Fair Labor firm under review for being unfair

Cdn T-shirt maker accused of being anti-union after closing Honduran plant

T-shirt maker Gildan Activewear has until the end of the month to convince the Fair Labor Organization that it’s putting money where its mouth is when it comes to labour standards and workers’ rights.

Less than a year after signing on with the New York-based not-for-profit labour practices monitor, the Montreal-based garment manufacturer has been put on a special review status, akin to probation. The move came after Gildan announced it would close down the El Progreso factory in Honduras, the site of alleged workers’ rights violations dating back to 2002.

What happens next will be a test of credibility for both Gildan and the association, which doesn’t want to be seen as a cover for employers that pay lip service to corporate social responsibility but continue to flout workers’ protections.

The Fair Labor Association, established in 1999, monitors about 25 companies that voluntarily commit to honour the association’s labour code. Because it conducts independent and unannounced audits of factories worldwide, ethical investment funds and rights-conscious buyers, like anti-sweatshop student groups, often look to FLA as a stamp of approval.

Gildan’s reputation on the treatment of factory workers has been under heavy scrutiny in recent years (see sidebar). Soon after joining FLA as a participating member in November, the company lost its third-largest investor when Quebec’s union-backed Solidarity Fund sold all its shares worth about $90 million.

Last month, in response to the closing of the El Progreso factory, social investor Real Assets divested about $20,000 worth of shares.

Stéphane Lemay, vice-president of public and legal affairs at Gildan, said the company is “actively working with the FLA to come up with a satisfactory resolution of this process.”

Its participation in FLA, said Lemay, is “not just for public relations.”

Gildan joined FLA after allegations had already emerged — twice — that groups of workers at the El Progreso factory were dismissed after filing for union recognition or organizing to form a union.

The timing itself isn’t a knock on credibility, said FLA executive director Rutledge Tufts, drawing a careful distinction between a company that runs for cover by signing up with a voluntary code when its reputation is in dispute, and one that runs for shelter — for help to fix its problems.

The FLA understands that a company doesn’t have to be perfect in order to join the association, said Tufts. In fact, companies typically have three years to bring their practices up to FLA code. (Tufts noted, though, that as Gildan owns its manufacturing facilities, it’s easier for it to comply with the voluntary code than for other participating companies that rely on suppliers.)

Gildan didn’t get the three-year grace period because an anti-sweatshop watchdog group, the Toronto-based Maquila Solidarity Network, filed a third-party complaint shortly after Gildan joined.

As a result, FLA launched an audit of the El Progreso factory. It found that the company had violated FLA codes on a variety of issues, including freedom of association and health and safety.

But in July, while Gildan and FLA were still in talks to correct problems uncovered by the audit, the company announced that, for business reasons, it was closing the plant and laying off 1,800 workers. Workers’ rights groups saw that decision as indicative of possible noncompliance.

Shutting down a “problem” factory was Gildan’s way of telling workers in the region to “keep quiet about labour and human rights violations or they’ll lose their jobs,” said Deb Abbey, CEO of Real Assets. “By cutting and running, Gildan is not taking responsibility for the full impact of its operations and is scoffing” at concerns by groups like FLA, Abbey told Canadian HR Reporter.

FLA has placed the company on a 90-day probation, during which the company has to “acknowledge that there were restrictions in the El Progreso factory on workers’ rights to freedom of association.”

Lemay declined to comment on whether Gildan will make such an acknowledgement, but added that the company is committed to remain a participant of the FLA.

“We were quite open and transparent with the reasons behind the closing. We had explained the operational and economic rationale,” he said. “It had nothing to do with the audit but was purely an economic decision.”

He added that laid off employees got a severance package that went “much beyond” what’s called for under Honduran law. “We have put together a social office and a doctor’s office — a clinic, basically — until January of next year that the employees can take benefit of.”

Tufts said that given the unusual circumstances around the case, what’s needed is “some sign” from Gildan to “convince people that (it does) embrace the principles involved in workplace standards.”

The Gildan story: What happened

February 2002 — Concerns about workplace conditions at a Gildan factory in Honduras emerged, including allegations of workers being dismissed for organizing.

November 2003 — Gildan joined the Fair Labor Association. A week later, the Solidarity Fund decided to sell $90 million worth of shares over firing of workers.

December 2003 — The Maquila Solidarity Network, filed complaints alleging that workers were fired in October 2003 for their organizing activities.

February and March 2004 — The FLA conducted its audit to follow up on the complaint and found there had been non-compliance with FLA code. Informed of the findings, Gildan began developing a remediation plan.

July 2004 — At a meeting to discuss the remediation plan, Gildan announced the plant would close in late September. In response, the FLA board put Gildan on special review status, the first for the association.

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