July 1, 1999

Words Versus Reality


Wal-Mart says it has a Code of Conduct and monitoring program which guarantees respect for the human rights of any worker, anywhere in the world, who produces goods for sale in Wal-Mart stores. But in Saipan the reality for the women sewing Wal-Mart clothing is:

  • 10-to-12-hour shifts, seven days a week 
  • $3 an hour wages 
  • Young women fired and deported for becoming pregnant, refusing to work overtime without pay, or complaining about working or living conditions.

Read the lawsuit filed against Wal-Mart

Then why is Wal-Mart being sued?

The reality is that Wal-Mart is now being sued in a class action suit being brought by the law firm Milberg, Weiss, Bershad, Hynes and Lerach LLP for either knowingly or recklessly and negligently disregarding the systematic violation of human and worker rights at its contractor's factory in the U.S. Commonwealth of Saipan. Wal-Mart is being sued for conspiring to hold workers in conditions of peonage and indentured servitude.  

Wal-Mart and the other "Retailer Defendants who purchase and sell these garments" (and, therefore, have the greatest control over the conduct of their contractors to correct such conduct as a precondition of doing business with them) are aware of or recklessly or negligently disregarding these conditions, even though many of these retailers either have offices in Saipan, visit the factories for quality control purposes and/or claim to have extensive monitoring programs in place, purportedly to prevent the very conditions that exist in garment industry of the CNMI (Commonwealth of Northern Mariana Islands). These Retailer Defendants profit from this system, participating in an unlawful enterprise with the garment factory owners, recruitment agencies and others to unlawfully evade laws prohibiting peonage, indentured servitude and violation of internationally recognized civil and human rights, and are therefore responsible to the class of workers sought to be represented for the violations of law described herein." 

(United States District Court for the Central District of California, Western Division, 1999)  
Milberg, Weiss, Bershad, Hynes and Lerach, LLP  
355 South Grand Avenue, Suite 4170  
Los Angeles, CA 90071

Wal-Mart in Saipan  

Between 1994 and 1998, Wal-Mart imported 7.3 million pounds of clothing made in Saipan, with a retail value of at least $88 million.

Saipan is part of the Northern Mariana Islands, a U.S. Commonwealth in the South Pacific. This allowed Wal-Mart and the other retailers to say their clothing was "Made in the USA."

Though Saipan is a U.S. Commonwealth and considered U.S. soil, it is not covered by U.S. minimum wage or immigration laws. This is how Wal-Mart got away with paying $3-an-hour wages to contract workers brought in from China.

From Saipan, Wal-Mart and the other retailers could export their clothing duty-free to the U.S., with absolutely no quota restrictions. Wal-Mart and the others saved over $200 million a year by avoiding U.S. duties and tariffs. Such a system also allowed China to get around its quota restrictions by simply shifting production to Saipan and entering the U.S. through the back door.

Overall, about 85 percent of the $1 billion of clothing made in Saipan each year and sent to the U.S. was considered "sensitive apparel," meaning that there were significant job loss and plant closings in the U.S. where this type of apparel was being made.

Wal-Mart's clothing is made in Saipan at a factory called Mirage. Here's how the system operates:

Wal-Mart Says: Buy American Policy  

"Wal-Mart has a strong commitment to buy as much merchandise made in the United States as feasible. Vendor Partners are encouraged to buy as many materials and components from the United States as possible. Further, Vendor Partners are encouraged to establish U.S. manufacturing operations." 
(Wal-Mart Stores Inc. "Standards for Vendors") 

"Made Right Here, Wal-Mart's unprecedented commitment to purchase from American vendor-partners whenever pricing . . . is comparable to goods made offshore . . ." ("A Good Neighbor" 1998, Wal-Mart web page. Emphasis added)

But the Reality is:  

Fifteen thousand, mostly young women, were brought from China as contract workers to Saipan, where they were employed in sweatshops which are 70 percent foreign-owned, using foreign machinery, foreign textiles, and overseen by foreign managers, sewing clothing for export to the U.S. 

Of all Wal-Mart's private label apparel, only 17% is made in the U.S.! 83% is made offshore

The women sewing U.S. garments in Saipan could be fired and deported if:   

  • They fell in love; 
  • Got married; 
  • Became pregnant (terminate pregnancy or be deported); 
  • Participated in political or religious activities; 
  • Failed to meet their daily production quota; 
  • Refused to work overtime, including unpaid "volunteer" hours; 
  • Criticized working or living conditions; 
  • Participated in any activities which lessened their energy for work; 
  • Refused to lie to inspectors regarding safety conditions at work, the number of hours worked, the true number of women living in each barracks room; 
  • Asked for a higher wage; 
  • Tried to organize a union. 

Remember, these are conditions at factories on U.S. soil making garments for Wal-Mart and the other major retailers.

Wal-Mart's Zero Tolerance for Human Rights Violators

"Since 1992, Wal-Mart has required its vendor-partners to comply with stringent standards in their relationships with contractors and subcontractors." (Jay Allen, Wal-Mart Vice President for Corporate Affairs, March 23, 1998 letter) 

"Wal-Mart has zero-tolerance for forced...labor, as well as mental or physical disciplinary practices." (Wal-Mart "Standards for Vendor Partners," June 1997) 

"We favor Vendor Partners who utilize less than sixty-hour work weeks, and will not use suppliers who, on a regularly scheduled basis, require employees to work in excess of a sixty-hour week." 

"Wal-Mart prefers work weeks limited to sixty hours per week with one day off per seven-day week." (Wal-Mart's "Standards for Vendor Partners" June 1997) 

"Employees should be permitted reasonable days off and leave privileges." (Ibid.) 

"Wal-Mart favors Vendor Partners who have a social and political commitment to basic principles of human rights and who do not discriminate against their employees . . . on the basis of national origin, gender, religion . . . or political opinions." (Ibid.) 

"Factories working on Wal-Mart merchandise shall provide adequate medical facilities, fire exits and safety equipment, well lit work stations, clean restrooms, and adequate living quarters when necessary." (Wal-Mart Stores, Inc. "Standards for Vendor Partners") 

"Wal-Mart asks Vendors to provide safe, clean, and healthy working conditions for their employees." (Wal-Mart's "Standards for Vendor Partners," June 1997)

While in Reality, Human Rights Were Completely Trampled  

This is how the conspiracy to strip the workers of their rights was organized in Saipan. 

Private employment agencies working with the Saipan contractors sent recruiters to China, where they told young women that they could get good, well-paying jobs in the U.S., working in clean and safe factories, all travel expenses paid. If they wanted to work, all they had to do was sign on the dotted line and everything would be taken care of for them. 

However, they would have to pay a small recruitment fee to the agency, ranging from $2,000 to $7,000. For that, they would get a one-year work contract in Saipan. 

Once in Saipan, they would be housed in dorms in the factory compound and fed. For this they would have to pay $200 a month, $100 for food and $100 for dorm expenses. 

The women were given just a one-year work contact and they had to stay with the contractor they were delivered to. 

They were paid just $3 an hour. Now, imagine if they worked a 45-hour week. This would mean they would earn $135 a week.  

The average recruitment fee the Chinese women had to pay was $5,000. In addition, they would have to pay $2,400 for food and dorm expenses for the year ($200/mo food & dorm x 12 months = $2,400). That means that the women have to pay off $7,400 in expenses to the company during their one-year contract. But if they work 45 hours a week for the entire year, they will only earn $7,020 - which is even less than their expenses. 

Two things are clear here. One, the women didn't work 45-hour weeks. Two, they were being held under conditions of peonage, bound financially to the factory. As much as 90 percent of their wages went to pay off their expenses until their debt was cleared. These women were in the position of indentured servants. 

In fact, the Federal-CNMI Initiative on Labor stated that the "[Clinton] Administration continues to be concerned about the CNMI's heavy and unhealthy dependence upon an indentured alien worker program and on trade loopholes to expand its economy." (Fourth Annual Report, Class Action Law Suit, page 68)

  • Forced, underpaid overtime 
  • Unreachable quotas 
  • 84-hour work week 
  • 24-hour shifts 
  • Factory temperature of 100 deg. F 
  • Passports and Visas confiscated

  • Wal-Mart on Monitoring: The company runs a tight ship - or so they say 

    "Wal-Mart is giving greater emphasis than ever to making sure our associates, manufacturers and others understand our strict standards and the consequences of non-compliance." (Jay Allen, "Wal-Mart Vice President for Corporate Affairs, Letter, November 4, 1998) 

    "The Company is proud of its factory inspection program and believes that much good has been accomplished through the program." 

    "Each year, Wal-Mart's exclusive buying agent inspects every factory that produces goods for which Wal-Mart is the importer of record." (Wal-Mart's Notice of Annual Meeting of Shareholders, June 6, 1997) 

    "Vendor Partners shall designate . . . one or more of its officers to inspect each of its facilities which produces merchandise sold to Wal-Mart. Such inspections shall be done on at least a quarterly basis to insure compliance with the standards..." (Wal-Mart Stores, Inc., "Standards for Vendor Partners)

    Factory Life in Saipan: 10 to 12 Hours a Day, 7 Days a Week  

    The regular work week is 10 hours a day, seven days a week. However, on a regular basis the women would be paid for only 8 hours, being forced to work the extra hours for free. This was very common at Wal-Mart's contractors' factory where the women were obligated to "volunteer" 12 to 14 hours a week to the company, unpaid. Across Saipan, workers are routinely and illegally underpaid overtime hours. 

    One way the factories sought to avoid paying legal overtime premiums was to set the daily production quota so high that no worker could possibly reach her quota in the regular eight hours. Then the workers were forced to stay until they fulfilled their goal. Or if they made "mistakes," they were forced to remain without pay until all the repairs were completed. 

    Days off for rest were minimal. It was not uncommon to be forced to stay for 12-hour shifts, seven days a week, put-ting in an 84-hour workweek. At some of the factories, they kept the women working right through the night, putting in a 24-hour work day, when shipments had to get out. 

    Temperatures in the factories could reach 100 degrees and little clean drinking water was available to the workers. It gets even worse - If you speak up to defend yourself you will be fired and deported.  

    Along with the one-year work contract, most workers also had to sign a "shadow contract" with their employer. At any rate, everyone knew what the reality was. 

    In some of the factories, management confiscated the passports and visas of the workers. 

    Everyone knew that if they violated factory "rules" they could be fired and deported, and could face arrest when they arrived in China. They would also be facing huge debts, having to immediately pay off the recruitment fee and return airfare to China. They and their families would be ruined. They had no money. So they could be jailed, or forced to live indefinitely in debt.

    "These Are No College Dorms"  

    When they weren't locked in the factory, typically 4 to 6 women would share one 10 by 25-foot, hot, often insect-infected room. The food would be poorly prepared and often inedible. In many of the barracks, water was turned on only 15 minutes a day for bathing. Even drinking water was not provided on a regular basis. 

    The dorms were guarded and surrounded by barbed wire. Even when they weren't working, the women's movements were severely restricted. They were given specific curfews. In some barracks, guards demanded that the women account for their whereabouts before they could leave. 

    Here is what the U.S. Occupational Health and Safety Administration (OSHA) had to say about the barracks conditions endured by the workers in Saipan who were sewing garments for export to the U.S. According to the class action suit: 

    "During the first half of 1997, OSHA sent four inspection teams to the CNMI and found over 500 violations in the labor barracks alone. Inspectors confirmed the claims of Class members that barracks were unhealthy, with overcrowding, unsanitary facilities, dirty and inoperable toilets, dirty kitchens and electrical hazards. Further, federal investigators noted evidence of Class members being abused or fired for complaining about these poor facilities. During the most recent inspections carried out in February 1998, the OSHA Regional Administrator noted in an interview with a local news agency that working conditions in Saipan were worsening. In fact, since 1993, there have been over one thousand regulatory violations identified by OSHA inspectors in the CNMI garment factories with which the Retailer Defendants do business." (Class Action Suit, pg. 69)

    Wal-Mart Says Its Factories Are Just Too Good To Disclose Their Whereabouts  

    According to Wal-Mart spokeswoman Betsy Reithemeyer : "If we find a very good factory we want to keep it to ourselves." "This is very competitive," she said. (Providence Journal Bulletin, June 19, 1998) 

    Jay Allen, Wal-Mart's Vice President of corporate affairs, also weighed in opposing public disclosure of the factory locations where Wal-Mart goods are produced. 

    "The media has not been so quick to report on Wal-Mart's aggressive program to help prevent child labor and human rights abuses by manufacturers who produce apparel and other merchandise sold in our stores." Mr. Allen continued, "We are outraged when we discover a manufacturer has violated our strict standards and produced merchandise under sweatshop conditions." 

    Then why oppose transparency in the global economy? Why shouldn't the American people be trusted? Why won't Wal-Mart take the simple step of disclosing the names and locations of the factories around the world that produce Wal-Mart goods? This would be the most direct way to show that Wal-Mart isn't trying to hide sweatshop abuses from the American people. 

    Here's what Mr. Allen has to say: "Recently, there have been requests for retailers to reveal the locations of the factories their suppliers use. As with many aspects of the apparel business, the factories used to produce merchandise provide a competitive advantage to retail suppliers. The industry standard and practice is not to reveal the factories or their locations, just as businesses do not talk about all of their sources. Wal-Mart and our vendors adhere to these industry standards and practices." (Jay Allen, Wal-Mart Vice-President, November 4th, 1998 Letter) 

    No one would doubt that finding a factory making clothing carrying the "Made in the U.S.A." label while paying the workers $2.15 below the U.S. minimum wage, forcing them to work 70 to 84 hours a week, cheating them of their overtime pay, and firing and deporting them if they fail to meet their excessively high daily production goal or dare criticize their working conditions, gives Wal-Mart a "competitive advantage." 

    That is exactly why the American people have the right to know where, in which factory, under what human rights conditions, and at what wages the products we purchase are made. Full public disclosure of factory locations brings desperately needed transparency to the global economy, so companies can be held accountable to respect human rights and pay a living wage. Trust but verify. Once the locations of the factories are known, independent respected local religious, human rights, and labor rights organizations can verify compliance with human and worker rights. 

    But independent verification is exactly what Wal-Mart is afraid of. Why?

    Trade Secret? Hardly, since every other retailer knows which factories the other companies are using. In fact, in any given factory, several retailers' labels are being sewn side by side.  

    There is another problem with Wal-Mart's claim that it must keep its "very good" factories secret for rear of competition. The problem is that the competition is also using the Mirage factory in Saipan and their labels are being sewn simultaneously alongside Wal-Mart's clothing.

    Gap, J. Crew, and The Limited all used the Mirage factory along with Wal-Mart! What Secrecy?  It is all a hoax! 

    Recently the National Labor Committee asked a buyer for major U.S. retailers about the secrecy of factory locations. Her response was: "What secrecy? Why do you need disclosure? Everyone already knows what factories the companies are using. It is no secret, nothing is being hidden."  

    In other words, everyone in the industry already knows what factories the companies are using. The only people who don't know are the American people. And Wal-Mart wants to keep it like that. 

    When we pressed the buyer further, she explained that: "no company wants to give up its new styles. For example, if The Gap had a new tank top going into production, they would not want the details of the style being broadcast publicly before the garment was well into production and ready for shipping into the U.S." 

    But we don't care about the style of the garment, and we have never asked for it. All we want to know is which factories Wal-Mart is using around the world to produce the goods we purchase in their stores. 

    There is no legal justification for keeping factory locations secret. Mere factory location does not constitute trade secret. Further, there are no exclusive contracts. As we have seen, the various labels of several different retailers are commonly produced side by side in any factory. 

    What conclusions can there be, other than that Wal-Mart opposes full public disclosure in order to continue to hide its sweatshop production around the world.

     Working for The Limited in Saipan

     Limited garments are sewn at the American Pacific factory in Saipan. The Class Action plaintiff is here referred to as Doe VI, for fear that if her real identity is revealed she could face actual physical violence and deportation to China. 
    Page 12 of the Class Action suit: 

    "Upon arriving at defendant American Pacific's facilities in China, Doe VI's passport and visa were confiscated by defendant's management and she was threatened with deportation if she did not meet her quotas or complained about working conditions. Doe VI reported witnessing workers being whipped with rags by American Pacific manager if they did not meet their quota and using obscenities such as the workers "needed to be treated like dogs" to get them to work. Doe VI's living quarters were insect and rat-infested, and she shared 20 square meters of space with three other women. When Doe VI recently requested to leave the CNMI to return to China, one American Pacific manager began to beat her and pull her hair, cutting her hands in the process and leaving her arms severely bruised." 

     Working For Nordstrom In Saipan

    Nordstrom clothing is sewn at the Global Manufacturing Inc. plant in Saipan. The class action plaintiff is referred to as Doe V, for fear of retaliation should her identity be known. 
    Page 11 of the class action suit: 

    "Upon arriving at defendant Global Manufacturing facilities from China, Doe V's passport and visa were confiscated by Global management and, during a new employee meeting, she was threatened with deportation if she did not meet her quotas, complained about working or living conditions, became pregnant, attended church services, or otherwise used energy that should be devoted to work. Doe V was denied medical care despite requesting to see a doctor. Doe V's housing quarters were insect and rat-infested and surrounded by a fence, and she shared a 10 square meter space with one other woman. Doe V personally witnessed a warning by Global Manufacturing Inc. management that a worker who was pregnant would be sent home to China, and therefore unable to pay the debt incurred for the recruiting fee, if she did not terminate her pregnancy." 

    Nor does Wal-Mart support independent verification of factory conditions or payment  of a living wage 

    Wal-Mart's position is:

    "Wal-Mart believes that it is extremely impractical for a retailer to monitor community wages on a global basis. It is also impractical for Wal-Mart, or any other retailer, to monitor purchasing power on a global basis, especially when the company has no direct contractor relationship with the suppliers." 

    "The shareholder resolution also asks Wal-Mart to take steps that are too broad. For example, the proponents want Wal-Mart to force vendors to raise wages beyond legally required minimum wages and to pay outside corporations with little or no factory inspection experience to conduct inspections. The company believes that these portions of the proposal could be very costly, placing the company at a competitive advantage, while having little real impact." 

    (Shareholder resolution brought by the United Methodist Church's General Board of Pension and Health Benefits/ Wal-Mart's Notice of Annual Meeting of Shareholders, June 6, 1997.) 

    In other words, Wal-Mart refuses to open its factories to respected religious and human rights organizations - who are not on Wal-Mart's payroll - to independently verify compliance with respect for human rights. This way Wal-Mart can continue to hide its sweatshop production around the world, including1000 factories in China alone! For anyone who would actually care enough to look, it is clear that minimum wages around the developing world are often set well below subsistence levels, as poor nations are locked into a desperate competition to attract multinational investment and jobs. Take El Salvador, for example, where Wal-Mart sources production. The minimum wage is just 60 cents an hour. No one can survive on that wage. To climb out of misery and into poverty, a worker would need to earn about $1.18 an hour. Would that be too much for Wal-Mart to afford, given its $7.6 billion a year in operating profits? 

    If Wal-Mart did the right thing they could have a huge impact on the global economy. Wal-Mart's annual sales of 137.6 billion are larger than the GDP - the entire economic output - of 155 countries, and there are only 192! Imagine if Wal-Mart acted responsibly!