Nike Labor Practices in Vietnam

by Vietnam Labor Watch

Thuyen Nguyen

Enclosed you will find our report on Nike labor practices in Vietnam and Nike's own corporate statements and promises. This report is the result of several months of research as well as interviews with 35 Vietnamese workers from Nike factories in Vietnam. Please do compare what Nike said to the reality of Nike workers in Vietnam. We, then, urge you to send the enclosed letters. The first letter is for President Clinton urging him to ask Nike to provide monetary compensation to workers in Vietnam who are owed backpay. The second letter is for Nike's CEO, Mr. Phil Knight, asking Nike to:

1.     Accept proposals by non-governmental organizations to form independent monitoring boards in each country where Nike shoes are produced.

2.     Adopt a fair living wage practice for all workers, one that would enable workers to meet basic needs, as well as save for the future. Nike can use independent studies by academics and NGOs to determine living wage standards.

3.     Promote conditions at Nike factories conducive to the empowerment of workers. Stop Nike subcontractors from using boot camp techniques in managing factory workers. Adopt a corporate goal of having no tolerance for physical abuse, humiliation, corporal punishment as well as sexual abuse in Nike factories.

4.     If Nike agreed with our findings concerning issues related to its violation of Vietnamese minimum wage law, then Nike should provide some forms of backpay to its Vietnamese factory workers to compensate for lost wages that Nike factory workers have endured.

Nike should forced all its factories in Vietnam to comply to the recommendations of the HCM City Health department and Bien Hoa Health Department.

Nike is a consumer oriented company and will respond to public pressure. Therefore, your letters to President Clinton and to Mr. Knight will make a big difference in this effort to improve the daily living conditions of Nike factory workers in Vietnam, China and Indonesia. Thank you very much for your help.

TABLE OF CONTENTS

EXECUTIVE SUMMARY    4

Executive Summary

This report is the result of a six month effort by Vietnam Labor Watch (VLW) to understand the working conditions of workers at factories in Vietnam that make Nike products. The effort was started in October 1996, after the CBS News program 48 Hours ran a segment detailing the abuse of Nike workers in Vietnam. A group of Vietnamese Americans, deeply disturbed by the report, decided to contact labor groups and journalists in Vietnam to verify the report, to meet with Nike officials to discuss the problems and to organize a group called Vietnam Labor Watch to monitor the issue on an ongoing basis.

From March 2-18, 1997, at the invitation of Nike, Vietnam Labor Watch traveled to Vietnam to visit the factories. We met with workers, shoe manufacturing executives, labor union officials, union representatives, legal experts and foreign investment experts in Vietnam. In addition to the official factory tour of the Sam Yang plant, we did surprise visits to Sam Yang and three other plants that produce Nike shoes _ Pouchen, Dona Victor and Tae Kwan Vina. We conducted in-depth interviews with 35 Nike shoe factory workers outside their respective factories.

This study covers the following issues: labor law violations, wage, working conditions, health and safety practices, and sexual harassment. The study also compares what Nike told the American consumers about its labor practices versus what VLW has found in Vietnam.

We are glad that Nike is providing needed jobs in Vietnam, but we are deeply concerned about the company's labor practices. Nike contractors are exploiting the Vietnamese workers in many areas, including wages, working conditions, health and safety practices. Nike has a fine Code of Conduct but this Code of Conduct is being violated consistently by Nike contractors in Vietnam. While Nike claims it is trying to monitor and enforce its Code, its current approach to monitoring and enforcement is simply not working.

A simple story illustrates this fundamental problem. On the day we made an official visit with Nike representatives to the Sam Yang plant in Ho Chi Minh City, we found that the doors to the six factories of this facility were wide open, as stipulated in the fire codes. However, on the day, we made a surprise visit to the same facility, we found three factories had their doors closed, while workers were still working inside. A small industrial fire in any of these factories could easily lead to the loss of many lives.

Under the current system, Nike has no way to ensure that its contractors abide by its Code of Conduct. There are not enough Nike expatriates or employees in all of Nike's various departments in Vietnam to ensure that Nike contractors are complying with the code of conduct on a day-to-day, shift-to-shift basis. Auditing is also not adequate. Any visit, audit or study to find out about working conditions through worker interviews within the confines of the factory will simply be inaccurate. The workers are under a constant threat of retaliation and would not reveal their true feelings to anyone while they are inside the factory. To be accurate, any study or audit must interview workers outside the factory and must be done by a neutral party who could guarantee the anonymity of the workers.

We found that Nike subcontractors violated many critical Vietnamese labor regulations. We found violations of the laws covering overtime wages, night shift wages, and Sunday wages. We were shown pay stubs with such irregularities in compensation that they suggest a systematic form of wage cheating. We found many workers who received below minimum wage during the first three months of employment, which is another violation of Vietnamese law. We also found that in 1996, many workers worked over the legal maximum of 200 hours of overtime per year. In 1997, we already found several workers working such long hours of overtime that they were reaching the yearly limit within the first two months of 1997!

Over 90 percent of the Nike workers in Vietnam are women, and most of them are between the ages of 15 and 28. A uniform complaint among the women we interviewed was that they were not being paid a livable wage. The daily wage is approximately $1.60 and the cost of three simple meals is $2.10 per day. The women told us that they literally have to make a daily choice between eating a balanced meal or paying rent for the single rooms that most of them rent out. Ninety percent of the workers we interviewed told us that they received extra help in terms of finance, food, or housing from their families to make ends meet. Most of the women are from the countryside, and all the women we interviewed told us that they cannot afford to save money to send back home to their families.

The treatment of workers by the factory managers is a constant source of humiliation. We found that verbal abuse and sexual harassment are frequent, and corporal punishment is often used. During our two week visit, 56 women workers at a Nike factory were forced to run around the factory's premise because they weren't wearing regulation shoes. Twelve of them suffered shock symptoms, fainted during the run and were taken to the hospital. This deplorable event occurred on International Women's Day, an important holiday when Vietnam honors its women. This abuse of workers reflects Nike's inability to enforce its Code of Conduct. It took place during a period when Nike knew that Vietnam Labor Watch was in Vietnam investigating Nike labor practices. During this same two week period, the workers at another Nike factory conducted two work stoppages, one of which lasted for three days.

Several factory rules in place violate sensibilities and indeed, human dignity. Workers cannot go to the bathroom more than once per 8-hour shift and they cannot drink water more than twice per shift. Forced and excessive overtime to meet high quotas is currently the norm at Nike factories. During January 1997, we found workers who worked over 80 hours of overtime, and in February, which was a short month due to the national four-day holiday for Lunar New Year, they were forced to work over 70 hours of overtime.

Many health and safety standards in Vietnam are ignored by Nike factories. In March 1997, we found that a Nike factory had not even implemented a single health and safety recommendation from a list of many made in September 1996 by the Ho Chi Minh City Health Department. It is a common occurrence to have several workers faint from exhaustion, heat and poor nutrition during their shifts. We were told that several workers even coughed up blood before fainting. The medical facilities at the factories we visited were inadequate. The Sam Yang's medical facility is only staffed with two nurses for approximately 6000 employees. There is only one doctor who works for two hours a day, even though this factory operates 20 hours per day.

Given the distressing conditions, the relationship between factory managers and worker is extremely tense. We believe if this antagonistic relationship continued, there could well be very serious clashes.

VLW believes that Nike can only enforce its code of conducts for its factories through the use of monetary fine and independent monitoring. Nike needs to adopt a policy of zero-tolerance for corporal punishment and physical abuse of its workers just as it has a policy of zero tolerance for poor quality shoes. Nike can only improve the working conditions at Nike factories in Vietnam by working with the Vietnam General Confederation of Labor and the labor union representatives at the factories. Nike also needs to consult with other shoe manufacturers in Vietnam who have managed to produce high quality shoes for other US shoe companies while providing higher wages and offering much better working environment than Nike factories in Vietnam.

Labor Law Violations

1.    In the Nike Production Primer, Nike stated that workers in its factories in Vietnam "can earn triple the wage offered in state-run factories" (p. 2.8)

2.    The first rule of Nike's code of conduct is that "(Subcontractor/supplier) certifies compliance with all applicable local government regulations regarding minimum wage; overtime; child labor laws%"

Vietnam Labor Watch has obtained actual pay stubs from 1996 and 1997 that confirm CBS News' report that Nike violates Vietnamese laws in regards to minimum wage and forced overtime. In addition, we found that Nike has violated the training wage provision of Vietnamese labor law.

CBS news program 48 Hours reported that workers at Nike shoe manufacturing plants in Vietnam made an average of 20 cents per hour. Team leaders were making $42 per month, which is less than the Vietnamese minimum wage of $45 per month. Regular workers made even less. CBS documented this through interviews with team leaders and even showed a copy of a labor contract in its broadcast.

We also have obtained pay stubs (exhibit 1 & 2) in which a full-time worker received less than $27 for March and April 1996; the minimum wage in Vietnam at that time was $35. While Nike claims that this practice has ended, we found pay stubs of other workers who received less than $38 a month between November 1996 and February 97 (exhibit 3, 4, 5); the minimum wage in Vietnam since July 1996 is $45. All 35 workers from Nike factories in Vietnam that we interviewed confirmed that they received a wage lower than the minimum wage for a period of 90 days when they first started working at the factory. All 35 are not aware that this was a violation of the minimum wage law.

Nike might claim that new workers are paid a lower wage because Vietnamese law allows for a training or probationary wage that is less than the minimum wage. Vietnam's legal code, however, specifies that the training wage can be paid only for a "probationary period" of 30 days for jobs requiring high school education and 6 days for jobs requiring less than high school education (under Article 32 of the Labor Code of June 23 1994 and Article 5 (2) of Decree 198-CP of Dec 31, 1994). Of the 35 workers that Vietnam Labor Watch interviewed, only 8 of them finished high school. In terms of training, the majority of shoe factory jobs other than stitching and sewing require about one week of training, according to the workers we interviewed. We also were informed by the Vietnamese General Confederation of Labor as well as Ho Chi Minh City Confederation of Labor that the legal definition of training and probationary wage under the Vietnamese legal code is one and the same.

Nike contractors might also claim that the workers, during the first three months, are considered students receiving a technical or vocational education and therefore can be paid below the minimum wage. We firmly believe that this is just an excuse to squeeze further profits out of these workers. Nike workers are not receiving a formal technical education or vocational training. There are no classroom facilities in the factory and no educational materials are provided to the workers. The proof that Nike factory jobs require no formal training is the fact that Nike factories currently employ workers on the assembly lines who only have a 9th grade education, and new workers are usually immediately placed on the assembly line after only a few hours of training These "students" also work many hours of overtime, just like regular workers. If a worker is good enough to virtually immediately start producing shoes and to work many hours of overtime, then they should get the wage of a regular employee.

Article 69 of Vietnam's Labor Law stipulates that "The labor user and the laborer may agree to work overtime, but not for more than four hours a day, 200 hours a year". Several workers told CBS News that they are forced to work overtime to meet a daily quota that is set very high. We have found that on average Nike workers are forced to work 500+ hours of overtime per year.

Our pay stub records (exhibits 6 to 12) show that one Nike factory worker worked 238 hours of overtime from April 1996 to October 1996. Exhibits 13 to 17 show that another worker worked 236 hours of overtime from May 1996 to October 1996. Both of these women work on different assembly lines, and said they were forced to work this much overtime. Since each assembly line involved 50 workers, additionally there must be at least 98 other workers who were forced to work over the legal overtime limit. We found one pay stub indicated that a worker has worked over 73 hours in February 1997 alone (exhibit 19), and 84 hours of overtime, including three Sundays, in January 1997 (exhibit 18).

The many irregularities we found in our analysis of pay stub records suggests a deliberate form of wage cheating. We also received complaints from workers about not getting the correct compensation for overtime wages, night shift wages or Sunday wages. According to Vietnamese labor law, the overtime wage is 1.5 times the regular wage, night shift wages should be 1.3 times, and Sunday and holiday wages should be twice the regular wage.

For example, we have two pay stubs for the month of February 1997 from two workers (exhibit 5 and exhibit 19). They told us that during February, they worked many hours of overtime, including double shift days, several Sundays, one worked over 100 hours of overtime and the other worked over 60 hours of overtime. According to these pay stubs, both workers worked 29 days in February, but there are only 28 days in February 1997. During the month of February, the workers were supposed to have received 4 days off for the Lunar New Year. Either they did not receive the holidays according to the law or they did not receive the correct overtime compensation. Another legal violation is that if they have worked the entire month of February 1997, they must have worked four Sundays but the pay stubs did not indicate any Sunday hours.

Over 60% of the workers we interviewed complained about not being paid overtime even when they worked overtime. They told us that in some parts of the factories, each assembly line is assigned a specific daily quota, and if the workers do not meet this quota, then they have to work extra hours until they meet the quota_without getting overtime pay.

In conclusion, Nike factories violate many labor laws in Vietnam, including the provisions regarding minimum wage (Article 3 of Decree 198-CP of December 31, 1994, Section II. (1.) of Circular 11/LDTBXH-TT of May 03 1996), provisions regarding probationary period (Article 28 of the Labor Code and Article 5 (4.) of Decree 198-CP), in addition to the above-cited provision regarding the overtime limit.

Workers cannot live on Nike factory wages

1.    Nike has agreed to "%only do business with partners whose workers are all cases employed voluntarily, not put at risk of physical harm, fairly compensated%, and not exploited in any way." (Athletic Footwear Association's Statement of Guidelines on Practices of Business Partners, signed by Nike, 3/93)

Reality

    The 35 workers we interviewed told us that they cannot live on the basic factory wage, which is the equivalent of $47US per month. It is simple math, they said. A simple, basic meal (like rice, vegetables and some tofu) costs 70 cents; three meals a day costs $2.10. They are paid about $1.60 per day. So the basic salary they receive from Nike factory jobs does not even cover the cost of food. Then there are other expenses: renting a room ($6 per month), clothing, soap, toothpaste etc. They also do not receive the full $47 wage, because there are deductions for health insurance, social insurance and meals from their paycheck.

    All 35 workers told us that they receive some financial assistance to make ends meet from parents or relatives in terms of housing, money and food. They were surprised that the cost of living in Ho Chi Minh City is so much higher than in the rural areas where they came from and they were not prepared for city life.

    All 35 workers we interviewed confirmed that they do not send any money home to their parents in the rural areas of Vietnam. They were quite surprised that we even asked such a question. They all felt that there is no way any of them could save enough money to send home unless they stopped eating for a couple of days per week.

    How do they currently manage with the salary from Nike factory jobs? They skipped meals. When they eat, they only eat rice and vegetables. And a couple of times a month, they get help from their parents or relatives in terms of gifts such as money, rice, chicken, eggs and fish.

    Thirty-two out of 35 workers we interviewed told us that they had lost weight since working at Nike factories. All reported not feeling good generally since working at the factories. They complained of frequent headaches as well as general fatigue.

    The economic statistics released from the World Bank confirmed the reality facing these workers. The GDP for Ho Chi Minh City was $925 for 1995. Considering that Nike factory workers only make about $564 per year, it is not surprising that they are having trouble making ends meet.

6.     Boot Camp Assembly Lines

1.    Nike has agreed to "%only do business with partners whose workers are all cases employed voluntarily, not put at risk of physical harm, fairly compensated, allowed the right of free association and not exploited in any way." (Athletic Footwear Association's Statement of Guidelines on Practices of Business Partners, signed by Nike, 3/93)

2.    Nike claims that it has employees on site daily at the factory and enforced the Memorandum of Understanding. (Nike Production Primer, Nike Consumer Affair, 1996)

3.    At the shareholder meeting on Sept 16, 1996, Nike CEO Phil Knight said about reports of physical abuse from Vietnam Nike factories (from transcript of Nike shareholders meeting),

We had a situation that got some publicity more in Asia maybe than in the United States, where we had a -- a stitching room floor lady, a Korean floor lady in -- in one of the Vietnamese factories, you know, hit a Vietnamese stitcher on the -- on the arm with an upper. And an incident was made out of that.

We believe that the incidents of worker abuse found at Nike factories in Vietnam are not isolated incidents but are caused by the "boot camp assembly line" system in which workers are subjected to various forms of corporal punishment. Corporal punishment, including humiliation, is employed as a form of worker control by Nike contractors in Vietnam. This tactic is current employed in other Nike factories in Indonesia and Southern China. The "boot camp assembly line" is a method of controlling workers similar to those used in boot camps of military institutions to train new recruits. The only difference is that these young women have no idea that they were signing up for boot camp when they agreed to work for a Nike factory. Coming mostly from rural areas of Vietnam, they are not educated and are not familiar with their labor rights.

Fifteen Vietnamese women told CBS News and other Vietnamese newspapers that they were hit over the head by their supervisor for poor sewing at Nike Sam Yang's facility; two were later sent to the hospital. At Nike's Tae Kwan Vina facility, women were forced by their supervisors to kneel down with their hands up in the air for 25 minutes . A supervisor also taped the mouth of several workers for talking during work. Throughout 1996, we found many incidents of corporal punishment at Nike factories reported by Vietnamese newspapers, i.e. forcing workers to stand in the sun (sun-drying), writing down their mistakes over and over again like parochial school children, cleaning the toilet and sweeping factory floors.

Despite the many employees that Nike claims are at the factory sites in Vietnam, Mr. Knight did not present the correct information about these incidents to shareholders at the Nike shareholders meeting. If Mr. Knight had just consulted the Vietnamese newspapers, he would have had a more accurate picture. For example, the headline story in The Worker newspaper on March 31, 1996 proclaimed, "Foreign Technician Strikes 15 Vietnamese Workers." The same newspaper, on April 1, 1996, proclaimed: At Sam Yang Company, Cu Chi District, Ho Chi Minh City , Korean Technical Employee Strikes Many Vietnamese Female Workers. It went on to say that immediately after the incident took place, 970 workers on strike to protest the mistreatment of their fellow workers.

On Nov. 26, 1996, 100 workers at the Pouchen factory, a Nike facility in Dong Nai, were forced to stand in the sun for an hour over lunch because one worker had spilled a tray of fruit on an altar. After 18 minutes, one employee (Nguyen Minh Tri) refused to remain in the sun and walked away; he was then formally fired. Mr. Nguyen Minh Tri was reinstated after intervention by Nike management and the local labor federation officials. The three supervisors who abused the workers are still working at this factory. These supervisors must be severely reprimanded or fired (exhibit 20).

The use of corporal punishment continued even during our Vietnam visit. On March 8, 1997, International Women Day, a supervisor at the Nike Pouchen's facility in Dong Nai forced 56 women workers to run around the factory in the hot sun (exhibit 21). Eleven of them suffered shock symptoms and fainted, one became unconscious. All 12 were taken to the hospital by other factory workers. The People's Committee of Dong Nai has asked the police to hold the supervisor, Hsu Jui Yun, and to investigate the matter further. Vietnamese all over the country were outraged that on the International Women's Day, when most companies in Vietnam give women workers flowers and other gifts, 12 Vietnamese women were so abused that they have to spend the day in the emergency room.

Even with all the publicity about abuse of women workers at Nike factories, Nike has not put an end to the use of corporal punishment in its boot camp assembly lines. Therefore, we have no choice but to conclude that the current monitoring system is woefully inadequate. Just from examining the Nike departments in Vietnam, we could see that no matter how well intentioned these expatriates were, they could not be in all five factory facilities, which have eight to nine factories in each facility. These factories also run night shifts, a time when Nike expatriates are rarely present.

This method of boot camp assembly line creates an extremely tense atmosphere at the Nike factories. Strikes, work stoppages and work slowdown occur frequently. During a one week period, when Vietnam Labor Watch representatives were in Vietnam, one work stoppage occurred on 03/06/97 and another on 03/10/97. There were also several work slowdowns in February 1997 (exhibit 22). The reasons for these strikes or work stoppages are disputes about overtime pay, arbitrary firing of workers, and abusive treatment.

Verbal abuse is common. One worker recalled a story when a supervisor told the entire line how his dog in Korea could be trained better in one year than all the Vietnamese workers on the line. One worker, when asked how they were treated in Nike factories, said, "They treat us like animals."

Basic principles of human dignity are being violated at Nike factories. The workers we interviewed all complained about not being allowed to drink water more than twice per 8 hour shift or go to the bathroom more than once per shift. If they violate this rule, they are given a warning and after three warnings, they can be dismissed. Drinking water and using the toilet facility is controlled by a card or hat system. In order to use the facility, the supervisor must first assign a card or a hat to a worker. Wearing the hat or carrying the card, the worker is allowed to go. However, the number of cards or hats are limited per assembly line to 3 cards for 78-person line, 4 cards for a 300-person line.

    Based on interviews with workers, Nike factory workers have no choice but to work overtime. If they refuse, they will be punished (using the various forms of corporal punishment that we have discussed earlier) or received a warning. After three warnings, they'll be fired. Only in a family emergency (major illness or death) are workers be allowed to skip the mandatory overtime.

The workers we interviewed are afraid of retaliation from Nike contractors if they are known to make complaints about the factory management. The workers told us that people are being fired without any reason and without the presence of their union representative. During the last strike at Sam Yang factory in October 1996, all mechanics were fired. Several workers were also fired and under pressure, were later hired back. During a work slowdown between March 10-12, 1997, the whole line was fired and then rehired.

The workers also told us that the factory management prepared the factory and warned the workers when there were visitors from the United States or Europe. Workers are too afraid of retaliation to express their true feelings to these visitors. During such a factory visit, workers are allowed to work slower and verbal abuse or other forms of corporal punishment do not occur. But when the visitors leave, things go back to the normal, miserable conditions. When VLW made a visit to a Nike facility in Ho Chi Minh City with a Nike representative, we found that the doors to all the factories were open, as stipulated by law. But on our subsequent, surprise visit to the same facility, several factories have their doors closed with workers inside, constituting a serious fire hazard.

Based on our experiences, we believe that any visit, study or audit using interviews of workers within the confines of the factory will not be accurate. To be valid, the worker interviews must be done outside the factory by people who can guarantee workers their anonymity.

Health and Safety Problems

1.    Nike has agreed to "%only do business with partners whose workers are all cases employed voluntarily, not put at risk of physical harm, fairly compensated, allowed the right of free association and not exploited in any way." (Athletic Footwear Association's Statement of Guidelines on Practices of Business Partners, signed by Nike, 3/93)

Reality:

    Working in an environment with the threats of corporal punishment, fear of retaliation and excessive overtime is debilitating to the workers. Workers we interviewed complained about weight loss and general fatigue. In general, they are in poor health. We can easily see the reasons. Working on a Nike assembly line is a stressful job: workers must keep up an inhuman pace and on top of that they have to worry about potential corporal punishment or verbal abuse when they slow down. The hours are long: many factory workers work 11 hours a day, six days a week, and sometimes have to work on Sundays as well. Pay stub records reflect that it is common for workers to put in 40 to 50 hours of overtime per month. During February 1997 the month of the Lunar New Year, a major holiday in Vietnam when workers get 4 days off, we found pay stubs in which a worker worked over 70 hours of overtime (exhibit 19).

    Workers fainted often while working in Nike factories in Vietnam. About three incidents of fainting occur per day. The union representative told us that he witnessed one worker cough up blood and faint while working on the assembly line. All 35 workers we interviewed confirmed that at least once a week they saw or heard about someone who fainted while working in the factory. As to the reasons, they attributed them to stress, exhaustion, heat, the smell of chemical (glue, paint) in the factory as well as people not eating to save extra money.

    We obtained a report dated September 9, 1996 from the Ho Chi Minh City Health Department which describes problems at Sam Yang, a Nike facility. The major problem is that many areas of the factory have a high concentration of toluene, reaching a level of 180 mg per sq. meter when the legal limit is 100 mg per sq. meter. The noise level in several area were found to be much higher than the legal limit. The report also provided many recommendations to ameliorate these problems. As of March 12, 1997, the Sam Yang factory management did not implement any of the recommendations in this report. We also found that the factory management ignore recommendations made by Nike's labor practice department, such as the recommendation that they leave factory doors open in case of fire.

    The medical facility at the factories we visited were inadequate. The Sam Yang medical facility is only staffed with two nurses for about 6000 employees. There is only one doctor, who is available for only two hours a day, while this factory operates 20 hours a day. We were told that the factory management did not want to spend the money to hire a full-time doctor. Workers during the night shift complain about having to go to the hospital about 30 minutes away for medical emergencies such as electric shocks, loss of finger nails, or severe cuts in their hand and fingers.

4.     Sexual Abuse

Nike Claims:

1.    "Nike expatriates aggressively work to ensure our subcontractors follow our Memorandum of Understanding..." (Nike Manufacturing: Perception vs Reality. Nike Consumer Affair, 1996)

2.    At the shareholder meeting on Sept 16, 1996, Nike CEO Phil Knight also commented on a report of sexual abuse at Nike factories in Vietnam. This is what Mr. Knight said (from transcript of Nike shareholders meeting),

Fairly recently in Vietnam, that basically there was a situation on the night shift where four of the woman th-- who were in the stitching fell asleep. And -- and the night watchman who again was Korean in coming through the room, two of them woke up and fled the room. And he shock the other two. And in the shaking of one of 'em, there was perhaps some misappropriate behavior. And then he touched a part that he should not have.

That basically she protested. And -- and basically, it comes about as close as you can get to sexual harassment in U.S. terms, as you can get. The night watchman was sent back to Korea. And - essentially, trying to rectify the situation. However, it was reported in one of the Vietnam -- at least one of the Vietnamese newspaper as a rape.

Reality:

    A Nike plant supervisor fled Vietnam after he was accused of sexually molesting several women workers. The Nike expatriates who were at the factory daily did not try to make the supervisor stay in Vietnam to face criminal charges. The government of Vietnam later instigated extradition procedures against the supervisor.

    Once again Nike CEO still did not have or did not present the correct information about these incidents to Nike shareholders. From The Worker newspaper, Nguoi Lao Dong, August 23, 1996.

At 4:40 am on the morning of August 18, 1996, Kim Sung Rat went to inspect passing an area where there were four Vietnamese female workers working in the computer embroidery room. Kim Sung Rat let two of the workers take a break and called the other two female workers, NTH and NTVP, to come to the storage area at the farthest end of the factory where there was no one working, about 50 meters away from the computer room. Here Kim Sung Rat called NTVP into the storage area and made a gesture that she should take off her shirt. After that, Rat tore the shirt of P and felt her up. P ferociously resisted, and was able to run and escape.

At that moment Rat grabbed a hand and pulled H into the room. Again with a very obscene action, he rubbed her chest, pulls the pants zipper of H, and rubbed her private parts. After that, Rat made a sign by his finger in a very obscene manner indicating sexual intercourse. Although weaker than P, and being unable to escape nevertheless, H ferociously resisted. Being able to guess the activity or Rat in the storage room, as he had done with her, Miss P had run to call the guards, and R was caught in the act.

    There are many problems with Nike using its own expatriates to try to clean up problems in the factories. Besides not having the correct information, the on-site expatriates at the factories in Vietnam have not prevented the contractors from engaging in unethical and probably illegal behavior. Nike subcontractor, Taekwang Vina, has offered bribes to the two female workers, asking them to keep quiet. From The Worker newspaper, Nguoi Lao Dong - August 25, 1996 (excerpts of an interview with the victims)

Questioner: (to NTH) Can you tell us, after this took place, on the side of the company, what was their manner?

NTH. After this took place, the leadership of the company put forth their "separate condition" with me and P. The company agreed to compensate us in order to smooth over this matter. Two times they gave to me and to P, each of us, an envelope full of money in order to buy us off and smooth over the action of this expert Kim. But we refused. I answered them, we will not for money sell our dignity or our honor.

    Nike factory workers in Vietnam we interviewed all complained about frequent sexual harassment from foreign supervisors while working on the assembly line. In broad daylight, in front of other workers, these supervisors would try to touch, rub or grab the buttocks or chest areas of these women. Those women who are considered particularly good looking are frequent targets of sexual harassment. One supervisor even told a female factory worker that it is a common custom for Korean men to greet women they like by grabbing their behinds.

4.     Other Shoe Factories In Vietnam

For comparative purpose, we also interviewed 25 workers at two other shoe manufacturing companies in Vietnam: Thai Binh and Hiep Hung. Thai Binh is privately owned and Hiep Hung is a state enterprise. Both of these companies are currently producing shoes for Reebok, as well as other European shoe companies. Both are employing from 4000 to 6000 workers each. We found that the working conditions and even the wages are better than those found in Nike factories. The Thai Binh factory is in Song Be province, which has a lower minimum wage than Ho Chi Minh City. Yet the factory workers there receive a higher wage than those in Nike factories.

Just from a few visits, it is easy to see the difference in treatment of workers as soon as one walks into these factories. The workers smile at the guests; they are working but they are relaxed, while workers in Nike factories are tense, sheepishly looking at the guests. At Thai Binh and Hiep Hung factories, several workers started conversations with us when we walked through the factory floor. At Nike factories, the workers did not even want to sit next to us during lunch.

During lunch at Thai Binh, workers and managers all share the same table, talking and eating. At Nike factories, the managers have a separate dining room. At the end of the shift, one can also see another major difference in treatment of workers. At Thai Binh, the workers simply walked their bikes and packages out of the factory. At Nike's factory Sam Yang, the workers are searched if they carry any bags because the factory management does not trust its own employees .

In terms of wages, both of these Vietnamese shoe factories offered higher pay than Nike factories. Thai Binh, in Song Be district (a lower minimum wage than Ho Chi Minh), offered $52 US per month. At Hiep Hung, the entry level wage is $65 US per month.

    In the June '96 issue of Life Magazine, Sydney Schanberg (author of The Killing Fields) documented child labor being used in Pakistan in the production of Nike soccer balls -- for 60 cents a day.

    The March 16 edition of the New York Times carried a story on union busting by Nike shoe contractors in Indonesia. One worker was "locked in a room at the plant and interrogated for seven days by the military, which demanded to know more about his labor activities."

    The October 17 edition of the CBS program 48 Hours had a segment on Nike's labor rights abuses in Vietnam, including: beatings, sexual harassment and forcing workers to kneel for extended periods with their arms held in the air.

    On November 3, an article by Australian labor scholar Anita Chan was published in the Washington Post. She described Chinese shoe factories -- producing for Nike and other companies -- where supervisors submit workers to a military boot camp style of control.

    On March 14 1997, Reuters had a report on a Nike factory, Pouchen in Dong Nai, forced 56 Vietnamese women workers to run around the factory's premise, 12 fainted and were taken to the hospital emergency room.

%     Recommendations to Nike

Vietnam Labor Watch firmly believes that a modern, high-tech shoe factory can_and must_be managed without practices that are exploitative and abusive to factory workers. Corporal punishment and severe disciplinary measures should not be necessary to produce high-quality shoes. Labor practices of the 19th century should no longer be tolerated at the end of the 20th century, especially by a U.S. corporation that claims the moral high ground, projects a progressive image, and is extremely wealthy.

We believe that Nike is willing to change its practices, and we also believe that Nike has the power to make its contractors rectify their labor practices. In a spirit of cooperation, so that we can improve the daily lives of the workers, we recommend that Nike take the following steps in Vietnam:

Nike should abandon the practice of using training/probationary wages or paying the workers below minimum wage under the guise of providing technical/vocational training. Many Nike factory jobs do not qualify as technical vocations and the current Nike factories cannot be considered vocational schools. Using this approach to underpay Nike workers is illegal and unethical. Wages in Vietnam are already at rock bottom. There is no need for Nike to pay workers any lower than the $45 monthly minimum wage.

Nike should make the implementation of its Code of Conduct a top priority, putting it above even quality and cost. Once the situation improves, then Nike can shift this priority. Nike should demand that all managers who use corporal punishment or are guilty of sexual harassment be dismissed. Nike should make it the responsibility of the general manager of the factory to run a factory that respects its workers. After three violations of Nike's Code, the general manger should be dismissed. The current approach of having no specific punishment for violating the Code of Conduct generates the impression that the Code has no teeth.

Nike should levy a stiff monetary penalty on the contracting company whenever it violates the Code of Conduct. The current practice of not making the subcontracting company responsible for its managers' treatment of workers will only encourage further violations. Companies tend to respond well to severe monetary fines. With so many repeated violations after only 18 months of operation in Vietnam, this is the only course of action left to demonstrate to outsiders that Nike is serious about enforcing its Code of Conduct.

Nike should immediately enforce the 60 hour work week specified in the Code. The current practice of excessive, forced overtime (sometimes over 70 hours per month) would be considered abusive by any standards.

Nike should be a good corporate citizen in Vietnam. Nike cannot assume that creating low paying jobs is good enough. Vietnamese workers_and their supporters around the world_will not simply be grateful for the jobs and ignore the deplorable labor practices in the factories. Moreover, it is unjust that Nike shareholders profit handsomely from the low wages paid these Vietnamese workers. Nike should take some of the profits it makes from Vietnamese workers and invest them in projects that help improve the lives of poor Vietnamese.

Nike should work directly with the Vietnam General Confederation of Labor to hear the complaints from workers and to talk with workers outside the factory environment. We found that as long as the workers remain within the confines of the factory, they are very fearful and are not willing to talk about their conditions to anyone. The Vietnam General Confederation of Labor at both the local and district levels were very helpful to us in arranging meetings with factory workers outside factories. We believe that the Confederation could be an important addition to Nike's efforts to improve its labor practices.

Nike should consult with several Vietnamese who are experts in shoe factories and on how to establish better labor practices. Beside Nike factories, we had an opportunity to visit two other shoe factories in Vietnam: Thai Binh and Hiep Hung. Both are Vietnamese companies and both are producing high-quality shoes for Western shoe companies such as Reebok and Fila. The presidents of both of these companies have expressed their willingness to consult with Nike on how to treat its Vietnamese workers. Even though they consider Nike a competitor, both of these managers are willing to help because they want to improve the working conditions of the workers at the Nike factories. Their desire to help is sincere and generous, and we believe that Nike should take them up on their offer.

Nike should form an independent monitoring board in Vietnam consisting of representatives from neutral parties, including government labor officials, NGOs, and labor unions There are many excellent organizations, as well as respected individuals, who would be willing to serve on such a board.

Nike should immediately implement all of the recommendations made by Vietnam's Health Department to improve the health and safety conditions at Nike factories.

Nike should implement all of the recommendations made by Ho Chi Minh City's General Confederation of Labor, which include: classes on labor rights for workers, regular medical examination for workers, and establishing a pay scale that is fair and abides by Vietnamese labor law.

Exhibits (not shown)

Exhibits 1 & 2 combines together demonstrate that Nike's subcontractor, Samyang Vietnam Co., Ltd violated the minimum wage law of Vietnam. The minimum wage in Vietnam for the period of March and April 1996 is $35 USD or 387,000 dong (VND). These two exhibits demonstrate that this worker, employee no. 6032, received a wage 271,000 VND for 32 days. According to Vietnamese law, Nike subcontractor can pay a wage that is less than the minimum wage for a trial period of 6 days. Therefore, Nike factory definitely owed at least 26 days of backpay to this worker.

Additionally, Exhibit 1 shows that employee 6032 worked 4 hours of overtime for March 1996 and Exhibit 2 shows that the same employee worked 20 hours of overtime for April 1996.

Exhibit 3, 4 & 5 also demonstrate that Nike's subcontractor, Sam Yang Vietnam Co, Ltd. violated the minimum wage law of Vietnam for the month of November, December 1996 and February 1997. These three exhibits show that employee no 6111 received a wage of 387,000 VND for 3 months. VLW could not obtain a paystub for Jan 1997., nevertheless we can easily assume that this worker received the same wage as December 1996. The minimum wage in Vietnam since July 1996 is $45 USD.

Exhibit 3 demonstrates that in Nov. 1996, employee 6111 received a basic salary of 387,000 VND which is below the minimum wage of Vietnam ($45).

Exhibit 4 demonstrates that in Dec. 1996, employee 6111 received a basic salary of 387,000 VND which is below the minimum wage of Vietnam ($45 USD).

Exhibit 5 demonstrates that in Feb 1997, employee 6111 received a salary of 387,000 VND for 16 days of work which is below the minimum wage of Vietnam ($45 USD). There are other irregularities with this paystub. Please refer to exhibit 19 for explanation.

Exhibit 6 shows that employee 6032 worked 40 hours of overtime in May 1996.

Exhibit 7 shows that employee 6032 worked 36 hours of overtime in June 1996.

Exhibit 8 shows that employee 6032 worked 31 hours of overtime in July 1996.

Exhibit 9 shows that employee 6032 worked 53 hours of overtime in August 1996.

Exhibit 10 shows that employee 6032 worked 29 hours of overtime in September 1996.

Exhibit 11 shows that employee 6032 worked 21 hours of overtime in October 1996.

Exhibit 12-17 shows that employee 5101 worked 236.5 hours of overtime from May 1996 to October 1996. The Vietnamese legal limit of overtime is 200 hours per year.

Exhibit 13 shows that employee 5101 worked 36 hours of overtime in June 1996.

Exhibit 14 shows that employee 5101 worked 31 hours of overtime in July 1996.

Exhibit 15 shows that employee 5101 worked 55 hours of overtime in August 1996.

Exhibit 16 shows that employee 5101 worked 31 hours of overtime in September 1996.

Exhibit 17 shows that employee 5101 worked 39.5 hours of overtime in October 1996.

Exhibit 18 shows that employee 5101 worked 84 hours of overtime including 21 Sunday hours in Jan 1997

Exhibit 19 and exhibit 5 have many irregularities suggesting a systematic form of wage cheating. Both paystubs indicate that both employees worked 29 days in February 1997 but there were only 28 days in February 1997. If the workers have worked for the entire month of February, then they must have worked 4 Sundays, yet the paystubs indicate that they did not receive any Sunday pay (2 times the basic salary). If the workers have worked two shifts on some days, then the second shift should be compensated as overtime pay and not as night-shift pay. Overtime pay is higher, 1.5 times the basic salary, than night shift pay, 1.3 times the basic salary.

In February, there is a 4 day national holiday for the Lunar New Year. If the workers have worked during the holidays, they did not receive holiday pay which is 2 times the basic salary. The worker in exhibit 19 insisted that she got 4 days off for the Lunar New Year, and she worked at least 100 hours of overtime including several Sundays, and several days of double shifts. Exhibit 19 indicates that she only worked 73 hours of overtime.

Exhibit 18 and 19 together demonstrates that this one worker has already worked over 157 hours of overtime during the first two months of 1997. The maximum overtime limit for Vietnam is 200 hours per year. After two months in February 1997, this worker is reaching the legal maximum limit.

April 1, 1997

President Clinton

The White House

1600 Pennsylvania Avenue, NW

Washington D.C 20500

Dear President Clinton:

We, the undersigned, welcome your Fair Labor Coalition. We agree with you that there is a desperate need to develop strategies to assure American consumers that the products they purchase are produced under acceptable labor conditions abroad. The coalition's work is important both to American businesses and consumers, as well as to foreign workers of US corporations. The integrity of your Fair Labor Coalition is crucial and therefore members of this coalition should not include companies that have knowingly violated their own business codes of conduct and the local laws of other countries.

We have enclosed documentation which shows that Nike did not pay its Vietnamese workers the country's legal minimum wage. Pay stubs also reveal other labor law violations. These illegal practices were discovered and publicized by CBS News. CBS News also has documented that Nike factory supervisors have abused factory workers. Nike factory workers were also found by other organizations to be working under military-style, boot camp conditions where they are frequently humiliated and corporal punishment is often employed.

We have provided the same information to Nike and have asked the company to address these specific labor problems. So far Nike has not taken steps to remedy its practices in Vietnam. Nike has not provided backpay to its Vietnamese factory workers to compensate for prior underpayment. The company also has not addressed the abusive behavior of Nike subcontractors; more incidents of corporal punishment have occurred since CBS News highlighted these problems. Even more disturbing, workers who refused to accept the abuse have been fired.

In light of Nike's labor law violations in Vietnam, we seek for your help in asking Nike to address these labor issues in Vietnam as well as to provide some forms of compensation to workers who have suffered many months of wage cheating.

                            Sincerely yours,

April 1, 1997

Mr. Phil Knight, CEO

Nike Corporation

Nike World Headquarters

One Bowerman Dr

Beaverton OR 97005

Dear Mr. Knight:

The 48th Hours on CBS, October 17, 1996, was watched closely by many. The program dealt with the inhumane treatment of fifteen (15) Vietnamese lead workers by their supervisor, wages below the legal minimum wage and sexual abuse of several women workers. Reuters on March 14th, 1997, reported that 56 women were forced to run around another Nike factory and 12 suffered shock symptoms, fainted and were taken to the emergency room.

It is commendable that Nike, through its subcontractor, has decided to make available job opportunities to Vietnamese workers. Thus, the above issues should be resolved in the spirit of human dignity and human decency. In this spirit, we believe that Nike should agree to the following recommendations:

1.     Accept proposals by non-governmental organizations to form independent monitoring boards in each country where Nike shoes are produced.

2.     Adopt a fair living wage practice for all workers, one that would enable workers to meet basic needs, as well as save for the future. Nike can use independent studies by academics and NGOs to determine living wage standards.

3.     Promote conditions at Nike factories conducive to the empowerment of workers. Stop Nike subcontractors from using boot camp techniques in managing factory workers. Adopt a corporate goal of having no tolerance for physical abuse, humiliation, corporal punishment as well as sexual abuse in Nike factories.

If Nike agreed with CBS News and VLW findings concerning issues related to its violation of Vietnamese minimum wage law, then Nike should provide some forms of backpay to its Vietnamese factory workers to compensate for lost wages that Nike factory workers have endured.

Respectfully,