Chang’an Town, Shatou Industrial District, Dongguan City , Guangdong Province
Contact Number 86-769 81608888
Fax 86-769 81663888
Area Approximately 150,000 square meters
Number of Workers
Peak Season: About 9,000 to 10,000 workers
Slow Season: About 6,000 workers
Male to female ratio is 4:6 during both peak and slow seasons
Product Sports shoes
Primary Client PUMA

Surpassing is a factory invested by a Taiwanese corporation. The factory does not have its own brand, and it primarily produces sports shoes for its major client PUMA. In the past, the factory has been a supplier to Adidas, Reebok, Avia, Converse, L.A.Gear, And 1, and Asolo. Its busiest time is between May and June and the factory employs about 10,000 workers to manufacture shoes for PUMA. The factory consists of three districts–the workshop, dormitory, and entertainment districts.

On April 19 th , 2008, China Labor Watch (CLW) has released an investigative report on Taiway Sports Ltd. that revealed the PUMA supplier’s various approaches in taking advantage of its workers. As a result, PUMA stated that efforts have been made on factory’s corrective action despite the fact that most of the findings by CLW are largely exaggerated and unfounded. We suggested that the findings at Taiway should not be taken into account as a single case; it is merely the reflection of PUMA suppliers’ general conditions and that further improvements on audits needs to be taken to ensure a decent work environment for the workers. Regrettably, our suggestion was ignored and accused by the company of overstating.

At Surpassing Shoe Co. Ltd., just eight miles apart from Taiway, CLW discovered that similar critical conditions existed at Taiway are present, and that PUMA merely address the conditions in a factory that were brought to the attention of the public through the media and failed or chose not to monitor other suppliers efficiently, in this case, the Surpassing factory which is only about ten minutes driving from Taiway.

At Surpassing:

• Requires an employed referrer to each new worker; referrer will be partially financially responsible for the worker’s misconduct.
• Excessive Overtime; workers are forced to work overtime, working about 12 hours a day on weekdays, at least 11.5 hours and sometimes even overnight on Saturdays.
• Workers are paid 64 cents an hour for each regular hour
• Excessive fines; workers could be fired and given a 43.35 USD fine if they refuse to work overtime up to three times.
• Poor management; workers have been insulted for filling out contract incorrectly, lectured for asking about payment details.
• Poor dormitory conditions. Garbage can be seen everywhere in the hallway, and at least 80 workers sharing one bathroom and restroom.
• Questionable food conditions; Insects are often mixed with the food.
• High risk work conditions; workshops reeks of an insistent mixture of chemical smell that makes workers feel uncomfortable and disgusted and the factory does not enforce workers to wear safety equipments unless audits are taking place.
• Unethical waste disposal procedure; waste such as paint and glue and etc. are dumped into the sewer.
• Workers have hard to quit; Surpassing rejects a large number of resignation requests and withholds workers’ luggage.

Contract & Hire

Workers are required to sign a contract upon employment, which is issued and distributed by the Dongguan City ‘s Labor Bureau, and both workers and the employer are able to retain a copy.

Prior to signing the contract, Surpassing checks the applicant’s personal identification and collects a photocopy. Surpassing does not spend time training new workers; they can only expect to learn through working with other experienced workers.

The recruiter first fills information on the contract regarding work post, wage, and wage distribution date and etc. and reads out the filled in information. According to workers, the practice is very inconvenient for workers because they don’t have a chance to voice any comments or questions about the contract. Moreover, workers suggest that the contract is but a tool to pass the government and clients’ audits, and the contract cannot be implemented as the law mandates.

Incident

Yin (Alias) was hired by Surpassing and asked to fill out a contract. When she had mistakenly filled out the contract and asked recruiter for a new one, the recruiter said, “Are you uneducated or illiterate? Just leave if you can’t fill it out correctly!”

Work Hours

Under the agreement by both parties, workers work eight regular hours a day, five days a week, with at least one off day a week, and are entitled to paid vacation for national holidays, maternity leave, as well as mourning and marriage leave. When asked about the amount of payment given for these paid off days, workers are unsure of the methods used to calculate their wage.

The work schedule designed by Surpassing is listed below:

Schedule	Monday ~ Friday	Saturday (Overtime)	Sunday
Morning	7:30AM ~ 11:30AM		Off
Lunch Break	11:30AM ~ 12:40PM		Off
Afternoon	12:40PM ~ 4:30PM		Off
Overtime	5:30PM ~ 9:30PM		Off
Average Daily Hours	12 Hours (4 Hours Overtime)	About 11.5 Hours or all night to fulfill production needs.	None

According to the schedule, Surpassing requires workers to work about 41.5 hours of overtime on a weekly basis. In some cases, workers are asked to work all night in order to fulfill the needs of a client. The most recent case of an all-nighter was on May 17 th , 2008, in a workshop located on the second floor of building B.

Asked about overtime, workers responded that overtime is arranged by the factory and is compulsory. Depending on each supervisor’s personality, refusal to work overtime could result in a minor warning
Three minor warnings is equivalent to one major warning which results in a $43.23 (300 RMB) fine and unemployment. In other words, using the pay table below as reference, the fine is equivalent to a 17 to 27 percent worth of workers’ wage.

Absence from work will lead to a fine depending on the duration of absence; a half day absence leads to an $11.53 (80 RMB) fine and a full day absence leads to a $21.61 (150 RMB) fine. Moreover, coming to work late or leaving early could result in a minor warning.

Although the schedule stipulates that 7:30 AM is when work begins, Surpassing obligates workers to be present at workshops before 7:30AM, so at 7:20AM most workers have already begun the day’s work. Due to the large number of workers at Surpassing, the factory allows workers to leave work in groups every ten minutes, starting at the stipulated off time. Workers are unsure how the factory determines each group’s release time as they merely follow the orders of their supervisors.

Workers are able to take bathroom breaks during work hours, though one must find a substitute for his/her work post prior to leaving.

Although there are one hour lunch and dinner breaks implemented in the work schedule, due to the large amount of workers and the lack of windows for food distribution open, there is a long wait before workers actually get to eat. Most workers would try to finish their meals very quickly so that they can return to the workshop to take a nap in order to be ready for the rest of the day.

Wage & Benefits

Level	Wage (China Currency: RMB)	Wage (US Currency: USD)
A	1,600 ~1,800 RMB/Month	$230.55 ~259.37 USD/Month
B	1,500 ~1,600 RMB/Month	$216.14 ~230.55 USD/Month
C	1,100 ~1,200 RMB/Month	$158.50 ~172.91 USD/Month

Note: Exchange rate as of May 28 th, 2008: $1 USD = 6.94 RMB

With the exception of office workers and management employees, workers are paid under the piece-rate system. The chart above is a pay method composed by Surpassing for piece-rate workers. From A, the highest pay level to C, the lowest, workers’ level of pay is determined by a manual labor contribution standard referred to as the IE Standard. The IE Standard determines a worker’s pay level by the amount of his/her average production with acceptable quality assurance within the stipulated work hours.

Incident

Lee (Alias) once went to Surpassing’s HR department and inquired about the wage calculation. However, instead of receiving a proper answer to his question, he received a lecture.

Surpassing distributes wages on the 25 th of each month. Wages are distributed in two forms, cash or direct deposit. According to workers, cash payment is only for workers under probationary period, and regular workers’ wages are deposited directly to their bank accounts. When asked about the details of payment calculation, workers said that they had no idea about how they are paid, and they can only blame their luck if they were underpaid.

Though Surpassing agreed in the contract to provide workers social insurance, which /includes medical and work injury insurance as well as a pension, in reality, workers only receive pensions. Regarding insurance, workers said that Surpassing deducts about $11.10 (77 RMB) from workers’ monthly wage and most of them did not even receive a social insurance card.

Department Code: E05		Dongguan Surpassing Shoe Co., Ltd. 2008 January Pay Stub Worker Name: N/A		Human Resource Code: N/A
Base wage	$99.42/ ? 690		Processing Fee	$0.29/ ? 2
Work Subsidy	$46.69/ ? 324		Accommodation Fee	$8.64/ ? 60
Work Bonus	0		Meal Fee	$10.37/ ? 72
Supervisor Subsidy	0		Income Tax	0
Overtime Premium	$62.10/ ? 431		Damage Reimbursement	0
Annual Bonus	0		Advance	0
Performance Bonus	0		Factory Uniform	0
Meal Subsidy	0		Account Opening Fee	0
Accommodation Subsidy	0		Utility	0
Other Subsidy	0		Insurance Fee	0
Production Bonus	0		ID Withheld	0
Subtotal	$208.21/ ? 1,445		Total Deduction	$19.31/ ? 134
Actual Wage	$188.76/ ? 1,310	Note: 100 RMB paper currency: 13 50 RMB Paper Currency: 0	20 RMB Paper Currency: 0 10 RMB Paper Currency: 1	Five RMB Paper Currency: 0

Canteen and Food Condition

The canteen is installed on the factory site and is located on the first floor of the supervisors’ dormitory. An IC card is distributed to workers to pay for their meals, and each month, Surpassing deposits $20.17 (140 RMB) in each worker’s IC card and does not deduct the amount from their wage. At the end of the month, workers are able to transfer IC card’s remaining balance to cash.

The factory canteen offers three meals a day, breakfast, lunch and dinner. There is a variety of dishes served, including stir fried dishes, soy milk, rice and soup noodles, and spicy kabob. The cost for stir fried dishes goes from $0.29, $0.50, $0.72 (2.7, 3.5 to 5 RMB). Soy milk and congee cost $0.22 (1.5 RMB) per cup or bowl compare to the market price outside which soy milk costs $0.07 (0.5 RMB)/cup and congee costs about $0.14 (1 RMB)/bowl.

When asked about the quality of food, workers expressed that the food has was of very poor quality, and one can often find insects mixed in the food.

The canteen does not have a unified management system; each window has a different contractor distributing food.

Surpassing deducts $8.65 (60 RMB) every month from workers’ wage for housing. There are three dormitory buildings on site, with each building consisting of six stories. Among the three dormitory buildings, two are for regular workers and one is for supervisors. In the dormitory buildings for workers, male workers live on the first floor and female workers live on the second floor and above.

There are big rooms and small rooms in workers dormitories; a big room has seven bunk beds, five sets of ceiling fans and two outlets. Each big room houses an average of 13 workers. A small room consists of four bunk beds, two ceiling fans and two outlets and houses an average of eight workers. Because electricity is only available in the dormitory between 4:30PM to 12:00AM, in the other hours, especially on the weekends, workers have to learn to survive without electricity.

There is no bathroom or restroom installed in the room. Public restroom and bathroom are installed at each end of the hallway on each floor. Inside each bathroom and restroom are 23 compartments, thus in other words, only 23 people are able to take shower or use the restroom. Such limited capacity, however, creates a certain level of inconvenience to workers since there are about eight rooms on each floor with a total of at least 80 workers. Because a large number of workers share one floor, and the floor has very limited space to dry clothes, many workers go to the top floor to try to find a space to dry clothes. Moreover, since there are no trash cans in the hallway, one can often find garbage laying everywhere on the hallway floor despite the fact that there are designated cleaning workers to clean the dormitory sites, thus raising a sanitation issue.

Work Conditions

Although there are fans installed at workshops, it does not completely rid the air of the smell of chemicals used such as glue and ink. The workshops reeks of an insistent tingling smell that makes workers feel uncomfortable and disgusted.

Incident

Wang, a print shop worker describes his painful experience: “My job requires me to be under daily exposure to ink. Since we didn’t understand the components in ink and possible risks it may cause, I don’t usually wear gloves since it delays my work speed, and I had to learned my lesson the hard way. My hand eventually started to decay, and it seems that the ink cleaner that I use at work has ripped open my flesh. It was a difficult time, I have to prevent my injured hand from water, especially when I am washing clothes, or my hand would start bleeding.

Though Surpassing provides masks on a weekly basis and gloves periodically, due to lack of training, workers generally do not understand the significance of using these safety equipment supplies while at work. They only know that wearing these equipments bring them discomfort and delay work speed, thus lower wages. Surpassing does not enforce the use of safety equipments unless audits are taking place.

Incident

On May 14, 2008, a female textile worker’s hand was injured due to machine failure.

There are no designated specialists cleaning the machinery equipments onsite, and Surpassing does not periodically arrange technicians to perform maintenance on the machines.

5S is a Japanese management practice introduced and implemented at Surpassing, the practice’s core ideology is to raise employees’ work conscience and quality.

5S consists of five phases, the chart below provides information for each of the phase:

Such procedures may have the capability to ultimately advance a factory’s operation if truly implemented. However, 5S application at Surpassing can only be observed when clients come to audit.

As mentioned in Contract & Hire , new workers are not provided with sufficient work training. Instead, the so-called training at Surpassing is new workers to learning from a designated senior worker while working. However, since the workload is usually heavy, and wage is earned by the amount of production, senior workers do not have time to help train new workers. Thus new workers largely learn by themselves.

Resignation

According to workers, Surpassing sets a three month probationary period for new workers, and during that period, resignation is not allowed. Moreover, even regular workers have difficulty quitting as Surpassing tends to reject resignation requests. Thus, many workers choose to leave without approval, which means forfeiting their wage. In many cases, workers are unable to retrieve their luggage because security requires workers on leave to be absent to work for three days before handing out a permission slip.

Other Conditions

• The most recent audit conducted by PUMA was on May 22 nd, 2008.

• Surpassing requires an employed referrer to each new worker, if new worker does not comply with factory regulation, the referrer will be fined a $21.61 (150 RMB) fine and not able to get a raise within one year timeframe.

• Upon employment, new workers are asked to pay a $18.30 (127 RMB) fee, which /includes $11.10 (77 RMB) social insurance and a $7.2 (50 RMB) IC card processing fee.

• Using a mobile phone at work is prohibited, and it will be taken away by supervisor for three months.

• Bonus is given to workers from time to time. In April, a client praised a production group, and each of the worker in the group was given $4.32 (30 RMB) by Surpassing.

• Inside the entertainment district are pool and ping pong tables, basketball courts though the district is only open every Saturday and Sunday.

• Wastes such as glue, ink, oil are dumped into the sewer; the factory does not have a designated recycling area.

• Though a union is established at Surpassing, workers are not familiar with its purpose and function.

• Complaint system is established on site, though its effectiveness is unknown.

Image: Surpassing’s designated area for waste disposal.

A Worker’s Testimony

I was recently hired by Surpassing. Since it was peak season at that time, the recruiter did not raise too many requests. I was asked to fill out an application, provide an identification card, have a referrer and hands check. Male workers needed to perform an additional step, which is signing an agreement that he would not create violence onsite.

After being hired, I was led to a print shop in workshop building B. The workshop’s environment is very difficult to get used to, especially the aggressive chemical scent and high temperature. At work, I have to share a small table with another worker. Since I have just started working, everything at the workshop is strange to me; I don’t understand the production signs, and I don’t know where to find tools or materials or how to utilize it. As a result, at my very first task, I placed the printing plates that have been integrated with codes for each shoe upside down and crippled the whole production unit. Then, the supervisor came and told me to be careful, since they don’t have time to train me, I would have to learn it myself and be responsible for all the problems that I have created.

Although we have an hour each for lunch and dinner, since it takes more than ten minutes to walk from the workshop to the canteen, and there is additional wait time for food at the canteen, I did not have much time to eat. Everyday at work I feel tremendous pressure and anxiety.

Including overtime, everyday I have to work about until 9:30PM, then I return to my dorm room to eat, take a shower, and wash my clothes. When all is done, it is already past 11PM.

The constant nonstop working style at Surpassing has drained most of my energy, so I decided to quit. Resignation process did not go as smoothly as I thought, Surpassing rejected my request and stated that I was not allowed to quit within the three month probationary period though I knew that according to the labor law, I am entitled to quit at anytime during the probationary period and receive owed wage in full. When I asked for my wage, the management said it is impossible, and when I asked for my luggage out of the factory, I was told that first I would need to be absent to work three days in a roll, then I will be given a permission slip to allow me to retrieve my luggage. I was furious, but since I am a worker and only a worker, I had no choice but to only take some important assets and abandon most of my belongings.

III. PUMA Supplier’s unchanged dreadful conditions

In March 2008, three years after the initial investigation, China Labor Watch conducted a follow up investigation on Taiway Sports, Inc. and found much of the poor conditions that were identified three years ago, still exist at Taiway;

• Poor contract procedure; Workers are able to use someone else’s name on the contract.
• Excessive Overtime; workers are forced to work overtime without overtime pay, working between 10 to 12 hours a day.
• Working 9 regular daily hours instead of eight hours as required by law.
• Withholds payment to workers. Wages are not distributed until the 25 th of each month.
• Discrimination towards one’s background; different treatment based upon one’s provincial origin.
• Theft and violence often occur in dormitory and work place. Workers are forced to live outside the factory in order to avoid harm.
• Team leader retaliated against worker for filing complaints to high level manager.
• Excessive fines; workers are fined when bed sheet is not folded.
• Pitiable food quality; workers expressed that they are treated as pigs.

Hereafter provides the information and data gathered by CLW investigators over the course of three months. As an organization that serves to protect workers’ rights in China, CLW hopes that PUMA, the factory’s exclusive client would abandon the denial attitude which many corporations would often take, and shift its attention on improving its supplier’s poor conditions.

Basic Fact

Taiway Sports LTD is a Taiwanese factory, belonging to the Taiwan Diamond Group. The factory produces mainly sports shoes and ice skates and exports its goods to Germany, Japan and the US. Its primary client is PUMA

Address: Xiaobian Industrial District, Chang’an Town, Dongguan City
Contact Number: 0769—-5536597
Number of workers: About 4,000, with a male to female ratio of 4:6

Contract

There is no deposit required upon recruitment, only personal identification is required. Though workers have to sign a contract, many felt like it was simply a part of procedure. For instance, one interviewed worker said though he used someone else’s name on the contract, he is still able to work. Workers are required to sign a new contract each year, and if one wishes to quit before the contract expires, all awards will be deducted.

Asking for days off is extremely difficult at Taiway. In October 2006, a woman was who requested for days off was rejected by her team leader. When she reported the rejection to a higher ranking manager, the team fired her for complaining to the manager.

Moreover, it is very difficult for workers to quit. Thus in order to leave, workers have tried many different strategies to get fired at the minimum cost.

Some make mistakes intentionally after receiving monthly wage, while some continue to skip work until Taiway fires them. In Taiway, workers are able to obtain their deserved wage after being fired though factory will deduct penalty for each mistake or violation workers commit.

Though the new labor law has been established and effective since January 1 st , 2008, a group of workers still have the old contract signed before 2008.

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Work Hours

Morning	Lunch Break	Afternoon	Overtime
7:30am ~ 12:00pm, 12:15pm, 12:30pm	12:00pm, 12:15pm, 12:30pm ~ 1:15pm	1:15pm ~ 4:15pm, 4:30pm, 4:45pm	4:15pm, 4:30pm, 4:45pm ~ 6:15pm,6:30pm,6:45pm

Taiway gives its workers lunch breaks in several shifts. The factory separates them into three groups: first group leaves for lunch at 12:00pm, followed by a second group at 12:15pm, and a third group at 12:30pm. It also requires workers to arrive to work at least 20 minutes earlier than the stipulated time, obligating employees to work the additional hour without pay.

Though Saturday and Sunday are scheduled as off days, in some cases, Taiway will rearrange workers’ off days to the upcoming week and asks them to work on weekends. That standard was established in September 2006, and previously, workers had to work until 11 PM even on Saturdays.

Currently, workers work an average of 2.5 hours of overtime daily. During peak season, however, workers have to work until at least 10:30pm. In other words, including overtime, workers regularly work at least 52.5 hours per week and about 62.5 hours during the peak season.

During work hours, workers are able to take a short restroom or water break after obtaining a pass from supervisor.

Some workers have reported that there were instances when Taiway reneged on agreements for overtime pay for overtime work.

Working Conditions

At work, there are no restrictions on using the bathroom. The shaping department consists of eight conveyer belts for production. The number of workers at each belt varies: some belts have about 80 to 90 workers and some have 20 to 30 workers. According to workers, they are required to produce about 2,700 pairs of athletic shoes and 3,000 pairs of casual shoes per day.

According to workers who use glue to attach the shoes, although they do not know the components of the glue, they can smell a distinctive smell when applying it to the shoes and at times experience dizziness and drowsiness and have a hard to breathing.

Workers are required to apply a type of chemical fluid when washing the shoes. Though workers do not know the name or the effect of the fluid which they are expose to, they have expressed that after using the fluid for a period of time it feels like the fluid is dissolving into their flesh.

Wage and Remuneration

Before September 2006, Taiway paid workers by a piece-rate. Currently, the factory pays its workers an hourly wage. Taiway pays regular workers by the minimum wage, of 770 RMB which includes 4.42 RMB per regular work hour, eight regular work hours a day and 21.75 work days a month. The wage does not include overtime, subsidy or award. Moreover on factory’s pay details, Taiway pays workers 6.64 RMB per regular overtime hour, 8.84 RMB per rest day (weekend) hour, and 13.28 RMB per holiday hour.

Cafeteria workers are paid by the base wage of 700 RMB if they work 26 days in one month. The wage will not be paid in full if the worker fails to work 26 days during that month. According to cafeteria workers, however, since workers have to take turns to work, many workers are only able to work about 24 to 25 days a month and cannot receive the minimum wage in full.

Taiway distributes wages in cash on the 25 th of each month and provides pay stub. During investigation, CLW investigators asked the question whether there has been any case of wage miscalculation and obtained different answers from different workers. A sewing department worker from Guangxi said, “Sometimes it’s a couple of RMB less and sometimes it is almost 100 RMB. I tried to complain to my team leader every time, and he promised to take care of it right away but never did. My problem was never solved because I am from Guangxi province, my team leader is from the Henan province, and there are very few workers from the Guangxi province.”

When workers from the Henan province were approached with the same question, they responded quite differently. They said that when wage miscalculation is brought to the attention of the team leader, they either receive the remaining wage in couple days or in the next payment.

Many workers also said that workers from the Henan and Sichuan provinces are paid much higher than workers from other provinces because they receive more awards. For instance, a team leader from Henan province often pays subordinates who are also from Henan higher awards.

In the past, Taiway provides uniforms to workers, and if workers need an additional uniform, the factory charges 25 RMB for a winter uniform and 15 RMB for a summer one. After April 2008, Taiway no longer requires workers to wear uniform to work.

Taiway offers a paid maternity leave, paying the minimum wage of 770 a month. May 1 st and October 1 st have a three day paid vacation. There is also a bereavement leave for 15 days, a marriage leave for 3 days, Qingming Festival, Labor Day, Dragon Boat Festival, and Autumn Moon Festivel for one day.

Under the Labor Law article 72, employers are responsible for providing workers pension as well as unemployment, medical, work injury, maternal and social insurance. Taiway, however, only provides social insurance to workers and work injury insurance to a small group of workers. There is a clinic on site, workers are required to pay a fee to receive treatment for injuries. Although the factory states that they only charge workers for the cost of the medical supplies that they use, according to interviewed workers, the medical supply price they pay to the clinic are more expensive than the market price.

Image: Pay stub acquired from a Taiway worker from the textile workshop. The pay stub was distributed in January. From the pay stub (left), one can see that a textile worker’s base wage is 962. However, in order to receive the base wage, it requires 184 regular work hours, 32.5 regular overtime, and 10 hours of weekend overtime. Moreover, though the total wage is 1062 RMB, after deductions include meal advance, insurances and etc., the worker receives only 941 RMB per month.

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Taiway Sports Ltd.
2008 January employee pay stub
Factory ID: N/A Name: N/A
Group: Textile
Level: 101 Standard Work Hour: 184
Regular Work Hour: 184 Regular Overtime: 32.5
Weekend Overtime: 10 Holiday Overtime: 0
Minimum Wage: 962 Employment Subsidy: 0
Special Subsidy: 0 Annual Bonus: 20
Achievement Award: 0 Total Award: 80
Regular Work Absence: 0 Overtime Work Absence: 0
Accommodation Subsidy: 0 Meal Subsidy: 0
Paid Vacation: 0 Paid Vacation Subsidy: 0
Overtime Subsidy: 0 Other: 0
(Deductions) Total Wage: 1062
Meal Advance: 110 Benefit: 5
Group Insurance: 4 Insurance: 0
Withhold: 2 Total Deduction: 121
Income Tax: 0 Remaining Meal Cost: 0
Wage: 941 Actual Wage: 941

Pay stub acquired from a Taiway worker from the shaping workshop.

Taiway Sports Ltd.
2008 January employee pay stub
Factory ID: N/A Name: N/A
Group: Shaping
Level: 101 Standard Work Hour: 184
Regular Work Hour: 184 Regular Overtime: 48.5
Weekend Overtime: 27 Holiday Overtime: 0
Minimum Wage: 1192 Employment Subsidy: 0
Special Subsidy: 0 Annual Bonus: 0
Achievement Award: 0 Total Award: 50
Regular Work Absence: 0 Overtime Work Absence: 0
Accommodation Subsidy: 0 Meal Subsidy: 0
Paid Vacation: 0 Paid Vacation Subsidy: 0
Overtime Subsidy: 0 Other: 0
(Deductions) Total Wage: 1242
Meal Advance: 110 Benefit: 5
Group Insurance: 4 Insurance: 0
Withhold: 2 Total Deduction: 121
Income Tax: 0 Remaining Meal Cost: 0
Wage: 1121 Actual Wage: 1121

Living and Canteen Conditions

There are five dormitory buildings on site. Canteens are built on the first floor in three of the five dormitory buildings. The second and third floors house male workers and female workers occupy the rest of the dormitory. Each dormitory room is about 30 square meters, installed with an independent bathroom, four to five bunk beds able to house ten to twelve workers, and two fans. Dormitories distribute hot water from 5PM to 6 PM and after 8:30 PM.

Workers who are not living in the factory dormitory can receive a 60 RMB subsidy a month. Many male workers choose to live outside the factory because there are limited spaces in the dormitory and it is safer living outside the factory though the average spending on rent including utilities costs about 200 to 300 RMB. According to interviewed workers, theft often occurs in the dormitories. A worker from Henan said,  My meal card which I can deposit money to buy food was stolen two months in a row, and the broken door was never fixed. There used to be eight people living in my room, but because of theft, five peope have left! 

Taiway conducts a dormitory room audit each week. First place receives 100 RMB, second place receives 50 RMB, and the awards are distributed among workers whose room is nominated. Furthermore, rooms in poor condition will be fined a 10 RMB penalty.

There are three canteens in Taiway, each with eight televisions installed. The largest canteen can hold about 2,000 workers, and the small ones hold about 700 workers. In the beginning of each month, Taiway deposits 110 RMB in each worker’s meal card and deducts the amount from workers’ wage at the end of the month without workers’ consent.

The canteen offers five different types of dishes for each meal. The price of each meal varies depends on the quality and quantity of the food, from two meat and one vegetable dish which costs about 3 RMB, two meat and two vegetable dishes that costs 4 RMB, to quality meal that charges 6, 8, or 10 RMB When asked to describe the quality of food, workers replied, it tastes like pig food. However, workers have no choice but to dine in the canteen because there are no other restaurants nearby. Workers who live offsite are more fortunate than workers who live on site, because they only have lunch in the factory canteen and breakfast and dinner offsite though food offsite are generally more expensive.

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Workers’ dormitor

A notice found at Taiway written, Whoever litters on the water fountain has no manner and is a pig. Is the trash can far from here?

Fines and Penalties

Taiway implements many fines. For instance, fighting at work will lead to three major penalties, and each major penalty costs 90 RMB, thus the total of a 270 RMB fine. If it is a serious case of violence, workers will be marked three penalties and fired. Smoking in a dormitory room will lead to one to three major penalties for everyone in the room, and smoking at work will lead to one major penalties, a 90 RMB fine. Unfolded bed sheets will also lead to one major penalty. Being more than one minutes late for work will lead to a deduction worth half an hour of wage and skipping work one day will lead to deduction worth three days’ wage.

Other Conditions

About 40 percent of workers at Taiway are from the Henan province, 40 percent from the Sichuan province, and the remaining 20 percent are from other provinces. Due to discrimination, workers from Henan and Sichuan have formed their own provincial groups and sometimes fight with rival groups. According to workers, in 2007, due to provincial discrimination, a Henan worker ripped open a Sichuan worker’s stomach and broke his finger.

As a result, Taiway now avoids in recruiting workers from Sichuan and Henan province. In addition, it now recruits mainly female workers between 18 and 40 years of age.

According to PUMA, in 2005, it introduced its S.A.F.E Pocket Guide which provides information on PUMA’s social, health, safety and environment standards and etc. Copies of the Pocket Guide are printed and sent to its suppliers for distribution for workers. However, on March 20 th, 2008, after interviewing seven workers from Taiway, none of the interviewed workers have received such guidebook.

Conclusion

At Taiway, the factory demonstrates a number of failures in its management; long regular work hours and overtime; discrimination based on origin; excessive fines; food and living conditions are extremely poor.

Work Hours

At Taiway, the government stipulated contract law means nothing; it is simply words that are irrelevant to factory’s production and heavy exploitation to workers in order to pursue higher profit. Though the contract law regulates that the daily work hours cannot exceed eight hours, Taiway requires workers to arrive to work 20 minutes earlier than the stipulated work time with no overtime pay, including lunch and dinner break, workers have no choice but to sacrifice one extra hour working for free, contributing to work while knowing they are receiving nothing in return but their decaying life. By obligating workers to work one extra hour with no overtime pay, under China’s new guideline of 21.75 average working days per month, each year Taiway squeezes about $873,430 USD (6,201,360 RMB) from its 4,000 workers.

At Taiway, during the peak season, workers are required to work the average of 250 hours per month, and at the end of the day, they gained nothing but an exhausted and sore body, low wages, and humiliation.

Wage and Remuneration

With the inflation in varies of commodities during the past few years, it is difficult for average workers, especially Taiway workers who are required to work extra hour for free, to self-sustain or support a family. In addition to the low paid wages, Taiway also posts varies fines in attempt to cover their cost. In Taiway, workers not folding their bed sheets before going to work will be fined 24 RMB, equivalent to six hours worth of wage.

Work Conditions

At Taiway, team leaders and supervisors judge and issue awards to their subordinates not by their work performance, but on their provincial origin. In the factory consisted with employees mostly from Henan and Sichuan province, team leaders and supervisors tend to favor workers who share the same provincial origin as them. Workers working under a team leader whose provincial origin is different than theirs should not expect to receive a fair award or a response for their miscalculated wage. The system has been greatly influenced and corrupted by such discrimination; workers from a province that is weak in numbers at Taiway can only blame their parents giving them birth at a wrong place.

Living and Canteen Conditions

Theft and violence often occurs in the dormitories and work places. Because of theft, many workers who used live in the factory dormitory because of work convenience are forced to rent apartments offsite and pay a significant portion of their wages to avoid their belongings being continuously stolen.

Due to discrimination, workers from Henan and Sichuan have formed their own provincial groups and sometimes fight against each other. Such large scale violence promotes Taiway’s system of discrimination, weakens workers’ desire to work, and endangers the whole factory’s safety. However, without any effective corrective action that could solve the root of the crisis, Taiway now merely rejects all applicants from Henan and Sichuan, thus adding another aspect that contributes to the discrimination at workplace.

Food is an essential element in human’s daily life; the right nutrient enhances immune system, increases durability and the drive to work more efficiently. In Taiway’s canteen, however, workers are viewed as cattle, fed by the lowest quality of food. Many workers expressed that the canteen food tastes like pig food though they have no choice but to continue to eat such horrible food because there are no other restaurants nearby.

In 2005, after receiving complaints from workers at Taiway factory, CLW began its initial research on the factory and discovered a number of horrifying conditions. Three years after, CLW conducted a follow-up investigation on Taiway, and discovered that, poor conditions remain at work place.

As Taiway’s primary client, PUMA has the responsibility to commit to the supplier and conduct regular and effective audits to ensure that its products are produced ethically. However, despite its code of conduct and social sustainability report produced annually, it seems that the only aspect PUMA is after is maximizing the company’s profit, investing more and more money in advertisement and composing reports that essentially creates a mirage to the audience internationally, making believe that PUMA is a responsible and respectable company, while behind the scene, workers struggle and suffer, working days and nights manufacturing PUMA’s products.

According to PUMA’s S.A.F.E. department, the company wants their suppliers to continuously improve themselves. Despite the statement, however, after the course of three years, conditions at Taiway persist; long work hours, low pay, poor living conditions, discrimination and more. Workers are still suffering under the vicious cycle created by PUMA, while the company climbs higher latter in revenues claiming itself to be socially responsible.

It is never CLW’s aim to criticize any particular company; our ultimate goal is to advance workers’ position at work place, maintain social justice, and ensure companies are complying with their own code of conduct. Li Qiang, Executive Director of China Labor Watch believes,  Compared to other companies in the same industry, PUMA tends to put less attention on workers’ conditions. Using Taiway as an example, the factory’s unchanged conditions suggest that PUMA merely focuses on marketing the finished products rather than what workers have to go through each day during the process of production. 

As a company expands and develops to a level that it is internationally known and its products, become the popular commodities used among the general public, its place in the society is significant and irreplaceable. Each approach it constructs, can greatly impact the society. Therefore, the company has a much greater responsibility not limited within the business sector, but also outreaches to maintain social justice and ethics, and serves as a reputable model to other businesses as well as the general public. PUMA certainly represents the company described above, though it frequently enjoys avoiding its responsibility and shifting blames. CLW hopes that by reporting the findings gathered from Taiway, it would gain the company’s attention to begin its production ethically, and offer workers better work conditions, rather than being a pure profiteer and ignore workers’ critical conditions. In the end, PUMA is the key pull these workers out of the cycle of vicious exploitation. Our belief is in accordance with PUMA’s Sustainability Report, that to ensure ethical sourcing, it is ultimately up to the company’s commitment.

IV. RECOMMENDATIONS

China Labor Watch urges PUMA to take the following actions:

• Obey Chinese labor laws and regulations.
• Not abandon its supplier factories, but rather commit to them and to be resolute in making sure that violations are corrected.
• PUMA and its supplier factories should not impose any form of retaliations on workers who filed complaints.
• PUMA should urge its supplier to offer workers legal work hours, fair wages that allows sustainability and eliminate discrimination at work place.
• PUMA should also publicize the results of factory audits.

To Consumers

April 21 st, 2008

Dear friends,

More than four thousand Chinese workers are currently working under heavy exploitation and they desperately need your support! We hope you will join our writing campaign to PUMA, to urge the German-based sports company to improve the working and living condition of their supplier factories’ workers in China.

The following is an investigative report summary on one of the supplier factories of PUMA. Based on the information obtained from many sources, including interviews conducted with workers from the factory, this report is intended to document several instances, in which the factory operators violate their workers’ legal rights, to disseminate that information to the international community, and to call for corrective actions by the factory to improve working conditions for its workers.

Below is the summary of our findings, each day, workers are forced to work under the critical conditions described below.

PUMA Supplier’s unchanged dreadful conditions

Basic Facts

Taiway Sports LTD is a Taiwanese factory, belonging to the Taiwan Diamond Group. The factory produces mainly sports shoes and ice skates and exports its goods to Germany, Japan and the US. Its primary client is PUMA.

Address: Xiaobian Industrial District, Chang’an Town, Dongguan City
Contact Number: 0769—-5536597
Number of workers: About 4,000, with a male to female ratio of 4:6

Wage and Remuneration

With the inflation in varies of commodities during the past few years, it is difficult for average workers, especially Taiway workers who are required to work extra hour for free, to self-sustain or support a family. In addition to the low paid wages, Taiway also posts varies fines in attempt to cover their cost. In Taiway, workers not folding their bed sheets before going to work will be fined 24 RMB, equivalent to six hours worth of wage.

Work Conditions

At Taiway, team leaders and supervisors judge and issue awards to their subordinates not by their work performance, but on their provincial origin. In the factory consisted with employees mostly from Henan and Sichuan province, team leaders and supervisors tend to favor workers who share the same provincial origin as them. Workers working under a team leader whose provincial origin is different than theirs should not expect to receive a fair award or a response for their miscalculated wage. The system has been greatly influenced and corrupted by such discrimination; workers from a province that is weak in numbers at Taiway can only blame their parents giving them birth at a wrong place.

Living and Canteen Conditions

Theft and violence often occurs in the dormitories and work places. Because of theft, many workers who used live in the factory dormitory because of work convenience are forced to rent apartments offsite and pay a significant portion of their wages to avoid their belongings being continuously stolen.

Due to discrimination, workers from Henan and Sichuan have formed their own provincial groups and sometimes fight against each other. Such large scale violence promotes Taiway’s system of discrimination, weakens workers’ desire to work, and endangers the whole factory’s safety. However, without any effective corrective action that would solve the root of the crisis, Taiway now merely rejects all applicants from Henan and Sichuan , thus adding another aspect that contributes to the discrimination at workplace.

Food is an essential element in human’s daily life; the right nutrient enhances immune system, increases durability and the drive to work more efficiently. In Taiway’s canteen, however, workers are viewed as cattle, fed by the lowest quality of food. Many workers expressed that the canteen food tastes like pig food though they have no choice but to continue to eat such horrible food because there are no other restaurants nearby.

Friends, Chinese workers need your help to fight against corporate greed. Please take action now! We sincerely appreciate you help.
In Solidarity,
Li Qiang
Executive Director, China Labor Watch

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Please direct your appeal to the individuals below:

Dr. Reiner Hengstmann
Global Head Environmental & Social Affairs
PUMA AG
Unit 802, 8 F.
Equitable Bank Tower
8751 Paseo de Roxas Avenue
Makati City
Philippines 1226
Phone +632-8897144 (direct line)
Fax +632-8860718
Email reiner.hengstmann@puma.com

Please sign your name under the following letter to urgently demand PUMA to take immediate measures to improve workers’ working conditions in the factory and announce these improvements to the public:

To Whom It May Concern:

This letter is regarding to your China-based supplier factory’s management. I am a consumer, and I recently have read a China Labor Watch’s investigation report on your supplier factory, Taiway Sports Inc. After reading the report, I became very aware and concerned about the workers’ situations in the factory. I wish you would take your time to truly focus on your supplier factory’s management and take immediate actions to improve workers’ working conditions rather than shifting blames and avoiding the problems.

Regards,

Please following this letter to your friend

Mr. Li Qiang
China Labor Watch Executive Director