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Summary of Inspection Findings for EVERGREEN INDSTRIES S.A. DE
C.V. and FORMOSA TEXTILE S.A. DE C.V. Zona Franca San Bartolo, San
Salvador, El Salvador
Audit Date: June 16-19, 1999
Introduction
From June 16 to June 19, 1999, two Verité auditors conducted
inspections and interviews at Formosa Textile S.A. de C.V. and at
Evergreen Industries S.A. de C.V., two garment assembly plants located
in Zona Franca San Bartolo, San Salvador, El Salvador.
Formosa and Evergreen are owned by the Formosa Textile Group located
in California, USA. All materials used at Formosa and Evergreen
are supplied by the Formosa Textile Group from the USA and Asia.
Evergreen produces apparel for ADIDAS. Currently, Formosa's work
for ADIDAS is restricted to embroidery, as it lowered production
for building maintenance.
On June 16, the auditors conducted a factory walk-through and interviewed
Fred Argueta the General Manager, Danny Guzmán the Administrative
Manager, Fabricio Menjivar the General Accountant, Jose Mario Maravilla
the Chief of Personnel at Evergreen, and Rafael Castillo the Chief
of Personnel at Formosa. Managers were cooperative, providing both
information and documentation. A follow-up interview with Mr. Argueta
was conducted on June 19. Seventeen workers were interviewed. Twelve
of them worked in Formosa until last May, and now are working at
Evergreen, the other five worked only in Evergreen. Workers shared
information but were afraid of possible consequences. All interviews
were conducted outside of the export-processing zone.
Evergreen has produced for ADIDAS since 1997. Last year Evergreen
produced 97,000 pieces for ADIDAS, approximately 45 percent of its
production capacity. Evergreen currently produces garments for Nike,
Wal-Mart, Kmart, and Vanity Fair. Other buyers have included Puma,
Holloway, and Eddie Bauer.
The information in this report is heavily based on the operation
of Evergreen because as we mentioned the Formosa factory was not
in full production at the time of the audit. However most of the
recommendations are for both factories because they have the same
policies and management practices.
Recommendations for Evergreen and Formosa
A re-audit is needed within six months.
1. Harassment
a. Ensure that neither factory will tolerate verbal, physical,
or sexual harassment.
b. Adopt a written policy to prevent verbal, physical, and sexual
harassment and communicate this policy to supervisors and workers.
Post these policies in various parts of the factory. Suggested posting
sites in Evergreen: cafeteria and locker hallway.
c. Develop strategies for workers to communicate incidents of harassment
to management.
d. Train supervisors in non-abusive and non-coercive discipline
techniques.
2. Overtime and Production Bonus
a. Pay workers the legal overtime rate for hours worked after regular
hours and during holidays.
b. Set production goals that can be reached during regular work
hours and stop penalizing workers who do not meet their quotas or
decline to stay after regular work hours to finish their quotas.
c. Train supervisors to communicate to workers that overtime is
optional.
3. Discipline and Punishment
a. Clarify the purpose and use of written warnings with supervisors
and workers.
4. Health and Safety
a. Allow workers to go to the social security clinic when they are
not feeling well.
b. Ensure that workers have free and unrestricted access to the
bathrooms and the water fountains.
c. Keep bathrooms open at all times.
d. Improve the cooling systems (fans/air conditioners) in the Evergreen
building.
e. Improve the ventilation system to remove dust and clothing particles
from the air.
f. Make available at least one more unblocked exit in Evergreen.
g. Educate workers about the need to wear protective masks, eye
protection, and gloves.
5. Freedom of Association and Collective Bargaining
a. Ensure that workers understand their legal right to form an
independent union and bargain collectively.
b. Allow workers to unionize without the threat of being fired.
6. Pregnancy and Maternity
a. Verify that women do not need to be tested for pregnancy prior
to or during employment.
7. Employee Termination
a. Review policies about employee termination.
8. Discrimination
a. Consider hiring women in the embroidery section.
9. Labor Codes and Company Policies
a. Post local labor laws and internal policies written in the local
language.
b. Educate workers about local labor laws, policies and Adidas'
Code of
Conduct.
10. Personnel Policies
a. Hire more security guards so workers are not waiting in long
lines during security checks.
Background: The Factory and its Workers
Formosa Textile
Formosa Textile S.A. de C.V. is located in the City of Ilopango,
Zona Franca, and San Bartolo. The factory complex has one plant
that comprises both production and administration. The building
(Attachment A: Formosa Layout) was constructed in 1990 and is approximately
5,100 m2. It is constructed of masonry floors and walls and metal
roofing. The building is currently being repaired and the auditors
observed people working on the toilets, roof, and electrical system.
Management expects to resume production in Formosa within the next
month. The Formosa Textile Group rents the Formosa facility from
the government.
Management reported that the total number of employees is 568 under
normal circumstances, 457 women and 111 men. At the time of the
audit, there were only 37 workers in the Formosa building; 531 workers
were moved to Evergreen.
Evergreen Industries
Evergreen Industries S.A. de C.V. is located in the Zona Franca,
San Bartolo. The factory complex (Attachment B: Evergreen Layout)
is one plant and an additional mezzanine where management's offices
are located. The building was constructed in 1996 and is approximately
4,000 m2. It is built of masonry floors and walls and metal roofing.
The Formosa Textile Group rents the Evergreen facility from a private
owner.
Management reported that the total of employees is 366 under normal
circumstances, however, at the time of the audit, there were 897
workers in the building; 531 workers were moved from Formosa.
Formosa and Evergreen
The typical worker is female, age 20 to 30, with a middle school
level of education. Most of both factories' employees are from El
Salvador with the exception of 14 production supervisors from Bangladesh
and one manager from China. None of the workers are sub-contract,
prison or child laborers. In El Salvador the minimum age of employment
is 16 years old (Attachment C: Labor Code- Código del Trabajo
-República de El Salvador (1998) - p. 43). In both factories,
all workers are at least 18 years old.
Employees work from 7 a.m. to 5 p.m. Monday to Thursday and 7 a.m.
to 4 p.m. on Friday. The facility rarely operates on Saturdays.
In embroidery and cutting, there is also a night shift. According
to management, the annual turnover rate is 2 percent. Two hundred
workers were recently dismissed due to a drop in orders during the
first three months of this year.
Findings: Issues and Problems
1. Harassment
The majority of workers interviewed cited incidents of harassment
involving Bengali supervisors. Management stated that they have
a "no tolerance" policy towards verbal, physical, and
sexual harassment. Nevertheless, most workers interviewed had experienced,
witnessed or heard of incidents of harassment. Six workers reported
a case of attempted sexual assault involving a Bengali supervisor
at Evergreen in 1998. Eight workers reported a case of physical
abuse in Formosa last year between a female worker and a Bengali
Supervisor. Another six workers reported cases of verbal harassment
and quoted abusive words in Spanish and Bengali used by supervisors.
The supervisors from Bangladesh are male and were hired as production
supervisors through a connection with the owners of Formosa Textile
Group. Several workers interviewed mentioned that they would prefer
Salvadoran supervisors.
2. Overtime and Production Bonus
The El Salvador labor code stipulates that any work performed beyond
the regular 44-hours per week be compensated at twice the hourly
rate or 10.50 colones (US $1.20)(Attachment C: Labor Code - Código
del Trabajo -República de El Salvador (1998) - p. 58). Management
has worked out a special arrangement with the Labor Ministry to
pay a production bonus of 20 colones (US $2.29) to operators and
10 colones (US $1.14) to assistants (slightly less than the legal
overtime rate) if the quota is met in overtime instead of paying
the extra hour(s).
Workers sign an agreement that says they accept the production
bonus rather than the overtime pay when they stay past regular hours
to reach a production goal (Attachment D: Production Bonus Form).
It was unclear whether workers understood the meaning of this document
and their choice to sign it. Workers claimed that written warnings
were given to employees who did not stay to finish their quotas,
and claimed there was a lot of pressure to sign the document and
felt that it was obligatory.
Six workers claimed that it was common to stay after regular hours
to work ahead for the next day or to be able to work under less
pressure the following day. This time spent working ahead is not
paid.
Finally, management stated that approximately 30 percent of workers
reached the production quota per day. According to the payroll record
(Attachment E: Payroll for Evergreen and Formosa) and worker interviews,
most workers reach their quota only once or twice a week.
3. Discipline and Punishment
Management recently implemented a new system of warnings using
a standardized form (Attachment F: Performance Controller 1999).
All workers interviewed understood that after three warnings they
would be suspended. On the third warning after suspension, the worker
is dismissed. Workers claimed that warnings were given out very
liberally and several expressed confusion about the meaning of the
warnings.
Eight workers spoke of another disciplinary measure referred to
as "being taken to the big table." This usually occurs
when a worker's production is perceived as low; a worker is sat
down alone in front of his or her supervisor and a personnel manager
who proceed to personally insult the worker. While walking through
the factory, auditors saw two situations where an operator was sitting
down and two people were standing over her; the groups quickly disbanded
when they saw the auditor. Many workers specifically complained
about the treatment they themselves or a work mate had received
from Rafael Castillo, the Head of Personnel in Formosa. They also
mentioned that when they complain about these issues, a manager
(Li-Chi) tells them that if they do not agree they could leave.
4. Health and Safety
Medical Care
Management does not allow workers to go to the social security
clinic without an appointment. If a worker has an appointment, their
manager will give them permission to go. Workers are not given permission
to leave if they do not have an appointment; therefore, workers
who suddenly feel ill or not well, are not allowed to seek medical
attention. Workers said that there is a two-day suspension for going
to the clinic without permission. Some of the workers mentioned
that even pregnant women have had difficulty in obtaining permission
from their supervisor to go to the clinic in cases of emergency.
At the time of the audit, there was no medical staff on duty in
the factory; however, management mentioned that a clinic has been
installed at Evergreen and it will soon be in operation.
Bathrooms
According to workers, they need a pass to go to the restroom and
the water fountain. Management employs this system to be able to
minimize the time spent waiting in line for the facilities. A majority
of workers interviewed claimed that one pass for the bathroom and
one for water was insufficient and they often had to wait a long
time to have access to either service. Management expressed that
they have been criticized for this policy, but they consider it
very useful.
Each production line consists of approximately 30 to 40 female
employees and is provided with one pass for the bathroom and one
pass for the water fountain. In Evergreen, there are two bathrooms
with nine stalls for women. Under normal circumstances, there are
320 women in Evergreen; however, due to construction, there are
about 750, which yields a woman to stall ratio of 42 to one. There
are two bathroom stalls for 111 men in Evergreen. Additionally,
the bathrooms are closed at 4:30 p.m.; not even pregnant woman can
access them.
Temperature and Ventilation
Management stated that the average temperature in the building
is 33 degrees Celsius (91.4°F). Though there are several ventilators
installed in the roof of the facility, the majority of workers interviewed
said the temperature in both facilities was too high. Auditors both
agreed that the temperature in the plant on the day of the audit
was higher than 33 degrees Celsius. The embroidery section and the
administrative offices are air-conditioned.
Evergreen is equipped with a humidification system that helps to
keep the fabric particles from circulating in the air. The same
system is currently being installed in Formosa as well.
Exits
The main floor of Evergreen is 4,000 m2. Due to construction in
Formosa, there are approximately 900 workers occupying the main
floor of Evergreen. There are only two exits available (Attachment
B: Evergreen layout). There is another exit that is a loading dock
but it is often blocked.
Protective Equipment
Although they are provided with protective masks, eye protection
and gloves, workers do not use them. Workers mentioned that using
gloves, for example, slows down their process and they cannot meet
their quotas. Auditors also saw two workers removing stains with
chemicals; one was using a mask and the other was not. Both management
and workers reported few accidents. There are rare needle stick
injuries.
5. Freedom of Association and Collective Bargaining
Article 204 of the El Salvador labor code says, "All workers
have the freedom of association to defend their economical and social
interests and rights. They can organize professional associations
and/or Unions" (Attachment C: Labor Code - Codigo del Trabajo
-República de El Salvador (1998) - p. 66). Also, the right
to organize and bargain collectively is protected by the Constitution
(Addendum I: U.S. Department of State, El Salvador Country Report
on Human Rights for 1998). According to management, workers have
the right to associate, but no attempts have been made to date.
Article 33 of the Internal Regulation of Evergreen prohibits the
company from influencing workers in regards to their right of professional
association (Attachment G: Internal Labor Regulation of Evergreen
Industries). However, the majority of workers interviewed said that
they did not have the right to form a union. Eight workers said
that workers were dismissed for attempting to unionize in Formosa.
Workers also said that last year more than 20 workers were dismissed
because they were promoting a workers' meeting.
6. Pregnancy and Maternity
All workers interviewed said that the factory required pregnancy
tests upon application while management claims that since late last
year, it has ceased to require a pregnancy test. The factory has
not hired any operators in the last several months so it was not
possible to verify this claim.
Pregnant women are entitled to three months of maternity with pay.
According to management, the company pays 30 percent and social
security pays 70 percent. Both workers and management mentioned
that women are allowed to return to the same position and the same
pay after their maternity leave.
7. Employee Termination
Both the manager and workers mentioned that 200 workers were dismissed
at the beginning of the year because production demands were low;
there is no documentation of the people dismissed. Two workers mentioned
that some people who are dismissed are forced to sign their resignation
under the threat of being accused of robbery.
8. Discrimination
All employees in the embroidery department are male. Management
explained that embroidery is seen as a man's job in El Salvador
and Central America. Women rarely, if ever, apply. Workers are required
to work a night shift and this is seen as 'dangerous' for women.
Based on the auditors' experience, night shifts are common for female
operators in many apparel plants in Central America. In fact, auditors
saw women arriving for night shifts in other factories in the zone.
Management described the work as lighter than that of operators.
Workers in embroidery earn approximately 300 colones above the minimum
wage per month and work in an air-conditioned environment. Management
agreed that this was a case of discrimination and said that they
would consider hiring women for this operation.
9. Labor Codes and Company Policies
The company's Internal Regulation was posted in the factory (Attachment
G: Internal Labor Regulation of Evergreen Industries). The document
was in bad condition. The internal regulations contain a list of
what the worker and the company are obligated to do and prohibited
from doing. Personnel policies regarding harassment, maternity benefits,
absences, etc are not detailed in this document. Management said
they were working on a summary of the internal regulation to post
as well as a manual for all workers with written personnel policies.
Such documentation was not made available to the auditors. The Adidas
Code of Conduct was prominently posted in Spanish, Bengali, and
English. The majority of workers interviewed said they had never
read any of the postings.
10. Personnel Policies
All production workers are required to submit to a body and bag
search before leaving the factory. Management reported a high rate
of pilferage. Female guards search women and male guards search
men. Men are required to open their pants; women are frisked on
top of their clothes. Management recently began implementing searches
when workers leave for lunch as well. Workers complained that there
were not enough guards to perform the searches and they subsequently
spent several minutes in line waiting to leave for their 40-minute
break.
Findings: Hours and Compensation
1. Wages and Payroll
The minimum wage in El Salvador for commercial, industrial, and
service employees is 42 colones (US $4.81) per day (Addendum I:
U.S. Department of State, El Salvador Country Report on Human Rights
for 1998 p.16 and Attachment H: Minimum Wage). Operators and assistants
make the minimum wage, which amounts to 1260 colones (US $144.30)
per month before deductions. Supervisors are paid 1500 colones (US
$171.70) and 1800 colones (US $206.14) depending on responsibility
and experience per month before deductions. Quality control personnel
are paid 1400 colones (US $160.33) per month before deductions.
Cutters make between 1800 colones (US $206.14) and 2000 colones
(US $229.04) per month before deductions. Employees in embroidery
make 1400 colones (US $160.33) per month before deductions (Attachment
E: Payroll for Evergreen and Formosa).
Only workers without production goals, such as cleaning staff,
are paid overtime (Attachment I: Overtime Requisition Form). For
workers with production quotas, the number of days they reached
the quota during a given 15-pay period is listed under overtime
on the payroll but they are remunerated according to the company's
incentive system.
2. Deductions
According to management, the monthly deductions are made for Social
Security and pension payments. Deductions range from about 110 colones
(US $12.59) per month to 150 colones (US $17.17) per month (Attachment
E: Payroll for Evergreen and Formosa).
3. Benefits
Workers are entitled to at least 11 days of holidays. After one
year of employment, workers are entitled to 15 days of paid vacation
and Aguinaldo (Attachment C: Labor Code - Codigo del Trabajo -República
de El Salvador (1998) - p. 66 and Attachment G: Internal Labor Regulation
of Evergreen Industries, VI and VII). When there is high demand,
workers do not take their vacation days. To be able to take off
a whole week of Holy Week, workers work on Saturdays to make up
for the three extra days given off at that time. Management reported
that workers have Retirement found (AFP) and loans for housing and
workers receive a 25 percent incentive for good behavior and attendance.
Findings: Facilities
1. Safety
Fire extinguishers are located throughout the facility (Attachment
B: Evergreen Layout) and there is some literature about fire safety
for the workers (Attachment J: Fire Safety). There is a maintenance
area for machines in both facilities and a record of service on
machines in maintenance (Attachment K: Maintenance Record).
2. Residential Facilities
The 14 Bengali supervisors live on the factory premises. These
facilities were not included in the audit due to their being residences
for supervisors and not workers.
ADDENDA & ATTACHMENTS
Summary of Inspection Findings for Evergreen Industries S.A. DE
C.V. and
Formosa Textile S.A. DE C.V.
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Addendum I: U.S. Department of State
El Salvador Country Report on Human Rights
Practices for 1998
Released by the Bureau of Democracy, Human
Rights, and Labor, February 26, 1999
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