Tell Gildan Activewear: Don't Cut and Run

Dear friends,

In a surprise move, Canadian T-shirt manufacturer Gildan Activewear announced the closure of its El Progeso sewing factory in Honduras, which has been under investigation for a series of worker rights violations. Please write to Gildan today demanding that the company reverse its decision to close the factory and that it comply with all recommendations to address the violations.

Many thanks in advance for your attention and support!

Maquila Solidarity Network
July 26, 2004

What’s Behind Gildan’s Decision To Close Its El Progreso Factory?

On July 12, Montreal-based T-shirt manufacturer Gildan Activewear made a surprise announcement during a meeting with the Fair Labor Association (FLA) and Worker Rights Association (WRC) that it will close its El Progreso factory in Honduras on September 30, leaving 1,800 workers unemployed. That unexpected announcement effectively terminated discussions on the corrective action to address worker rights violations at the factory that were substantiated by separate FLA and WRC investigations.

Gildan’s decision to cut and run from the factory in the midst of negotiations on corrective action is totally unacceptable and a clear violation of the FLA’s corporate membership requirements.

MSN is demanding that Gildan reverse its decision to close the factory and fully implement all recommendations for corrective action being requested by the FLA and WRC as a result of their investigations.

If Gildan refuses to reverse its decision and to fully implement all the FLA and WRC recommendations, MSN will be calling on the FLA to suspend Gildan’s membership as a FLA Participating Company until the company demonstrates its willingness to act in good faith.

On July 25, MSN called on the Fair Labor Association (FLA) to take disciplinary action against Gildan Activewear for the company’s decision to close the Honduran factory in the midst of the independent investigations.

Today, the FLA posted a statement on its website announcing that it had decided to “suspend the Third Party Complaint process” because Gildan’s decision to close the factory “has jeopardized the prospects of remediating the main findings in the complaint.”

In a statement released today, Gildan offers to reinstate only those fired workers who had no prior disciplinary record and who were fired after October 2003. It does not offer to reinstate workers unjustly fired for union activity prior to that date. This offer would only provide workers fired after October 2003 two months employment and severance pay calculated from the date of their reinstatement. Gildan’s offer includes a promise of discretionary payment for damages suffered by employees as a result of their dismissals, but does not commit the company to provide full back pay to all unjustly fired employees. The statement fails to acknowledge that the workers’ right to form or join a union of their own choice was violated. Nor does Gildan commit to working with unions of its workers’ choice.

WHAT IS GILDAN SAYING?

Gildan claims that its decision to close the El Progreso factory in Honduras has nothing to do with allegations of worker rights violations, union organizing attempts, or the FLA or WRC investigations of the factory, and that its decision was made “strictly for business and operational reasons.”

It gives the following reasons for the factory closure:

• The factory is no longer competitive. It is “inefficient and more costly compared to other sewing facilities where only one product is made.”

• Gildan is transferring sewing production to Haiti and Nicaragua where production costs are half those in Honduras.

• Gildan lost on average 1-2 production days every month because militant worker protests that had nothing to do with Gildan blocked a bridge access to the free trade zone.

WHAT ARE THE FACTS?

Because MSN does not have access to Gildan’s factory or financial records, it is difficult for us to determine how profitable or cost competitive this particular factory is. However, we do know that the factory is a very sophisticated facility with modular production and its workers are extremely productive. In fact, one of the key issues identified by researchers from the Honduran Independent Monitoring Team (EMIH) was health problems associated with the long hours of work and intensive pace of production at the plant. Workers also reported they were often required to work extra days after their normal 4-day workweek (11 hours per day) was completed. Worker interviews and pay slips also indicated workers were not receiving a living wage even by local standards.

While Haiti does offer even cheaper labour than Honduras, it is questionable whether the newly opened Gildan factory in Haiti could be as productive and efficient as Gildan’s El Progreso factory in the near future. Recently, another major apparel manufacturer, Grupo M, shifted some of its production from two factories in Haiti because of worker organizing, factory work stoppages and what the company claimed was low productivity at its Haitian factories.

The more fundamental question for Gildan and the FLA is whether it is acceptable for a FLA Participating Company to close a plant while it is under investigation in response to a third-party complaint merely because the company can get cheaper labour elsewhere. MSN does not believe this is acceptable behaviour, since it assumes that the search for lower costs and increased profits takes precedence over labour standards compliance and the rights of workers.

Concerning Gildan’s allegation that militant maquila workers have been blocking access to the free trade zone on a regular basis, reports from Honduras indicate that the most recent disruption was the result of political protests by teachers on the highway from which you enter the free trade zone and had nothing to do with actions by workers employed in the zone. The teachers’ dispute with the government has since been resolved. While political protests, including temporary blockages of highways, are not uncommon in Honduras, such actions are even more frequent in Nicaragua and Haiti, where Gildan is shifting production. Companies that invest in poor, cheap-labour countries must accept that disruptions due to political protest are part of the bargain.

WHY IS THE TIMING OF GILDAN’S ANNOUNCEMENT AN ISSUE?

Whether or not Gildan has plans to eventually shift some or all its sewing production from Honduras to Haiti and Nicaragua in order to exploit even cheaper labour, the timing of its decision to close its El Progreso factory is extremely suspicious. The FLA and WRC investigations of labour practices at El Progreso had been completed and Gildan was in the final stages of joint discussions with both the FLA and WRC on corrective action to address the findings of the two investigations when the company made the surprise announcement that it was closing the factory.

Gildan’s announcement that it would close the El Progreso factory at the end of September 2004 came as a complete surprise to MSN, the FLA and the WRC. There are a number of unanswered questions surrounding the decision and the timing of the announcement, including:

· Why would Gildan agree to cooperate with the FLA audit and enter into joint discussions with the FLA and WRC on corrective action if it intended to close the factory? Why would it not inform the FLA and WRC of its intentions prior to a crucial meeting concerning corrective action? Why would it make the announcement right before the FLA and WRC reports were to be made public? Why would Gildan give formal notice of the factory closure to its El Progreso employees one day after informing the FLA and WRC of the closure, allowing those organizations no opportunity to discuss possible alternatives?

· In May of this year, MSN received reports from Honduras that Gildan was in the process of creating a “solidarista association” at the Progreso factory, which included the establishment of a savings and loan program for workers. (Solidarista associations are a form of company union commonly used by employers in Central America to prevent the establishment of authentic unions.) Why would Gildan go to the trouble of creating a company union and savings and loan program for workers if it intended to close the factory?

· Why is Gildan keeping open its two other sewing factories in Honduras, which have not been the subject of a complaint or a FLA or WRC investigation?

· Will Gildan provide documentation to MSN, the FLA and WRC to prove that the Progreso factory was not profitable or cost competitive?

WHAT WERE THE FINDINGS AND RECOMMENDATIONS OF THE FLA AND WRC INVESTIGATIONS?

Although MSN has not yet received copies of the reports from the FLA or WRC investigations, the fact that corrective action was being discussed would seem to indicate that freedom of association violations were substantiated by both investigations.

The MSN complaint, which was filed with both the FLA and WRC in December 2003, focused specifically on the unjust firings of approximately 100 union supporters in 2002 and 2003. The FLA’s June 2004 “Third Party Complaints Update” states that an independent assessment of the facility“found a significant likelihood of noncompliance, as alleged in the original compliant.”

In a July 15 article in Le Devoir, FLA Executive Director Rut Tufts is quoted as saying he is “obligated to express his disagreement” with Gildan’s assertion that most of the problems at the factory have already been solved. “We were only at the exploratory stage and we are always careful of not focusing only on easy solutions that do not fundamentally change anything. I don’t see how Gildan, in this context, could come to this erroneous conclusion,” said Tufts.

Contrary to statements attributed to Gildan in the media (see below), the FLA audit of the El Progreso factory was the first audit carried out by the FLA of any Gildan facility. To date, no Gildan factories have“passed rigorous audits by the Fair Labour Association.” Nor is MSN of aware of any actions taken by Gildan to date “to apply the proposed remediation solutions [of the FLA and WRC] to other Gildan factories.”

In a July 14 article in Le Devoir, WRC Executive Director Scott Nova is quoted as saying, “We are very troubled by their decision to close the factory. While we haven’t seen all the facts, we fear that there is a link between the fact that they are subject of investigations for worker rights violations and the closure of the factory.” According to the article, “Nova was shocked by the news of the El Progreso plant closure at a moment when it was in ongoing discussions with Gildan over remediation plans.”

Even if Gildan were justified in closing its El Progreso factory, this would not remove its obligation to take corrective action to address the violations identified by the FLA and WRC investigations and compensate the workers whose rights were violated.

A July 14 article in the Montreal daily, Le Devoir, quotes Gildan spokesperson Stephane Lemay as saying the company has “already corrected 70% of the reported problems” identified in the FLA audit, and that Gildan is “also committed to apply the proposed remediation solutions to all of our other factories.”

According to representatives of the FLA and WRC, this is incorrect.

A July 15 article in The Globe and Mail attributes a statement to Gildan indicating it has addressed several of the concerns raised in the FLA report and that “they weren’t major.”

According to FLA Executive Director Rut Tufts, this is incorrect.

A July 15 article in the National Post attributes a statement to Gildan that claims, “Gildan plants have passed rigorous audits by the Fair Labor Association.”

The FLA audit of the El Progreso factory was the first FLA audit of a Gildan facility.

A July 16 article in Women’s Wear Daily quotes a Gildan spokesperson as saying, “The lease at El Progeso expires on September 30 and rather than renew it, we decided to consolidate production in Haiti and Nicaragua.” It goes on to say that two-thirds of the production will be shifted to Haiti and the remaining third to Nicaragua, which will result in an annual cost savings of $1.5 million.

According to Gildan’s Annual Information Form for the year ended October 5, 2003, dated February 20, 2004, the El Progreso lease expires in 2013. (A footnote states that this includes renewals.)

The WWD article and a July 15 article in The Globe and Mail attribute statements to Gildan indicating that the machinery at the El Progreso plant will be transferred to Gildan’s operations in Haiti and Nicaragua.

In contrast, July 17 articles in two Honduran newspapers, El Tiempo and La Tribuna state that the company will transfer some or all the factory equipment to its remaining factories in Honduras.

Gildan spokespeople have also made a variety of statements concerning the alleged problem of blocked access to the free trade zone where the factory is located. In the WWD article, a Gildan representative is quoted as saying that “militant action by workers in neighboring, unrelated plants in the same industrial park” was one factor motivating its decision, and that “workers at other factories would often block access to the park.” In a July 14 article in Le Devoir, Lemay is quoted as saying the only point of access to the industrial park is blocked“one or two times per month” by demonstrations that cost the company“hundreds of thousands of dollars per year.”

The most recent highway blockage was the result of a political protest by teachers. That dispute has since been resolved. Such protests are even more common in Haiti and Nicaragua, where Gildan is shifting production.

A July 20 Dow Jones Newswires article quotes Lemay as saying: “For sure, the timing was a surprise, but we went to Washington to meet with them [the FLA and WRC] and explain in great detail the business rationale behind the decision, to confirm that this had nothing to do with the current audit.” The same article says Gildan “has denied the allegations” [that workers were fired for union activity], and quotes Gildan’s chief financial officer, Laurence Sellyn, as saying, “(The firings) were related to seasonal changes in production levels.” Sellyn is also quoted as saying the company was never “formally notified” of a request to form a union at El Progreso, and that Gildan would be open to working with a responsible union. In the same article, Lemay is quoted as saying, “Nothing in the report was major or of concern to us.” The article also attributes a statement to Lemay that “many of the problems have been corrected or are being corrected.”

Why is Gildan still denying workers’ right to freedom of association have been violated when it participated in discussion of corrective action to address those violations?