FLA Audit Profile Country China Factory name 08001519C IEM SGS Date(s) in facility December 2 - 3, 2004 PC(s) Nordstrom Number of workers Around 430 Product(s) Knitted Garments Production processes Organizing, Knitting, Linking, Washing, Iron, Packing Findings Remediation Updates If Not Target Factory Company Follow Company Follow Up FLA Code/Compliance Country Law/Legal Was Finding FLA Benchmark Monitor's Findings Sources/ Documentation Corroborated, Best Practice PC Remediation Plan Completion Response Up (Cite Date of Documentation (Cite Date of Follow- Documentation Issue Reference Corroborated? Why Date (Optional) Follow Up) up Visit) 1. Code Awareness Confidential noncompliance N/A FLA Principle of Monitoring, Obligation of There was no a secure communications Interview with workers and Yes Factory to develop a secure 3/30/2005 3/30/2005 6/24/2005 Auditor confirmed that factory has reporting channel Companies: Develop a secure communications channel for the workers to report to the management; On site communications channel, in a established a suggestion box and procedure channel, in a manner appropriate to the culture and Company on noncompliance with the observation of the posted manner appropriate to the culture and within the factory to handle workers' situation, to enable Company employees and workplace standards, such as post the codes. situation, to enable Company complaints and concern. Nordstrom is employees of contractors and suppliers to report to the complaint phone number on site. employees and employees of piloting a telephone hotline in the factory for Company on noncompliance with the workplace contractors and suppliers to report to employees to call to report concerns. The standards, with security that they shall not be punished the Company on noncompliance with pilot will be introduced to the factory in or prejudiced for doing so. the workplace standards, with security September 2005. Workers who are that they shall not be punished or interviewed during audits will receive a card prejudiced for doing so. with the hotline number and an explanation of the purpose. 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. 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 for completing compulsory education in the country of manufacture where such age is higher than 15. 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. 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. 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. 7. Freedom of Association and Collective Bargaining Employers will recognize and respect the right of employees to freedom of association and collective bargaining. 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. 1 Findings Remediation Updates If Not Target Factory Company Follow Company Follow Up FLA Code/Compliance Country Law/Legal Was Finding FLA Benchmark Monitor's Findings Sources/ Documentation Corroborated, Best Practice PC Remediation Plan Completion Response Up (Cite Date of Documentation (Cite Date of Follow- Documentation Issue Reference Corroborated? Why Date (Optional) Follow Up) up Visit) Minimum Wage Minimum wage must be Employers will pay workers the legal minimum wage or Actual minimum wage could not be verified Cross checking the payrolls Yes Factory to ensure that all production 3/30/2005 3/30/2005 6/24/2005 Auditor reviewed records from January - provided for employees, the prevailing industry wage, whichever is higher. due to inconsistent payrolls records. (i.e. from workforce interviews records properly and clearly reflect May 2005. 20 records were randomly Clause 19 of Minimum workers reportedly paid piece-rate, but and production records. the correct information, as also selected from this time period. Records Wage Provision and Clause payrolls showed paid hourly; production recorded in payroll and timecards. consistent and worker interviews verified 48 of China Labour Law. relevant records indicated Sunday work, but Reaudit will be necessary to verify accurate records maintained. payrolls indicated rest day.) Also, payrolls did improvement of this issue. not reflect extra evening OT hours raised from worker interviews. 2 Findings Remediation Updates If Not Target Factory Company Follow Company Follow Up FLA Code/Compliance Country Law/Legal Was Finding FLA Benchmark Monitor's Findings Sources/ Documentation Corroborated, Best Practice PC Remediation Plan Completion Response Up (Cite Date of Documentation (Cite Date of Follow- Documentation Issue Reference Corroborated? Why Date (Optional) Follow Up) up Visit) 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 Clause 41 of China Labor Except in extraordinary business circumstances, Accurate OT hours could not be verified from Cross checking computer Yes Factory to ensure that all production 3/15/2005 3/30/2005 6/24/2005 Auditor reported that not all workers Law: The overtime working employees will (i) not be required to work more than the computer time records due to inconsistencies time records with workforce records properly and clearly reflect received 1 day off in 7 based on attendance hour cannot exceed 3 hours lesser of (a) 48 hours per week and 12 hours overtime with auditors' findings from workers' interviews and production the correct information as also records of January and March 2005. a day and 36 hours a month; or (b) the limits on regular and overtime hours allowed interviews and production records. Workforce records found on site. recorded in the payroll and timecards. Workers worked approximately 8-9 days Clause 38 of China Labor by the law of the country of manufacture or, where the interviews indicated OT work was frequent A reaudit will be necessary to verify without a day of rest in January and March Law: The facility should laws of such country will not limit the hours of work, the (usually to 11:00pm) and only had 1 day off the improvement of this issue. due to power shortage in these 2 months. make sure all workers have regular work week in such country plus 12 hours per month. But, their time records indicated Auditor confirmed workers received 1 day of 1 day off per week. overtime; and (ii) be entitled to at least one day off in OT hours no more than 9:00pm and at least 1 rest in 7 from April - May 2005. This issue every seven day period. An extraordinary business day off per week. Beside, production records will be further verified in September 2005 to circumstance is a temporary period of extra work that indicated Sunday work, but relevant time ensure compliance is maintained. could not have been anticipated or alleviated by other records showed rest day. So, factory lacked reasonable efforts. evidence to demonstrate compliance in legal OT limit. 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 150% of normal wage at The factory shall comply with applicable law for Actual OT compensation could not be verified Cross checking computer Yes Factory to ensure that all production 3/30/2005 3/30/2005 6/24/2005 Auditor verified all documentation is extended work hours on premium rates for overtime compensation. from payrolls since time cards/payrolls were time records with workforce records properly and clearly reflect accurate. Overtime wages compensated weekdays; 200% on inconsistent with workforce interviews and interviews and production the correct information as also according to law. Auditor will verify a Sundays and 300% on production records in areas of OT hours. records found on site. recorded in the payroll and timecards. second time in September 2005 to ensure Statutory Holidays, Clause Interviewed workers report paid at piece rate A reaudit will be necessary to verify compliance is maintained. 44 of PRC Labor Law and extra RMB 1/hour on OT compensation, the improvement of this issue. but payrolls showed hourly rate and legal rate on OT compensation. Miscellaneous 3