FLA Audit Profile Country China In 2005 Reebok helped create and deliver an action plan to this Factory name 13021536D factory. However, in 2007 this facility was deactivated by Reebok's IEM Organization Global Standards sourcing unit due to production reasons. As a result, the adidas- Date(s) in facility 11-Jul-05 Group's social and environmental affairs department was unable to PC(s) Zephyr Graf X and Reebok International, Ltd. ensure a successful completion of the remediation plan. Number of workers 500 Product(s) Caps Production processes Embroidery, Sewing, Finishing, Packing Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) 1. Code Awareness Code posting/information FLA Principle of Monitoring, Obligation of visual inspection Yes Code clearly Companies: Establish and articulate clear, written posted on all floors workplace standards. Formally convey those standards of the factory. to Company factories as well as to licensees, contractors and suppliers. Worker/management FLA Principle of Monitoring, Obligation of Workers do not have a clear worker interviews yes From internal audit: "All interviewed workers (12) The factory will provide a copy of and educate all 11/15/2005 COMPLETED 11/17/2005 The factory showed Zephyr 4/13/2006 The SGS auditors found that all workers interviewed 5/26/2006 Same findings. awareness of Code Companies: Ensure that all Company factories as well understanding of the CoC - need for showed a clear awareness of the Zephyr Graf X employees on the contents of the Code. The Code documents that each worker had were aware and understood the Code of Conduct. as contractors and suppliers inform their employees training. Code. They also knew how to contact the must be given to and reviewed with each new signed stating that they had attended a about the workplace standards orally and through the responsible person in Zephyr Graf, for the name employee. The factory management will also review training meeting on the Code of posting of standards in a prominent place (in the local and the contact ways including telephone number the contents of the Code will all employees at least Conduct. The factory had taken languages spoken by employees and managers) and and E-mail address were written on the Zephyr once a year. pictures of this meeting and committed undertake other efforts to educate employees about the Graf X Code and posted publicly for them." Also, to holding it annually, and individually standards on a regular basis. "The managers said they did provide training to for every new hire. workers on the Zephyr Graf X Code." Confidential noncompliance FLA Principle of Monitoring, Obligation of visual inspection yes Best Practice: a See above - Auditors stated that the Zephyr Graf-X The factory will make sure that the Zephyr Graf-X 11/15/2005 COMPLETED 11/17/2005 The name and number of the Zephyr 4/13/2006 From SGS audit results: "Zephyr Graf X Codes were 5/26/2006 The name and number of the Zephyr contact 6/17/2008 Zephyr works with an NGO in reporting channel Companies: Develop a secure communications channel, telephone number Code and contact information is posted. Code of Conduct contains the telephone number, contact were posted along with the posted on walls of workshops. And the directly were posted along with the Zephyr Code of Qingdao to provide the workers with in a manner appropriate to the culture and situation, to and address of the address, and e-mail address of the Zephyr contact. Zephyr Code of Conduct. contact phone number of Zephyr Graf X and contact Conduct. However, we are trying to work with a free complaint hotline. Also, enable Company employees and employees of Reebok contact person name were also posted near the Code." *** (an NGO based in Qingdao) to provide the Zephyr has handed out business contractors and suppliers to report to the Company on are listed on the workers with a local contact name and number. cards to workers during interviews noncompliance with the workplace standards, with CoC poster. with e-mail contact information. security that they shall not be punished or prejudiced for Workers can send an e-mail to doing so. Zephyr in the local language, and it will be translated. The e-mail and an international telephone number are also posted on Zephyr's Code of Conduct. 2. Forced Labor There will not be any use of forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise. Other China Labor Law, Article 16: Sign contracts as Employers will maintain sufficient hiring and employment The factory signs contracts with some management interview, The internal audits did not uncover this issue. The factory will sign contracts with workers as soon 11/15/2005 COMPLETED 11/17/2005 The factory management agreed to 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. soon as establishing labor relations. records to demonstrate and verify compliance with this workers only after passing probation. record review, worker as employment begins, not after a probationary sign all contracts right away. noncompliance. Code provision. interview period. Page 1 of 6 Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) 3. Child Labor No person will be employed at an age younger than 15 (or 14 where the law of the country of manufacture allows) or younger than the age N/A for completing compulsory education in the country of manufacture where such age is higher than 15. Legal compliance for juvenile Regulations for the Special Protection of Juvenile Employers will comply with applicable laws that apply to COMPLETED 4/13/2006 NEW FINDING - The factory did not obtain juvenile 5/26/2006 Factory obtained the permit on 5/24/2006. workers Employees (Document No. 498, 1994) Article 9: young workers, i.e., those between the minimum working worker registration permit for the 85 juvenile workers Employment of teenager labor should be under age and the age of 18, including regulations relating to in the factory. registration. (1) An employer who recruits and hiring, working conditions, types of work, hours of work, hires juvenile employees, in addition to complying proof of age documentation, and overtime. with general employment requirements, must also undertake registration procedure with the local labor administration department at or above the county level. The labor administration department will then issue the ‘Registration Certificate for Juvenile Employees’ and the ‘Registration Form for Juvenile Employees’. Juvenile worker Identification No special regulations on overtime of juvenile Employers will have a system for identifying work stations COMPLETED 4/13/2006 NEW FINDING - All 85 juvenile workers took overtime 5/26/2006 Remediation Plan - The factory will attempt to 6/17/2008 Factory instituted policy of hiring System workers in China. and operations that are inappropriate for young workers as same as adult workers, usually 66 hours per limit the amount of overtime allowed to juvenile adult workers (18 or older) after all according to applicable laws. month, and 31 juvenile workers in embroidery workers and will make sure that juvenile workers juvenile workers in factory had workshop took night work. are not allowed to use inappropriate work turned 18. Review of employee stations or machinery according to applicable records shows there are no juvenile laws. workers currently working in factory. 4. Harassment or Abuse Every employee will be treated with respect and dignity. No employee will be subject to any physical, sexual, psychological or verbal harassment of abuse. Freedom of Movement Constitution, Article 37: Freedom of civic people Employers will not unreasonably restrain freedom of Workers need to ask for supervisors' worker interviews Workers did not raise this issue. The factory will guarantee the workers' rights to 11/15/2005 COMPLETED 11/17/2005 Management confirmed to Zephyr that 4/13/2006 The SGS auditors did not find any evidence of this 5/26/2006 Same findings. 9/26/2007 Worker interviews confirmed that cannot be offended. movement of workers, including movement in canteen, permit for drinking water and using drinking water and use of the restrooms and will allow workers are allowed to get water or noncompliance issue. supervisors do not restrict workers' during breaks, using toilets, accessing water, or to toilets belong 10-minute break time workers to use these facilities beyond the allotted use the restrooms whenever they access to drinking water and the access necessary medical attention. during work, usually workers cannot break time. The management will also educate all want. Big jugs of cold, purified restroom. do that after break time. supervisors on this Code element so that this infraction drinking water are stationed in several does not occur again. areas, and workers can access these containers at anytime. 5. Nondiscrimination No person will be subject to any discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin. Hiring Discrimination Practices Employment decisions will be made solely on the basis of The factory hires workers from 16 to worker interview The internal audits did not uncover this issue. The factory will base their hiring decisions solely on 11/15/2005 COMPLETED 11/17/2005 During Zephyr's verification audit, we 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. education, training, demonstrated skills or abilities. All 30 years old, and workers who are the basis of education, training, and demonstrated specifically chose older workers and discrimination. employment decisions will be subject to this provision. not married. skills or abilities. The factory will make an effort to married workers as part of the They include: hiring, job assignment, wages, bonuses, hire beyond the stated age range and marital status, sample. The factory does not allowances, and other forms of compensation, promotion, assuming that they are still hiring workers based on discriminate based on age or marital discipline, assignment of work, termination of the above criteria. status. employment, provision of retirement. Pregnancy Testing Employers will not use pregnancy tests or the use of Pregnancy testing required before worker interview, The internal audits did not uncover this issue. The Global Standards audit team clarified this point. COMPLETED 11/17/2005 Management confirmed that 4/13/2006 SGS found that pregnant workers would go through 5/26/2006 Same findings. contraception as a condition of hiring or of continued entering the factory. management interview Because pregnancy testing is required by the local information on pregnancy testing is the following steps in order to acquire maternity employment. Employers will not require pregnancy testing government, and because the factory only used the only used to calculate maternity leave. leave: "1. Pregnancy worker would inform their of female employees, except as required by national law. information for calculating and providing maternity supervisors or management of their pregnancy. leave, it was determined that this finding is not an Supervisors and management would remember the indicator of discrimination. No action by the factory is pregnancy information and arrange the suitable work necessary on this point. or rest for them. 2. Pregnancy worker would apply for 3 months paid maternity leave to the management in time of need. The maternity leave records were kept in HR dept." Page 2 of 6 Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) 6. Health and Safety Employers will provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities Fire Safety Health and Safety Fire Control Law of the People's Republic of Employer will comply with applicable health and safety 1. Emergency exit 4/13/2006 NEW FINDING - 1. The emergency exit ladders of 5/26/2006 Remediation Plan - 1. The factory will construct 9/26/2007 The factory has constructed legal compliance China Article 14: Organs, societies, enterprises laws and regulations. In any case where laws and code stairs - COMPLETED two dormitory buildings are not suitable for suitable emergency exit staircases with handrails emergency exit stairs leading from and institutions should fulfill the following fire of conduct are contradictory, the higher standards will 2. Fire extinguishers - evacuation; it should be stairs with handrails instead outside of the dormitories. 2. Fire extinguishers the second floor of the dormitories. prevention safety responsibilities: 5) deploying fire- apply. The factory will possess all legally required COMPLETED of ladders. 2. Fire extinguishers were are 6" off the ground and well-marked with red fighting facilities and equipment, putting up fire permits. all directly placed on the ground. tape. prevention safety signs pursuant to relevant state provisions, and organizing inspection and maintenance at regular intervals to ensure that fire- fighting facilities and equipment are in perfect condition and effective; 6) ensuring that evacuation channels and safety exits are unblocked and putting up signs for fire prevention safety evacuation in keeping with the state provisions. Document Maintenance/ All documents required to be available to workers and The factory will post current information on national 11/15/2005 COMPLETED 11/17/2005 The factory has posted all relevant 4/13/2006 No chemical safety policy and procedure established 5/26/2006 Remediation Plan: The factory agreed to 10/20/2008 The factory has posted the MSDS Accessibility management by applicable laws (policies, MSDS, etc.) and local labor laws and relevant health and safety information on worker community in the factory. No MSDS available for the chemicals establish a chemical safety policy and for the spot remover (only chemical shall be made available in the prescribed manner and in regulations. These postings should be in all production boards. (glue, oil and paint) used in the factory. Auditor could communicate it to all workers. This will be done used) where it is stored and where it the local language or language spoken by majority of the rooms and any gathering places, like the canteen or not identify whether the chemical used properly or can in training as well as posted in all work areas. is used. The chemical is properly workers if different from the local language. dormitory common rooms. cause any potential affection to the operators. The factory will also make MSDS available for all stored, clearly labeled, and the chemicals used in the factory. worker using it has been properly trained. Evacuation Procedure Fire Prevention Law article 14.6, governmental All applicable legally required or recommended elements Evacuation plan is difficult to follow visual inspection yes The factory will add "You Are Here" indicators on all 11/15/2005 COMPLETED 11/17/2005 The factory has added large "You are 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. departments, social org., enterprises and of safe evacuation (such as posting of evacuation plans, and no "you are here" indication. No posted evacuation plans. The factory will post the here" indicators on all evacuation noncompliance. institutions shall make sure that the evacuation unblocked aisles/exits, employee education, evacuation evacuation plan posted in adjoining evacuation plan in all the production building's adjoining posters. The posters are color-coded signs that meet state regulations. procedures, etc.) shall be complied with and workers rooms to production. No evacuation rooms. A clear and easy-to-follow evacuation plan will and very easy to read. shall be trained in proper safety, first aid, and evacuation plan found in dormitories or canteen. also be created for the dormitories and canteen and procedures. will be posted in all relevant rooms. Safety Equipment Type A: combustible materials: wood, cloth, All safety and medical equipment (such as fire fighting Fire extinguishers in some production visual inspection yes Follow up visit (18 April 2005) Status: Corrected. The factory will make sure that all fire extinguishers, 11/15/2005 COMPLETED 11/17/2005 All fire extinguishers were clear and 4/13/2006 From SGS audit report: 1. "Fire extinguishers were all 5/26/2006 Fire extinguishers are 6" off the ground and well- paper and many plastics, Type B: Fires in equipment, first aid kits, etc.) shall be in place, maintained areas were blocked by materials. R40 Appropriate evacuation plans were posted on as well as other safety and medical equipment, remain easily accessible. A certified nurse is directly placed on the ground." 2. "One qualified nurse marked with red tape. flammable liquids, combustible liquids, petroleum as prescribed and accessible to the employees. First aid kit was found not adequately walls of all workshops’ wall. A qualified doctor was unobstructed by materials. The factory will also on staff with her own office for privacy. was responsible for first aid. Her certificate was gases, tars, oils, oil-based paints, solvents, stocked (no maintenance record employed as first aide. adequately maintain, stock, and train all employees on The first aid cabinets are fully stocked. checked during audit. A clinic with basic first aid lacquers, alcohol and flammable gases, Type C: present) also no one trained in first the first aid kits and keep maintenance records. The instruments and medicines also established for urgent Fires that involve energized electrical equipment aid. factory will employ, at minimum, one worker certified medical treatment." where the electrical non-conductivity of the in first aid to be on hand in case of an emergency, or extinguishing media is of importance. (OSHA the factory will send a current manager or worker to Website: www.myextinguisher.com) receive first aid training. Page 3 of 6 Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) PPE Safety Manufacturing Law, Article 37, Workers shall wear appropriate protective equipment No PPE provided for embroidery room visual inspection yes The internal audits did not uncover this issue. The factory will provide all necessary and required 11/15/2005 COMPLETED 11/17/2006 Every worker is provided with the 4/13/2006 Cutting operators were not using metal gloves while 5/26/2006 Metal gloves and earplugs are available at all manufacturers shall provide personal protective (such as gloves, eye protection, hearing protection, workers. PPE (masks) not used. personal protective equipment (PPE) to workers, appropriate PPE, and boxes of extra working; embroidery workers did not wearing appropriate stations. The factory will monitor the equipment to employees. Manufacturers shall respiratory protection, etc.) to prevent unsafe exposure Technicians/mechanics have no PPE. including, but not limited to, protective gloves for PPE are always available. earplugs when working in embroidery workshop. usage of the gloves and earplugs to make sure supervise and train employees to properly wear (such as inhalation or contact with solvent vapors, noise, ironing workers and PPE for workers in the Management encourages the workers the workers are wearing them. Confirmed by on- and use the personal protective equipment. dust, etc.) to hazardous elements including medical embroidery room. The factory management will also to wear the equipment at all times. site observation. waste. encourage the workers to wear the appropriate masks when spraying hats. If the masks are uncomfortable and too hot for workers to wear, the factory will collaborate with the workers to come up with an adequate solution. Machinery Maintenance Factory Safety and Health rules, Article 32, All production machinery and equipment shall be Button punching machines have no 2 visual inspection yes The internal audits did not uncover this issue. The factory will install a 2 hands safely switch on all 11/15/2005 COMPLETED 11/17/2006 All button punching machines were 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 On-site observation confirmed that all button protection devises shall be mounted on dangerous maintained, properly guarded, and operated in a safe hands safety switch, no needle guards button punching machines and needle guards on the fixed except one, which the factory noncompliance. machines have a two hand safety switch, and all parts , e.g. driving belt, open gear, grinding manner. on sewing machines. sewing machines. committed to fixing that day. All sewing machines have the appropriate needle wheel, electric saw, axial ring that is close to sewing machines had the appropriate guards. ground, rotary axle, belt pulley and flywheels. needle guards. Sanitation in Facilities All facilities including factory buildings, toilets, canteens, The toilets emit foul odors and are visual inspection yes The internal audits did not uncover this issue. The factory will immediately resolve this issue by 9/15/2005 COMPLETED 11/17/2005 Through on-site observation: floors of 4/13/2006 The SGS auditors found that all bathroom facilities 5/26/2006 Same findings. kitchens, and clinics, shall be kept clean and safe and be generally unsanitary. Additionally, cleaning toilets on a regular basis, checking sanitation the restrooms are clean and clear and were clean and well-maintained. in compliance with applicable laws. toilets on upper floors are not working frequently, and ensuring that toilets work properly. plumbing is in working order. Through as water is not sufficient (filled with The factory will hire a certified plumber if necessary. management interviews: a cleaning excrement). The factory will also check each bathroom daily to crew cleans bathrooms every three make sure there is an adequate stock of soap, toilet hours during the working day, every paper, and paper towels. worker is given a personal stock of toilet paper. This is because it is stolen so frequently if left in the restroom. Sanitation in Dormitories All dormitories shall be kept secure, clean and have The toilets emit foul odors and are visual inspection yes The internal audits did not uncover this issue. The factory will immediately resolve this issue by 9/15/2005 - 1. Toilets - 11/17/2005 1. See above 2. The factory has 4/13/2006 The SGS auditors did not find any evidence of the 5/26/2006 Same findings. 6/17/2008 The average area of dormitory per safety provisions (such as fire extinguishers, first aid kits, generally unsanitary. Additionally, cleaning toilets on a regular basis, checking sanitation toilets COMPLETED installed emergency lights, added first two problems. However, they did find the person is 2.85 sq meters which unobstructed emergency exits, emergency lighting etc.). toilets on upper floors are not working frequently, and ensuring that toilets work properly. 11/15/2005 - 2. Fire extinguishers, more fire extinguishers (and tags), and following: "The average area per person is around meets the legal standard of 2.6 sq Emergency evacuation drills should also be conducted at as water is not sufficient (filled with The factory will hire a certified plumber if necessary. the remainder of emergency lights, evacuation plans to Dormitory 2. 3. 1.7~2.4 square meters, which lower than legal meters per person. least annually excrement). Dormitory building 2 is The factory will also check each bathroom daily to the safety and evacuation plan - This is an on-going issue that will not standard: 2.6 square meters per person. This violated lacking adequate fire safety make sure there is an adequate stock of soap, toilet dormitory issues COMPLETED be resolved until the new factory is the article 3.2.1 of Standard of Dormitory Building ***. measures: no tags on fire paper, and paper towels. The factory will supply 3. Dorm space - built in two years. The factory cannot " extinguishers and none available on Dormitory building 2 with an adequate number of fire COMPLETED expand any further, and already rents upper floors. No emergency lights, no extinguishers and provide tags for each extinguisher. space in a vacant factory across the evacuation plans. Dorm rooms are The factory will inform Zephyr on the status of the new street. The factory will make too full: approx. 40 workers in a dormitory building that was to be built after the last absolutely sure that it provides its cramped room with 1 exit (3 to 4 sq company audit was performed in April. workers with enough space in the new meters per worker of living space factory. only). Page 4 of 6 Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) Other Fire Control Law of the People's Republic of COMPLETED 4/13/2006 NEW FINDING - The factory could not provide 5/26/2006 Remediation Plan - The factory will obtain a copy 6/17/2008 The *** Village office manager will China Article 10 Upon the completion of a building structure acceptance certificate and fire of the building structure acceptance certificate not release a copy of the building construction project containing a fire control prevention acceptance certificate of the buildings. from *** Village and keep the copy on file to certificates, but said that they are on design conducted in accordance with The factory manager explained that the factory show auditors. file in the office and available to requirements of the State Technical Standards on located in develop area of *** Village, the building was auditors. Fire Control for Engineering Construction, the under control of *** Village and they could not get project must go through acceptance checked on building structure acceptance certificate and fire fire control by relevant public security fire control prevention acceptance certificate. institutions; project without going through the acceptance check or considered unqualified after the acceptance check shall not be put into use. Construction Law of the People's Republic of China. Article 61 Construction projects having been Based on the call to *** Village, the office manager of completed and accepted through examination *** Village, Manager confirmed this. He explained that shall meet the stipulated quality standards on they are control all of the buildings in the develop construction projects, have complete technical and area, and can ensure the safety of those buildings. economic data of projects and warranties issued by builders, and satisfy other requirements set out by the state for the completion of construction projects. Only after a completed construction project is proved to meet the standards through examination can it be delivered for use. Construction projects having not been examined and accepted or having failed in examination shall not be delivered for use. 7. Freedom of Association and Collective Bargaining Employers will recognize and respect the right of employees to freedom of association and collective bargaining. Employer Trade Union Law, Article 2: Trade Union is a Workers’ organizations have the right to elect their The chairman of trade union is chosen management interview, Follow up visit (April 18, 2005) Status: New The factory will eventually have the workers elect all of 11/15/2005 ONGOING 11/17/2005 The factory management confirmed 4/13/2006 From SGS audit report: "Manager interview: the 5/26/2006 Zephyr is working with a local NGO,***, that will 10/20/2008 The factory has a committee that Interference/Elections public organization formed by laborers' free will. representatives and conduct their activities without by the management. record review Finding: The factory help workers to establish an their representation and will turn over the duties, that they helped the workers establish worker representative and chairman of union were hopefully be able to conduct training for the meets every few months to discuss Article 9 (2): Trade Union Committee in each level employer interference. union on April 15, 2005, the workers meetings, etc. entirely to the worker chairman and a committee by selecting the nominated by managers. They also explained that workers so that they can effectively begin a true worker complaints and overall is elected by members or members' representatives were appointed by the managers. representatives. chairperson. workers did not know how to implement their freedom worker-run and worker-elected committee. factory issues. The committee is representatives through democratic election. Both the mangers and the worker representatives of association. The managers try to nominate worker Remediation Plan: Factory will help workers form made up of mostly supervisors, who Trade Union Regulation, Article 10: Chairman and handling the union. representative and union chairman to help them get a worker committee that does not violate their were nominated by the workers in a vice-chairman are directly elected by members or an awareness of freedom of association." freedom of association. This means that all general election. The factory has members' representatives, or root committee of members of committee MUST be elected by posted an informational sheet about trade union. workers, and election records must be kept and the committee all around the factory made available. One possibility is to have so that workers understand the job workers in each area, embroidery, packing, etc., duties, how to contact the hold elections for their representative. Then committee, and how to join if representatives of all sections can form interested. committee and elect a chairperson who will communicate directly with management. It is very important that management does not interfere with committee, and allows them to meet during working hours. FLA Comment: The Chinese constitution guarantees Freedom of Association; however, the Trade Union Act prevents the establishment of trade unions independent of the sole official trade union – the All China Federation of Trade Unions (ACFTU). According to the ILO, many provisions of the Trade Union Act are contrary to the fundamental principles of freedom of association, including the non-recognition of the right to strike. As a consequence, all factories in China fall short of the ILO standards on the right to organize and bargain collectively. Recently, however, the government has introduced new regulations that could improve the functioning of the labor relations mechanisms. The Amended Trade Union Act of October 2001 does stipulate that union committees have to be democratically elected at members’ assemblies and trade unions must be accountable to their members. The trade union has the responsibility to consult with management on key issues of importance to their members and to sign collective agreements. It also grants the trade union an enhanced role in dispute resolution. In December 2003,the Collective Contracts Decree introduced the obligation for representative trade unions and employers to negotiate collective agreements, in contrast to the previous system of non- negotiated administrative agreements. 8. Wages and Benefits Employers recognize that wages are essential to meeting employees’ basic needs. Employers will pay employees, as a base, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and will provide legally mandated benefits. Minimum Wage Article 48 The State shall implement a system of Employers will pay workers the legal minimum wage or The latest minimum wage in [Factory worker interview, Follow-up visit (April 18, 2005) Status: New The factory will issue payments to workers equal to 11/15/2005 COMPLETED 11/17/2005 The factory has paid all back wages. 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. guaranteed minimum wages. The specific the prevailing industry wage, whichever is higher. name] is enforced since this January, management interview, Finding: Before 1st April, the minimum wage the the minimum wage difference from JANUARY 1 to This was confirmed through noncompliance. standards of minimum wages shall be determined but the factory only started to apply record review factory provided to workers was RMB 410 per MARCH 31, 2005. The payments can be made to the management and worker interviews. by the people's governments of provinces, the new wage level for March (paid in month, which was lower than the legal minimum workers all at once or spread out over the next three autonomous regions or municipalities directly April). wage of RMB 530 per month (effected since 1st months. The factory will keep record of these under the Central Government and submitted to January 2005). payments. the State Council for the record. Wages to be paid to laborers by employing unit shall not be lower than the local standards of minimum wages. Legal benefits Article 72, PRC Labor Code, the sources of social Employers will provide all legally mandated benefits to all The factory buys social insurance for document review Follow-up visit (April 18, 2005) Status: Open. The At minimum, the factory will provide insurance to 11/15/2005 ONGOING 11/17/2005 Every new employee is offered 4/13/2006 From the SGS audit report: "The factory only 5/26/2006 Remediation Plan - The factory management 10/20/2008 The factory is providing insurance for insurance funds shall be determined according to eligible workers. only 18 workers. factory only provided injury insurance and employees as required by local law. If the factory is insurance, but most turn it down. provides 67 employees with retirement insurance and needs to make sure they keep an accurate 198 out of 400 workers, and has a the branches of insurance, and an overall raising retirement insurance for 20 employees. It violated already meeting this requirement, it will provide proof Employees sign a waiver contract if disability caused by work-related injury or record of all employees' decision to accept or plan in place to increase the number of social insurance funds shall be practiced step the clause 72 of China Labor Law, which requires to Zephyr in the form of local policy or guidelines. The they do not want the insurance. occupational disease insurance. It violated article 73 decline insurance. It should be noted that of workers covered gradually. by step. The employing unit and laborers must employers should provide all kinds of social factory will also research group insurance plans so of PRC Labor Law. " workers do not pay for basic medical clinic Zephyr has recommended that the participate in social insurance and pay social insurance for all employees. that universal coverage may be phased in over the services. factory buy commercial insurance to insurance premiums in accordance with the law. next few years. cover workplace injury. Other Wages Payment Temporary Regulation, Article 9: All compensation shall be paid in a timely manner. It is written in the regulation that if record review The internal audits did not uncover this issue. The factory must change its regulation for paying 11/15/2005 COMPLETED 11/17/2005 The factory management confirmed 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. As long as any side of contractors or contracted workers leave the factory, they will wages to workers leaving the factory pursuant to that this has been fixed. noncompliance. end contracts before agreed date in the get paid their last payment 3 months Wages Payment Temporary Regulation, Article 9. contracts, employers must pay laborers later. immediately. Page 5 of 6 Findings Remediation [Status] Updates Company Re-audit by Third Party Monitor Company Follow up Updates Documentation (If Was Finding If not Target Company Company Follow External Company Follow up Monitor's Findings: Noncompliance finding corroborated, Completed; Pending; FLA Code/ Compliance issue Country Law/Legal Reference FLA Benchmark Corroborated? Yes corroborated, Best Practice PC Internal audit findings (Optional) PC Remediation plan Completion follow up up (November Documentation Verification Documentation (Cite date, if Documentation Company Follow up Documentation or Indicator verified by multiple On-going or No explain why Date (Cite date) 2005) (April 2006) appropriate) sources, list all) 9. Hours of Work Except in extraordinary business circumstances, employees will (i) not be required to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by the law of the country of manufacture or, where the laws of such country will not limit the hours of work, the regular work week in such country plus 12 hours overtime; and (ii) be entitled to at least one day off in every seven day period Overtime Limitations According to Article 41 PRC Labor Code, The Except in extraordinary business circumstances, Working hours of every week in document review and yes Follow-up visit (April 18, 2005) Status: Open and The factory will continue to work on decreasing the 11/15/2005 ONGOING 11/17/2005 The factory began implementing OT 4/13/2006 From the SGS audit report: "Workers in this factory 5/26/2006 Remediation Plan - The factory will again try to 6/17/2008 From ALGI audit report: "95% of employing unit may extend working hours as employees will (i) not be required to work more than the January, March and April 2005 management interview new finding. Based on the working time records amount of overtime hours worked by employees in sign-up sheets for overtime work in took more than 36 hours overtime per month, the discover ways to cut down on the amount of workers did more than 36 necessitated by its production or business lesser of (a) 48 hours per week and 12 hours overtime or exceed 60 hours. Workers worked for from December 2004 to March 2005, at least 90% accordance with Clause 41 of the China Labor Law. order to ensure that it is voluntary. average OT they took per month is 66 hours (more overtime each worker takes. The factory MUST hours/month, except Feb 2008. The operation after consultation with the trade union (b) the limits on regular and overtime hours allowed by two weeks without one day off in of workers took around 60-80 hours overtime per Also, the factory will provide its employees with at However, this soon became very than the legal standard, 36 hours OT per month). force employees to take at least one day off in monthly average was 67 hours." and laborers, but the extended working hours per the law of the country of manufacture or, where the laws January and March 2005. month. It violated Clause 41 of China Labor Law, least one day off in every seven day period, as tedious since all workers want Around 5% of workers took at most 4 hours OT per every seven day period, and continue to have The factory has instituted several day shall generally not exceed one hour; if such of such country will not limit the hours of work, the regular which stipulated that the overtime hours should not mandated by the PRC Labor Law. The factory will overtime. The factory changed its day (more than 3 hours per day, the legal standard) sign-up sheets proving that overtime is voluntary. steps to help combat overtime extension is needed for special reasons, under the work week in such country plus 12 hours overtime; and exceed 36 hours per month. b e g i n u s in g a s i g n - u p s y s t e m f o r o v e r t i me to ensure system, and began leaving sign-up on weekdays during the period from February to including: created a voluntary condition that the health of laborers is guaranteed, (ii) be entitled to at least one day off in every seven day that all overtime worked is voluntary. The factory will sheets for workers that did NOT want December 2005. All those workers violated article 40 overtime policy and procedure, the extended hours shall not exceed three hours period. An extraordinary business circumstance is a keep and maintain records of the overtime sign-up to work overtime shifts. Not many of PRC Labor Law. 36 packing workers continually created a voluntary overtime form per day. However, the total extension in a month temporary period of extra work that could not have been sheets. workers used the system, but those worked for 13 days in October 2005 (17-29). There for workers to fill out, strictly shall not exceed thirty six hours. anticipated or alleviated by other reasonable efforts. that did were not given extra hours. was no one day leave arranged for them during that enforced the 1 day off in 7 policy, period and workers worked 71 hours per week during and worked with Zephyr to that period. This violated article 38 of PRC Labor Law determine root causes for overtime. and FLA Benchmark." According to Regulations about Employee Work Nearly 90% of Workers consecutively worked from Time by the State Government - May 1, 1997, March 7-31 (24 days), from February 13-28 (15 Article #3 Employees shall work 40 hours per days), from January 17-31 (14 days). It violated week, overtime is not to exceed 36 hours per the article 38 of PRC Labor Law, which requires month. that employees should be allocated at least one day off in seven days. 10. Overtime Compensation In addition to their compensation for regular hours of work, employees will be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in those countries where such laws will not exist, at a rate at least equal to their regular hourly compensation rate. OT Compensation Article 44. The employing unit shall, according to The factory shall comply with applicable law for premium Because the factory did not apply the record review, The factory will pay overtime wages as mandated by 11/15/2005 COMPLETED 11/17/2005 The factory has paid all back wages. 4/13/2006 The SGS auditors did not find any evidence of 5/26/2006 Same findings. the following standards, pay laborers rates for overtime compensation. latest minimum wage (increase as of management interview the China Labor Law. The factory will review payroll This was confirmed through noncompliance. remunerations higher than those for normal January 1, 2005) until April, workers records from January 1- March 31, 2005 and will issue management and worker interviews. working hours under any of the following were paid incorrectly for those retroactive payments to those workers. The circumstances; (1) no less than 150% of the preceding months. payments should be calculated as the difference normal wages if the extension of working hours is between 200% of the normal wage (new 2005 arranged; (2) no less than 200% of the normal minimum wage), and the overtime wage the workers wages if the extended hours are arranged on were paid those days. days of rest and no deferred rest can be taken; and (3) no less than 300% of the normal wages if the extended hours are arranged on statutory holidays. 13. An enterprise has to pay an employee working on a piece rate basis for overtime work. [The method is same as above.] Miscellaneous Page 6 of 6