THE WAGE ISSUE
Upon receipt of Verité's final report on March 14, 2001, Nike
immediately
issued a remediation plan and began to work with Kukdong
Management to
correct identified areas of non-compliance. The complexity
of the wage
issue required a thorough investigation to determine the scope of
corrective action.
Mexico Local Labor Laws
There are two minimum wages that Kukdong is obligated by law to
pay to
workers.
1. Minimum wage for manual operators of 35.85 pesos per day.
2.
Minimum Professional wage for a Sewing Operators of 46.30.
Local labor laws do not specify wages for workers in training.
At Kukdong,
workers in training were sewing scrap pieces rather than actual
product on
the production line. In some instances, these training jobs
were held by
new workers learning skills and in other cases by workers hoping
to move
into a production line once a position opened.
Kukdong wages are established in the current collective bargaining
agreement (see Attachment A for information). The table
below provides a
summary of the wages currently being paid at Kukdong. As you
can see,
Kukdong pays 43.00 pesos for manual operators, and a minimum wage
of 48.00
pesos to a sewing operator in the starting category. As
workers on the
sewing line improve their skills, their wage moves upward from the
48.00
peso minimum according to the pay scale in the collective
bargaining
agreement.
Wage Category
(Region C, Year 2001)
Definition
Mandated by law
Kukdong wage
Minimum wage for a NON -Sewing Operator
Performing inspection jobs, or
passing bundles of garments
35.85
(per day)
43.00
(per day)
Minimum Professional Wage to a Sewing Operator
Sewers in a production line
46.30
(per day)
48.00
(per day)
Note: Although trainees are behind a sewing machine, by
Kukdong's
standards, they are not yet considered a sewing operator since
they are not
profit producing workers. Their wages fall under the
non-sewing operator
category, earning the same wage as a manual worker. Once
they acquire the
necessary skills, they will be moved to a production line and
their wages
will be increased to the professional minimum wage for a sewing
operator in
accordance with local labor laws.
Nike's Code of Conduct & Fair Labor Association (FLA)
Nike's Code of Conduct states, "The manufacturer provides
each employee at
least the minimum wage, or the prevailing industry wage, whichever
is
higher." Nike also has a standard, which applies to
contractors that
states: "Newly-hired workers in training must be compensated
at or above
the country/region minimum wage level, regardless of local
allowances for
training wages."
The FLA guidelines also state, "Employers will pay workers
the legal
minimum wage or the prevailing industry wage, whichever is higher.
Where
training wages are legally allowed, no worker will be paid a
training wage
for more than three months cumulatively." However,
there is no specific
language addressing situations in which workers in training are,
for a
period of more than 3 months, receiving more than the minimum wage
but less
than the professional wage because they are not sewing on the
production
line.
Verité Audit Findings and Nike's Subsequent Investigation Results
This section provides information directly from the Verité
report, along
with the information resulting from further investigation by Nike.
Supporting documentation exists for this information but it is not
provided
as part of this summary in order to keep names of workers
confidential.
Verité Findings: "Two sewers reported earning 38 pesos
(US$3.96) a day.
Management provided the auditors with a list of active workers
that
includes their daily salaries, which indicated that approximately
one-third
of the sewers on the list are paid a daily base wage below the
legal
minimum of 46.30 pesos (Attachment I: Active Workers List)."
Unfortunately, the Active Workers List that was provided to the
Verité
auditors by Kukdong Management did not specify what type of job
each worker
was performing.
Nike investigated the above finding, by individually reviewing
each
worker's record to determine what type of work he/she was
performing at the
time of Verité audit. A review of each worker's status was
also necessary
because many workers had received a wage increase since the time
of the
audit after moving from a manual or training position to a
position as a
sewing operator. All current wage information was confirmed
through copies
of pay-stubs signed by workers.
The information can be separated into two areas that Nike
investigated:
1) Two workers interviewed reportedly earned 38.00 pesos on the
sewing line.
Nike was unable to identify any sewers earning 38.00 pesos in the
Active
Workers List. It is possible that the two
workers identified in the
Verité report may have been in training and reported their wage
for year
2000, since Kukdong's minimum wage paid in 2000 to non-sewers was
38.00
pesos. Around the time of the Verité audit, the collective
bargaining
agreement had just been re-negotiated and the wages were increased
for year
2001. Therefore, it is possible that there was some
miscommunication
between the factory and Verité auditors during the audit.
2) Approximately one-third of the workers on the list were earning
below
the minimum wage.
Nike conducted a thorough review of all of the workers to
determine whether
as many as one-third of the workers were making below the minimum
wage, as
stated in Verité audit report. Below you will find the
results of this
investigation, broken down by production line.
Line 5
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 36 workers, of which nine out of 36 (25%)
earned 43.00
pesos. All nine workers were either manual workers or
trainees at the time
of the audit, which means they were being paid above the minimum
wage for
their category. Currently six of the nine workers have moved
up to become
Sewing Operators and are now earning a wage of 48.00, leaving
three manual
operators on this line.
Line 6
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 37 workers, of which 13 out of 37 (35%)
earned 43.00
pesos. All 13 workers were either manual workers or trainees
at the time
of the audit; therefore these workers were being paid above the
minimum
wage for their category. Currently six of them have moved up
to becoming
sewing operators and are now earning a wage of 48.00 pesos,
leaving seven
manual operators on this line.
Line 7
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 37 workers, of which 13 out of 37 (35%)
earned 43.00
pesos at the time of the audit. All 13 workers were either manual
workers
or trainees at the time of the audit; therefore these workers were
being
paid above the minimum wage for their category. Currently
five of the 13
workers have moved up to becoming sewing operators and are now
earning a
wage of 48.00 pesos, leaving eight manual operators on this line.
Line 8
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 34 workers, of which 14 out of 34 (41%)
earned 43.00
pesos at the time of the audit. All 14 workers were either
manual workers
or trainees at the time of the audit. Therefore these
workers were being
paid above the minimum wage for their category. Currently
six of the 14
workers have moved up to becoming sewing operators and are now
earning a
wage of 48.00 pesos and one has moved up to become a supervisor
earning
53.00 pesos leaving seven manual operators on this line.
Line 9
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 40 workers, of which 15 out of 40 (37%)
earned 43.00
pesos at the time of the audit. All 15 workers were either
manual workers
or trainees at the time of the audit. Therefore these
workers were being
paid above the minimum wage for their category. Currently
seven of the 15
workers have moved up to becoming sewing operators and are now
earning a
wage of 48.00 pesos and one has moved up to become a supervisor
earning
53.00 pesos, leaving seven manual operators on this line.
Line 10
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 39 workers, of which 16 out of 39 (41%)
earned 43.00
pesos at the time of the audit. All 16 workers were either
manual workers
or trainees at the time of the audit. Therefore, these
workers were being
paid above the minimum wage for their category. Currently
eight of the 16
workers have moved up to becoming sewing operators and are now
earning a
wage of 48.00 pesos, leaving eight manual operators on this line.
Line 11
Verité's report states that this line was comprised, at the time
of the
audit, of a total of 43 workers, of which 20 out of 43 (46%)
earned 43.00
pesos at the time of the audit. All 26 workers were either
manual workers
or trainees at the time of the audit. Therefore these
workers were being
paid above the minimum wage for their category. Currently
eight of the 20
workers have moved up to becoming sewing operators and are now
earning a
wage of 48.00 pesos, leaving 12 manual operators on this line.
Conclusion
The discrepancies identified by Nike's investigation of wages at
Kukdong
could have been avoided by a thorough checking of each worker at
the time
of the audit to determine whether they were sewing operators in a
production line, manual workers, or trainees. After having
reviewed all
the information one can conclude that Kukdong is committed to
providing
jobs with wages well above the minimum. This is evidenced
also in the fact
that approximately 50% of those workers previous in training have
now been
promoted to a sewing operator position earning 48.00 pesos.
One issue, which this exercise did raise is that there should be
appropriate corrective action in instances where workers are
receiving
training wages above the minimum wage but below the professional
wage for a
period of greater than three months. Training wages are
currently limited
by FLA guidelines for three months cumulatively. However, if
no job was
open on a production line, many workers would presumably rather
stay beyond
the three-month period of training receiving more than the minimum
wage if
there is a possibility of eventually moving to a professional
category and
obtaining a higher wage. Nike will take this issue up with
the FLA and
follow its recommendations.
For more information on the situation at Kukdong or Nike's
Corporate
Tim Connor
Coordinator,
The NikeWatch Campaign
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55 Wells Street, Redfern 2016, AUSTRALIA
Phone: 61 2 9698 2394
Fax: 61 2 9280 3426
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