Fair Labor Association Releases Foxconn Investigation Report

The Fair Labor Association (FLA) has released the results of its independent investigation into Apple's supplier Foxconn, China's largest private employer.

After growing criticism during 2011 about the working conditions at Foxconn, including those conditions that led to deadly accidents, Apple agreed to allow FLA to conduct a thorough investigation of those suppliers, beginning with three factories at Guanlan, Longhua, and Chengdu in China.

The findings of FLA's nearly month-long investigation revealed serious and pressing noncompliances with FLA's Workplace Code of Conduct, as well as Chinese labor law. In addition to the findings summarized below, this report contains a detailed set of necessary remedial measures to protect the health and safety of workers, reduce worker hours to legal limits while protecting worker pay, and establish genuine avenues for workers to provide input on company decisions that affect their lives and livelihoods.


The following are the FLA's key findings. Notably, they did not find issues related to child labor, forced labor or payment of the legal minimum wage.

Hours of Work
There are two issues here – the FLA Code Standard of 60 hours per week in total (regular plus overtime) and the Chinese legal limits of 40 hours per week and a maximum of 36 hours overtime per month (effectively nine hours per week). All three factories exceeded the FLA Code Standard and the requirements of the Chinese labor law at some point in the last 12 months.

Compensation
The SCI assessors found that wages are paid on time and are above the applicable legal rates. The legal minimum wage in Shenzhen is RMB1500, while the starting wage at Foxconn is RMB1800. After the probation period, wages go up to about RMB2200. Sick leave payments are higher than the local law requirement, with workers compensated 70% as opposed to the minimum law requirement of 60%. Overtime hours were also paid at the appropriate premiums.

With respect to satisfaction with wages, 64.3% of workers thought that their salary was not sufficient to cover their basic needs. The discontent with salaries was more pronounced in Chengdu where the legal minimum wage is lower; 72% of workers at Chengdu said their salaries did not cover basic needs. (According to the survey respondents, the average monthly salary in Chengdu was 2,257 RMB, compared to 2,687 RMB in Longhua and 2,872 RMB at Guanlan.)


Interns
The issue of work by interns has been the source of much controversy in China in recent years and represents a major concern for external stakeholders. We therefore made a special effort to understand and assess the risks of the internship system at Foxconn. Internship agreements for vocational school students are three-party agreements involving the school, Foxconn, and the intern. For college students, the agreement is signed directly between Foxconn and the intern. Internships are for three to six months and a teacher accompanies the interns. In 2011, 2.7% of the workforce of Foxconn Group consisted of interns, an average of 27,000 interns per month. Their average tenure was 3.5 months.

The intern labor force is seasonal, peaking in the summer months when most students seek internships (5.7% of the workforce consisted of interns in August 2011). At the time of our March 2012 assessment, 519 interns worked in the three factories assessed, including 126 at the Longhua facility and 58 in Guanlan. The working hours of interns should not exceed eight hours per day, five days per week, and interns should never work seven days straight. Our assessors found that interns worked both overtime and night shifts, violations of the regulations governing internships.

Industrial Relations
Workers had very limited knowledge of the structure, function and activities of the worker participation bodies within Foxconn. When we investigated the industrial relations system at Foxconn we found that even though a union exists, a large majority of workers seemed unaware of its activities and of the collective bargaining agreement. Only 32.7% of the respondents in our perceptions survey stated that workers elect worker representatives, while 20% believe that management elects them. Another 42.3% do not know how the committees are formed. Workers are equally divided on the question of whether worker representatives participate in the factory's decision-making processes: 12.8% said they don't; 17% said that they do; and a large majority (70%) did not know. This low level of awareness may be explained, in part, by the turnover rate of workers. Yet the bottom line is that too many workers are not aware of the system of worker representation, which reduces the potential for workers' integration.

Health, Safety and Environment
Our assessors identified numerous issues related to inconsistent policies, procedures and practices. These problems appear in detail in the individual assessment reports, along with the actions that Foxconn has agreed to take to improve performance in this area. In many instances those actions have already been completed.

The issue of aluminum dust was of particular concern to us because of the explosion at the Chengdu site last year. There is an ongoing government investigation into the causes of the explosion that initially restricted access to the building concerned but our assessors were subsequently able to visit that building and confirm that no work is being conducted there. They were also able to visit other buildings in which aluminum is cut, drilled, ground or polished. The standard operating procedures in these sections have been strengthened and the concentration of dust particles in the air regularly measured. We looked at the frequency of measurements, the calibration of the instruments, the training of the staff responsible for those measurements and the keeping of records. Our assessors did identify some machines at which sensors, hoods or barriers needed to be connected to automatic cut-out mechanisms to prevent workers from reaching into the machines, and they also flagged the use of compressed air in some sections where it could pose a risk. A number of these issues were rectified immediately.


Apple and Foxconn have provided the FLA with a comprehensive remediation plan that addresses each of the findings. Below are some highlights of that plan.

Remedial Plan: Hours of Work
Foxconn has agreed to move beyond compliance with the FLA 60-hour/week standard to achieve full compliance with Chinese law regarding hours of work (limit of 36 hours of overtime per month) by July 1, 2013. This means reducing overtime hours from 80 per month to 36 while protecting worker pay. Foxconn will have to hire and train a significant number of extra workers, build accomodation for them, and develop a compensation package that addresses the income lost through reduced hours.

Remedial Plan: Compensation
Foxconn has accepted that the policy and practice relating to unscheduled overtime and work-related meetings outside of regular working hours need to be changed. In the future, workers will be paid for overtime in units of 15 minutes and for work-related meetings outside regular hours will be compensated. Given the concerns expressed by workers about whether wages cover their basic needs, the FLA recommends a follow-up study to document spending patterns and the actual costs of the components of a basic needs wage. We discussed the issue of unemployment insurance for migrant workers extensively with Apple and Foxconn, and they have agreed to a two-track remedial strategy. The companies will investigate alternative private options to provide unemployment insurance to migrant workers and work with government agencies to expedite the transportability of benefits.

Remedial Plan: Interns
Foxconn has proposed to adapt its system to ensure that interns enjoy the protections necessary for a productive, healthy and safe educational experience. Given that students find internships valuable and that Foxconn is in a position to offer a significant number of internships at above-market conditions a set of recommendations have been endorsed by both Foxconn and Apple and those can be found in an annex to this document.

Remedial Plan: Industrial Relations
Foxconn has agreed to develop an action plan to align union activities with the provisions of the Shenzhen Municipal Implementing Regulations for the Trade Union Law, to enhance workers participation in committees and other union structures, to ensure that nominations and elections take place without management involvement and to engage committees in decision making processes. Workers will all receive a copy of the Collective Bargaining Agreement and new workers will receive information about the union and union activities during their orientation process.

Remedial Plan: Health, Safety and Environment
The key to improved performance in this area is to enhance workers' engagement in the health and safety committees and to make those more active in the formulation and implementation of policies and procedures. The turnover of workers makes it necessary to refresh the training of workers frequently. We will continue to make periodic checks on the implementation and review of the standard operating procedures by Foxconn in order to ensure that the workers involved have the appropriate training and personal protective equipment, that the dust concentrations are measured at the appropriate times and remain within safe levels, and that the correct documentation is maintained.

You can read the full report, recommendations, and remedial plans at the link below...

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