How About Sensitivity Training For The Foxconn Honchos?

March 29, 2012

[By Sudarshana Banerjee]

The Fair Labor Association (FLA) has released its report on the working conditions at Foxconn, the company that is a major supplier of Apple (among other companies) in China. The report details excessive overtime and problems with overtime compensation at the factories, several health and safety risks, and unsafe working conditions among workers.

Apple’s CEO Tim Cook is currently in China touring the Foxconn facilities, and Foxconn has promised that things will be better.

Promises are made to be broken…

The challenge is, while promises are being made, implementing better working conditions in this case involve not just hiring a few change management gurus, and doing a strategic process overhaul. The audit by the Fair Labor Association is new, but conditions at Foxconn have been sour for quite a bit. Things have not changed despite outcries by the international media, worker suicides, and accidents.

The Fair Labor Association is “a coalition of universities, non-profit organizations and businesses committed to improving the health, safety, fair treatment and respect of workers worldwide.” It has no legal standing to ‘enforce’ humane conditions.

Lets look at an excerpt from Apple’s own report:

At 90 facilities, more than half of the records Apple reviewed indicated that workers had worked more than 6 consecutive days at least once per month, and 37 facilities lacked an adequate working day control system to ensure that workers took at least 1 day off in every 7 days. 42 facilities had payment practice violations, including delayed payment for employees’ wages and no pay slips provided to employees. 68 facilities did not provide employees adequate benefits as required by laws and regulations, such as social insurance and free physical examinations. 49 facilities did not provide employees with paid leaves or vacations. 67 facilities used deductions from wages as a disciplinary measure. 108 facilities did not pay proper overtime wages as required by laws and regulations. For example, they did not provide sufficient overtime pay for holidays.

According to Hon Hai chairman Terry Gou, factory workers are like, well, animals; and last heard he was looking for tips on how to herd them better from the director of the Taipei Zoo. The Want China Times quoted Mr. Gou, and the company subsequently issued an apology over the statements of its chairman. The changes in Foxconn need a fundamental attitudinal shift on the part of its management, not just a door fixed here, and a retroactive payment fix there.

The Investigation Process

On February 13, FLA launched an independent investigation into labor rights allegations at Foxconn, an Apple supplier in China. FLA assessors logged more than 3,000 staff hours inside the factories. They evaluated conditions based on visual observation and review of policies, procedures and documentation (payroll and time records, production schedules, employee records); interviewed hundreds of Foxconn workers and managers both on- and off-site; and conducted an anonymous worker perception survey of 35,500 randomly-selected Foxconn workers.

Under FLA rules, its assessors have unfettered access to conduct thorough investigations of Apple suppliers. This investigation of three Foxconn factories at Guanlan, Longhua, and Chengdu, in China is the beginning of FLA’s in-depth, thorough examination of the entire operation to assess whether workers’ rights and labor standards are being respected throughout Apple’s supply chain, said the agency.

What did the FLA find?

FLA’s investigation found that within the last 12 months, all three factories exceeded both the FLA Code standard of 60 hours per week (regular plus overtime) and the Chinese legal limits of 40 hours per week and 36 hours maximum overtime per month. During peak production periods, the average number of hours worked per week exceeded 60 hours per worker. There were periods in which some employees worked more than seven days in a row without the required 24 hours off.

14 percent of workers may not receive fair compensation for unscheduled overtime. The assessment found that unscheduled overtime was only paid in 30-minute increments. This means, for example, that 29 minutes of overtime work results in no pay and 58 minutes results in only one unit of overtime pay.

According to FLA’s worker survey, 64 percent of employees say that compensation does not meet their basic needs. FLA observed other serious issues in areas such as health and safety, worker integration and communication, treatment of interns, and China’s social security enrollment, among others.

A considerable number of workers feel concerned about the protection of their health and safety. More than 43 percent of the workers report that they have experienced or witnessed an accident. These accidents range from hand injuries to factory vehicle accidents.

The assessment also found that the union at Foxconn is dominated by management representatives and does not provide true worker representation.

What happens now?

The FLA says it has commitments that will reduce working hours to legal limits while protecting pay, improve health and safety conditions, establish a genuine voice for workers, and will monitor on an ongoing basis to verify compliance.

Foxconn has committed to be more inclusive of workers in health and safety monitoring and decisions. Until now, Foxconn only recorded accidents that resulted in a production stoppage. Beginning immediately, Foxconn committed to require supervisors and workers to report all accidents resulting in an injury.

Foxconn has committed to bring its factories into full compliance with Chinese legal limits and FLA standards on working hours by July 2013, according to its remediation plan in FLA’s report. The supplier will bring working hours in line with the legal limit of 49 hours per week, including overtime

Foxconn has also agreed to develop a compensation package that protects workers from losing income due to reduced overtime, says the FLA. In order to maintain capacity while reducing workers’ hours, Foxconn committed to increase its workforce significantly as it builds additional housing and canteen capacity.

In keeping with local laws, Foxconn has agreed to ensure elections of worker representatives without management interference.

FLA secured agreement from Foxconn and Apple to retroactively pay any worker due unpaid overtime. The companies are currently conducting an audit to determine the payments due to workers.

FLA will conduct a cost of living study in Shenzhen and Chengdu to assist Foxconn in determining whether worker salaries meet FLA requirements for basic needs, as well as discretionary income.

FLA also secured agreement by Foxconn to find alternative ways to address low enrollment in social security benefit programs and to adapt its internship program to ensure that interns enjoy the protections necessary for a productive, healthy and safe educational experience.

Many of Foxconn’s health and safety problems, including blocked exits, lack of or faulty personal protective equipment and missing permits, were immediately corrected during the course of the investigation, says FLA. The agency says it finds that a year after the Chengdu explosion, Foxconn had improved operating procedures, measurement, and documentation to reduce risks related to aluminum dust where Apple products are made.

“The Fair Labor Association gave Apple’s largest supplier the equivalent of a full-body scan through 3,000 staff hours investigating three of its factories and surveying more than 35,000 workers. Apple and its supplier Foxconn have agreed to our prescriptions, and we will verify progress and report publicly,” said Auret van Heerden, President and CEO of the Fair Labor Association.

You can find the worker survey data here. You can find a copy of the FLA report on Foxconn here.