26 Sept 2003

Overview:

Substantial evidence shows that PT Kahatex Sweater has violated several core domestic and international labor laws since May 2003 (wage violations have been documented as far back as 2001) including laws regarding:

1. minimum wage Per-08/PEM/81 (1)
2. overtime KEP-72/Men/84 & UU13/2003 (2)
3. forced labor / homework - UU19/99 (modeled after ILO Convention No. 105, 1957)
4. right to strike UU-13/2003
5. severance Kep-150/MEN/2000
6. freedom of association UU21/2000
7. leave (menstrual UU-12/1948, maternity, sick, and annual KEP-69/MEN/80 leave)
8. health insurance PER-03/PEM/1992 (3) & PER-01/MEN/1998 & PER-14/PEM/1993 & UU-03/1992

Wages & Fines:

• Substantial evidence shows that Kahatex Sweater Division has been paying below the legal minimum wage since 2001. The current UMK (minimum wage of Kabupaten Bandung) is Rp 537,500 a month, or roughly Rp 258,000 for a two-week pay period.
• Government Regulation, PER-01/MEN/1999, divides the monthly wage up by days/ not hours worked, and that the number of days per month is not 30, but 25 or 21 depending on if one works at a place of employment that follows a 6 or 5 day work week respectively (PER-01/MEN/1999 Article (2)a). Thus at PT Kahatex Sweater Division, which follows a 6 day work week, should use the calculation for the two week pay period would be as follows:

  Rp 537,500 / 25 = Rp 21,500 (per day) x 12 (days) = Rp 258,000

• Most pay slips reviewed fall between Rp 80,000 and Rp 230, 000 per pay period.
• Under Kep-81/MEN/85 Article 7(a) and Article 25(1) PT Kahatex must pay a fine to each employee for not paying the legal UMK. The WRC now has documentation that PT Kahatex Sweater has been paying a sub-UMK piece rate since 2001. By looking at this law and evidence alone PT Kahatex Sweater technically owes its employees hundreds of millions of Rupiah-the "severance" paid thus falls far short of the amount legally due to workers. Also see Per-08/PEM/81 the main law on the minimum wage (UMP)

Overtime and Forced Homework:

• Overtime is almost never calculated properly - pay slips do not even show a line item for overtime. H&M has discovered workers being clocked out at 3 p.m., then going right back to work off the clock to finish production targets.
• Workers are often told to take fine, hand sewing or finishing work home with them. This work is sometime paid at a sub-minimum piece rate, or not paid at all.

Strike/ Lock Out:

• UU 13, 2003: general overview - this law says that employees must try remediation with management before striking…this took place at Kahatex, please see the chronology.
• UU 13, 2003 Article 146(2): Cannot lock out employees that are striking over violations of their normative rights (such as the minimum wage).
• Also Article 145 of UU13/2003: Legal strikers must be paid their base wages while on strike, (for many of the Kahatex workers the "severance" package didn't even reach the amount due to them for wages during the lock-out/strike period).

Severance (Coercion) & Freedom of Association:

Two workers were taken into police custody after a fight that broke out on the picket line in front of the factory compound. PT Kahatex managers, Harja Haruman and Nelson S. tried to convince the locked-out workers to resign and accept less than legal severance in exchange for the factory using its influence to gain the release of the arrested workers. Such actions constitute a gross violation of college and university codes of conduct, Indonesian law and international law. Using arrest and the threat of prosecution to force workers to resign their jobs is unacceptable and any such action must cease. Any resignation made under such circumstances would be invalid and the workers would maintain their right to immediate reinstatement with back pay. See July 16th Agreement and accompanying Affidavit

All of the workers locked out were active in the KPS, Komite Pekerja Buruh (Sweater Worker's Committee) this is not a registered union, but it publicly know as being affiliated with PPB, a local garment union. The two arrested workers were KPS leaders.

Reinstatement:

Regarding the severance agreement you are referring to, you have heard faulty and misleading information from PT Kahatex management. The July 16th agreement laid out the terms for a "settlement package" or "termination bonus", but it was clearly understood by both parties at the time of it's signing that this in no way precluded reinstatement, in fact workers were verbally promised by Harja Haruman and Nelson S. at the time of signing the agreement that they would all be reinstated to PT Kahatex Sweater, though in stages (groups of 100 or so employees at a time) and at the loss of their accrued seniority.

Of the few workers who taken back as employees at Kahatex, all have lost their former seniority, status as permanent employees, and have been told that they can only become members of SPSI or SBSI unions (not PPB/ KPS).

Leave/ Women's Rights

• Indonesian law guaranteeing that women shall not be compelled to work on the first and second days of their menstrual cycle. (4)
• Law gives workers 12 annual leave days a year. Mutually corroborative worker testimony has told us that employees who have worked 4+ years at Kahatex only remember getting to take leave once. (5)

Health Insurance:

Kahatex Sweater Division does not provide the legally required health insurance, JPK, or a better alternative.

Important Note:

Indonesian legal structure is such that issue specific laws such as Kep-150/MEN/2000 and UU21/2000 (Trade Union Act), sometimes referred to as "peraturan pelaksanaan" (regulations regarding proper implementation of general laws), are considered legally superior to general acts such as UU13/2003. According to this principle, Kep-150/MEN/2000 legally supercedes UU13/2003 in terms of issues related to industrial disputes. Furthermore, none of the peraturan pelaksanaan of UU13/2003 have been written yet. Given this fact one must use the current peraturan pelaksanaan such as Kep150/MEN/2000, until a regulation is written to take its place.

Notes:

1. Important note: Indonesian laws and regulations fall into four general categories: Keputusan Menteri (Ministerial Decrees; henceforth "KEP-/MEN/"), Peraturan Menteri (Ministerial Regulations; henceforth "PER-/MEN/"), Peraturan Pemerintah (Government Regulations; henceforth "PER-/MEN/"), and Undang-Undang (Acts/Ordinances; henceforth "UU").

2. KEP-72/Men/84. This Ministerial Decree on Overtime Wage Calculation states that the first hour of overtime must be compensated at 150% times one's hourly wage, and the second hour at 200%. UU13/2003 Article 78 (1a.) This article clearly states that, any overtime being requested by the employer, "must be agreed upon by the employee(s) involved."

3. PER-03/PEM/1992 sets out the four elements of JAMSOSTEK coverage: insurance for workplace accidents, life insurance, provident fund, and health insurance. PER-14/PEM/1993, Article 2(4) clarifies that all firms employing more than 10 workers must provide all four packets of JAMSOSTEK. Companies are only exempt from providing the fourth packet (often referred to as "Packet B" or "JPK") if they provide private health insurance that is equivalent or better.

4. UU-12/1948, Article 13(1)

5. KEP-69/MEN/80