The University of Wisconsin and Purdue University are both reviewing alleged workers' rights abuses at two factories run by Nike subcontractors in Honduras. Both factories were reportedly shut down without notice in January. Since then, their owners have allegedly failed to pay workers a combined total of more than $2 million in severance and back wages. Both schools said they may end their contracts with Nike.
In a statement, Purdue said it that besides reviewing the labor allegations, it also will consider whether the contractors should take over responsibility for the severance pay.
“We take these licensing matters seriously and work to ascertain all the facts before making any determinations, in fairness to all parties,” said James Almond, senior vice president for business services.
Purdue noted that Honduras has been in the throes of widespread political unrest, including a military coup in June and the just-completed presidential election. Industry there also has been seriously impacted by the global recession causing hardship for the Honduran workers.
“While all of these cases are difficult to unravel with certainty, the complaint involving Nike is more complex than most,” Almond said. “What is clear is the Honduran factories have closed and only some of the severance has been paid by those companies.”
A watchdog group, the Worker Rights Consortium, contends that because there are no other potential sources of funds besides the plants' customers, Nike should make every effort to get the contractors to pay the workers, Almond said. Both contractors contend they do not have a legal liability nor financial ability to pay. There also is a dispute as to whether and how much collegiate-licensed product the two factories produced, Purdue's statement noted.
Employees are reportedly owed an average of $1,000 per person, a significant sum in the country, according to the WRC.
“The WRC has recommended Nike use all of its influence to compel the contractors to pay money owed by the closed factories,” Almond said. “The WRC acknowledges that while it is debatable whether university licensing codes of conduct obligate a licensee like Nike to pay workers through its own resources, they contend the licensee must do whatever it reasonably can to compel contractors to do so.”
In this case, while Nike and the WRC agree the matter has been discussed with the contractors, no progress has been made in getting them to pay. The Purdue Organization for Labor Equality contends Purdue should terminate its licensing contract with Nike unless the remaining dollars are paid.
Purdue's statement noted that the business relationships also are complex. Nike's contractors, Liberty and HB Sports/New Holland, subcontracted work to the two factories that closed in January. Nike says its records indicate that Liberty's last Nike products were completed by the end of 2007 and HB Sports' were completed in December 2008.
Purdue also said Nike states that these subcontractors did not manufacture collegiate-licensed apparel for Nike except for a one-time order in 2007, although Nike acknowledges that collegiate license tags were found in one of the plants. Nike says the tags had been “erroneously used on blank product,” not on collegiate-licensed apparel. Nike also says that one of its independent licensees doing business with one of the subcontractors incorrectly listed itself as a collegiate supplier.
“From Nike's point of view, the company worked in good faith with its primary contractors, giving them significant advance notice that it would terminate its relationship with them,” Almond said. “At the time of the closing, the factories were producing brands unrelated to Nike. Information provided by the Worker Rights Consortium contradicts some of Nike's findings, so we are seeking more information from Nike.”
The Worker Rights Consortium and the Fair Labor Association – the two watchdog groups of which Purdue is a member – also are not in agreement. The WRC has reported that Nike is in violation of university labor standards. FLA, on the other hand, has taken no position. The Purdue Organization for Labor Equality has accused the FLA of a conflict of interest.
“Purdue appreciates the WRC and student Purdue Organization for Labor Equality for bringing these allegations to our attention,” Almond said. “We expect to make our decision by the end of the year.”
Meanwhile, the University of Wisconsin has also been probing the closed factories.
On Nov. 3, Chancellor Biddy Martin was the first college president to write to Nike asking for a detailed remediation plan. At its November meeting, the university’s Labor Licensing Policy Committee (LLPC) recommended that UW-Madison initiate termination of licensing agreements with Nike in response to perceived material breaches of the code of conduct. The group acts as an advisory body to Martin.
On Dec. 4, Martin wrote to the committee notifying the group that she believes the Nike is working in good faith toward a resolution and she plans to give the company four months to solve the issue or make “satisfactory, demonstrable progress” or allow the company’s relationship with the university to lapse.
“Nike agrees that the situation constitutes a problem that they have a responsibility to address,” Martin wrote. “They have been open about the range of complexities involved, but have not argued that the complexities absolve them of responsibility to make concerted efforts. I am heartened by that position.”
Martin is also seeking to build a coalition of interested schools from the Big Ten and other peer institutions, as well as the Workers Rights Consortium and the Collegiate Licensing Company.
Nike is a UW licensee, generating a combined total of $49,000 in royalty income to UW-Madison in 2008-09. In signing its licensing agreement, Nike agreed to a code of conduct that stipulated its responsibilities in dealing with workers, factories, subcontractors and suppliers.
Student activists played a key role in persuading Russell Athletic on Nov. 17 to rehire 1,200 workers in Honduras who had lost their jobs after Russell closed a factory late last year. Labor groups had claimed Russell closed the factory due to unionizing efforts while Russell said it was closed because of the global downturn. The factory was reopened as a unionized factory.
