15,000 Workers Living in Indentured Servitude While Producing Goods "Made in the USA"

More Than $1 Billion Sought -- Defendants Include The Gap, Tommy Hilfiger, May Company, and Sears

January 13, 1999

In the first-ever attempt to hold U.S. retailers and manufacturers accountable for mistreatment of workers in foreign-owned factories operating on U.S. soil, litigation was filed today in California and Saipan against 18 high-profile U.S. clothing manufacturers and retailers, including The Gap, Tommy Hilfiger, The Limited, J.C. Penny, May Company,and Sears (see chart below for complete list of companies).

These companies are accused of violating federal law by engaging in a "racketeering conspiracy" using indentured labor -- predominantly young women from Asia -- to produce clothing on the island of Saipan. (Saipan is part of the Northern Mariana Islands, a U.S. Commonwealth in the South Pacific.)

Their foreign-owned garment contractors in Saipan are also charged with failing to pay overtime and ongoing intolerable work and living conditions. In the last five years, contractors in Saipan have received more than 1,000 citations for violating U.S. Occupational Safety and Health Administration (OSHA) standards, many of which characterized capable of causing death or serious injury.

Two federal class action lawsuits were filed on behalf of more than 50,000 workers from China, the Philippines, Bangladesh and Thailand. The workers were allegedly drawn to Saipan with the promises of high pay and quality work in the United States. Instead, they found themselves working up to 12-hour days, seven days a week, often "off the clock" without receiving any pay or overtime.

A third companion lawsuit was filed in California state court by four labor and human rights groups (Sweatshop Watch, Global Exchange, Asian Law Caucus, and UNITE). The lawsuit accuses the retailers and manufacturers of using misleading advertising and trafficking in "hot goods" manufactured in violation of U.S. labor laws.

Together, the three lawsuits are seeking more than a billion dollars in damages, disgorgement of profits and unpaid wages.

"To allow such squalid conditions to persist on American soil is both patently unlawful and morally reprehensible," said Al Meyerhoff, one of the lead attorneys. "Saipan is America's worst sweatshop."

According to the lawsuits:

• Garments made in Saipan's sweatshops may carry a "Made in the USA" of "Made in the Northern Marianas, USA" label. American consumers are deceived into believing they have purchased a product made by American workers protected by U.S. labor laws, that guarantee a decent wage and a clean, safe work place.

• Last year alone, the federal government estimated that contractors and U.S. retailers avoided more than $200 million in duties for $1 billion worth of garments shipped from Saipan, that would otherwise have been paid for the same clothing if it were manufactured in China or the Philippines. Some Chinese garment interests have moved their textile operations to Saipan virtually "lock, stock and barrel," in large part, to avoid U.S. duties and quota restrictions. The federal government estimates that this increase in Chinese apparel production in Saipan has allowed China to exceed its import quota by 250% in 1997 alone.

• Although Saipan's garment factories are owned predominantly by Chinese and Korean companies, quality-control inspectors from The Gap, The Limited, and other U.S. retailers allegedly oversee the manufacturing process. Still, they have refused to exercise their power to mitigate the intolerable working and living conditions.

• Over 90% of garment industry jobs in the Marianas are held by foreign "guest workers." These and other foreign workers make up more than half of the estimated total Marianas population of 70,000. This is largely due to the Island's exemption from U.S. minimum wage and immigration laws instituted to encourage local economic development. Since 1996, over 200,000 apparel industry jobs were lost in the continental United States.

• With promises of a good job and a new life, workers agree to repay recruitment fees from $2,000 to $7,000. They often must sign "shadow contracts" waiving basic human rights, including the freedom to date or marry.

• The crowded, unsanitary factories and shanty-like housing compounds are in flagrant violation of federal law. The heat in some factories is so extreme it can cause workers to faint. Many live in a room with up to seven other people in inward-pointing barbed wire-enclosed barracks. Their movements are strictly supervised by guards, and are subject to lockdowns or curfews. Complaints about the conditions are met with threats of termination, physical harm, and summary deportation.

"Unfortunately, slavery and indentured servitude is alive and well in the many parts of the world, including the United States," said another lead attorney, William S. Lerach. "Companies like The Gap have reaped millions in profits from this scheme -- now they will be held accountable."

Conditions in the Marianas have generated a host of highly critical reports from federal agencies and Congressional oversight. One recent report on the Marianas from the U.S. Department of the Interior sharply criticized "the heavy and unhealthy dependence upon an indentured alien worker program and on trade loopholes to expand its economy."

Garment production in Saipan continues to increase, already exceeding that of Malaysia and Jamaica. Although the legal limit on foreign garment workers is 11,000 recent estimates exceed 15,000, and more factories are being built.

The plaintiffs are represented by a coalition of law firms, including Milberg Weiss Bershad Hynes & Lerach LLP -- class action specialists with principal offices in New York and San Diego. The firm has successfully litigated numerous consumer lawsuits against such companies as R.J. Reynolds ("the Joe Camel" case), Prudential Insurance (for life insurance fraud) and Lincoln Savings (for defrauding depositors).

Most recently, the firm negotiated a $1.2 billion settlement from Swiss banks as reimbursement to surviving families and victims of the Holocaust. They are currently seeking compensation for Holocaust victims forced to work as slave laborers in factories.