Haglofs AB, Complaint 428

CONCERNING LABOUR STANDARDS
Payment of a living wage Legally binding employment relationship
STATUS
Closed
DATE
2018-06-15

A group of 12 workers, who resigned, wished to complain about their outstanding salary not being paid. The factory would not settle the money owed or return their social insurance books (for some of them) after the termination of their contracts.
The first call was received on 15 June 2018. The complaints handler advised the complainants to first try using the internal grievance procedure. On 30 June, the factory had still not resolved the situation. The complainant sent a list of additional complainants whose contracts were terminated between August 2017 and May 2018. All complainants were still missing either their last month's salary or had not received their social insurance books.

A second group of 17 workers who had resigned from the factory called the Fair Wear helpline between 24 July and 22 August 2018. Most of them complained about not having received their remaining salary and insurance books. Some complainants were not enrolled in social insurance, so their complaints concerned only the remaining salary. The complaints handler advised them to contact the factory's HR officer to check the payment status at first. After contacting the factory, two cases were solved but the others remained unresolved.

Findings and conclusions

Between June and August 2018, Fair Wear's complaints handler in Vietnam received complaints from 31 workers who had resigned from a factory but had not received their outstanding salaries and insurance books. Fair Wear declared this complaint admissible and informed Haglofs, the Fair Wear member sourcing at this factory. After Haglofs received some documents from the factory, the brand and Fair Wear agreed that additional on-site investigation was needed. The country representative and the complaints handler of Vietnam visited the factory for a document inspection and worker interviews on 7 November 2018.

During the visit, the team checked payrolls from July 2017 to September 2018, resignation records, policy and procedure on termination labor contract. They interviewed the director of factory and an accountant cum HR officer, 5 workers who were still employed and 1 complainant which case had been resolved.

Findings of the on-site investigation:
- According to management interview, the social insurance books were settled and returned within two months from resignation. Factory management said that the social insurance books of workers who resigned before August 2018 had been settled.
- From worker interviews, it became evident that not all workers knew about the advance payment for Tet. The factory did not have any written policy and had not communicated this clearly to all workers.
- The factory did not have a written policy and procedure on termination.
- For illegal termination of labour contracts, the director explained that, because workers terminated their contracts without giving notice in advance, they had to pay a fine for the illegal termination; a fine equivalent to 50% of the salary of 45 days of notice in advance. From a review of resignation records, it is noted that workers were charged an amount equivalent to 50% of the salary of 45 days of notice in advance and this fine was deducted from their last month’s salary.

Based on review of social insurance records, it was noted that there were 103 out of 235 workers who signed labour contracts and were enrolled in the social insurance scheme. During worker interviews, it was found that some workers had not signed a contract and had not bought social insurance. Some of them had signed a contract but had not received a copy. None of them knew about the termination procedure.

Because some workers did not have labour contracts, and the factory did not have a procedure on termination, it was concluded that the factory should not have fined workers for terminating their contracts illegally. Factory management agreed with this conclusion.

In March 2019, the factory shared a written notice dated 25 July 2018 on termination procedure and a written notice on benefits. Also, the factory shared with the brand an updated list of resigned workers and payments due which were to be paid to them.

In June 2019, the complaint handler managed to talk with 10 complainants:
- Three workers were back to work and they said that the factory would pay the remaining salary in June 2019. They wanted to close their complaint.
- Two workers received an amount lower than expected but they said they are fine with it and wanted to close the complaint.
- Five workers could not remember the amount they received and they wanted to close the complaint since they had received their social insurance.

Of 31 complainants, 5 cases were resolved and 10 cases were resolved or closed.

There were 16 workers who could not be reached by the complaints handler. Thus this complaint case was closed on 9 August 2019. An audit will be conducted to follow up on issues related to resignation and due payments for resigned workers.

Overview of the complaint investigation

2018-08-20 Investigation

The brand informed the factory and asked for feedback.
The complaints handler advise they should contact to the factory (HR officer) to check the payment status at first. After contacting the factory, she could verify that 2 cases were resolved.

2018-10-03 Investigation

There are 29 complaint cases from Phu Viet (12 cases for 1st time and 17 cases for 2nd one)

- 2 cases were resolved internally.
- Factory sent payment receipts for 13 workers in which 9 payment receipts are of complainants and 4 cases are not complainants.
- Call 9 complainants to check the payment as following:
+ 2 cases are OK, they received the payment as in the receipts and have no complaint so far. (Nguyen Thi Lanh & Nguyen Tung Lam)
+ 1 case (Nguyen Thi Hau): she received payment as in the receipt but not enough, lack of about 2 million dong ---> she wants to continue her complaint.
+ 1 case (Nguyen Thi Hong Tham): She has not received any payment while the receipt shows that she received 4,491,967VND with her signature. She said that she must sign that receipt for receiving her social insurance book. If she does not sign, factory will not return her social book. HR officer let her know that her remaining salary was deducted at all for payment in advance (including year end bonus for 2017 and annual leave payment for 2017 ) and she still owes factory about 900,000VND. She did not agree with that deduction because that payment (including year end bonus and annual leave payment) for year 2017, not a payment in advance. So, she wants to continue her complaint.
+ 5 cases: I could not reach them. Their phone numbers may be changed by the mobile phone suppliers (from 11 numbers to 10 numbers). I try to contact them this Sunday.

2018-11-07 Investigation

After Haglofs informed and received some documents from the factory, the brand and FWF agreed additional on site investigation was needed.
The country representative and the complaints handler visited the factory for a documents’ check and workers’ interviews on 7 November 2018.

During the visit, the team checked payrolls from July 2017 to September 2018, resignation records, policy and procedure on termination labor contract.
Interviews:
- The director of factory and an accountant cum HR officer
- 5 workers who are currently employed by the factory
- 1 complainant which case had been resolved

Findings of the on-site investigation:

- Return social insurance book to resigned workers: From management interview, the social insurance book is settled and returned to resigned workers within 2 months after the terminating date. In the past, the factory has delayed settlement the insurance books. So far, the factory has settled the social insurance books of resigned workers who resigned before August 2018.

- Tet bonus and Tet salary in advance: Factory does not have a written policy on the year-end bonus and Tet bonus or the 13th month of salary. According to the director, before Lunar New Year (called “Tet”) workers were paid about 600,000VND for Tet bonus for the year of 2017. Besides, the factory paid an advance payment to workers which amount was about 1 month's salary based on average salary of workers in 2017 (called “the advance payment”). If workers resign in 2018, the factory will withdraw part of this advance payment. The factory only collects this advance payment from workers who quit.
From a review of resignation records, it is noted that workers were paid about 1 month’s salary based on the average salary of workers in 2017 and based on the attendance of workers in 2017. If worker resigns in 2018, she/he will be compensated 50% of the advance payment equivalent to the number of months without working in 2018. For example, a worker was paid 1,890,000VND for the advance payment. She resigned in September 2018, the compensation will be at 50% x (1,890,000VND/12 months x 3 months) = 236,250VND. This refund was deducted from the last month’s salary.
From the interview of workers, all workers do not know about the advance payment for Tet. They said that they received the year-end bonus approximately one month’s salary and which was paid before Tet.

This “advance payment” is in fact he year-end bonus, not an advance payment. Therefore, the factory should not collect this payment while factory did not have any written policy and had not communicated this clearly to all workers. The director agrees with this conclusion.
- The factory does not have a written policy and procedure on termination.
- For illegal termination labor contract, the director explained that, because workers terminated their contracts without giving notice in advance, they have to pay a fine for the illegal termination. The factory requires a fine equivalent to 50% of the salary of 45 days of notice in advance.
From a review of resignation records, it is noted that workers were charged an amount equivalent to 50% of the salary of 45 days of notice in advance and this fine was deducted from the last month’s salary.
Based on review of social insurance records, it is noted that there are 103 out of 235 workers (approximately 44% of workers) who signed labor contracts and are enrolled in the social insurance scheme.
From workers interviews, some of them have not signed the labor contracts and have not bought social insurance. Some of them signed the labor contracts but they did not receive a copy of their labor contracts. None of them know about the termination procedure. They only said that they will inform the line leader when they want to quit their job.

Since the workers did not sign labor contracts or did not receive a copy of the labor contracts, and since the factory does not have a procedure on terminating the labor contract; the factory should not require a compensation due to the illegal termination labor contract. The director agrees with this conclusion.

2018-11-07 Remediation

Remediation steps were discussed between FWF team and the factory management after the investigation. The factory agreed to the following steps:
(1) Factory should pay the last month’s salary to all complainants without any deduction on the “advance payment” (compensation on the illegal termination);
(2) Factory should settle the social insurance book and return the money to resigned workers within 30 days from the termination date;
(3) Factory should develop and implement a written policy on wages and benefits including the year-end bonus or the Tet bonus and communicate it clearly to all workers;
(4) Factory should develop and implement a written policy and procedures regarding termination labor contract. The termination procedure should be clearly communicated to all workers;
(5) Factory should develop and implement a formal grievance mechanism. The grievance mechanism should have multi channels for workers to use, including contact with the direct supervisors, HR department, Union, suggestion boxes, hotlines. The grievance procedure should be clearly communicated to all workers.
(6) Factory should ensure that 100% of workers have signed labor contracts and provide them with a copy. All workers should also be enrolled in mandatory insurances.
(7) Factory should pay resigned workers within 7 days from terminating the labor contract.
(8) Factory should pay severance allowance for probation/apprentice period, maternity leave, and sick leave from 14 days in a month (As per Article 14.3 of Decree No. 05/2015/ND-CP);
(9) Factory should pay the unused annual leave to resigned workers;

2019-03-14 Remediation

The factory shared pictures of policies documents for termination and bonuses:

I. A written notice dated 25 July 2018 on termination procedure:
1. Workers need to send a termination letter with prior notice 30 days for ending the contract.
2. Payday is on the 25th of every month. Resigned/terminated workers are paid at 4 PM on Saturday after the payday 2 weeks. The social insurance books will be returned within 3 months from the termination day. If the resigned workers do not receive the social insurance books within 3 months, their social insurance book will be returned to the local social insurance agency.
II. A written notice on benefits (no date):
Beside piece salary, workers are also paid the followings:
1. Motivation bonus: 600,000VND/month;
2. Seniority bonus: 5,000 VND x number of working month;
3. ….
9. The advance payment in the new year is equivalent to 1 month's salary. Seniority bonus is 30,000VND x number of working year. Tet bonus is 600,000VND. A party bonus for lines or department to organize the party (equivalent to 200,000VND/worker).

16. Workers are allowed to take from 0.5 day to 1 day off a month for personal reason. Workers are provided 14 days of annual leave per year and 4 days of Lunar New Year.

2019-05-20 Remediation

The factory shared with the brand, an updated overview of list of resigned workers and payments dues which were to be paid to them.

The complaint handler reached out to some complainants to cross-checked that they receive all due payments, it appears that some havent' received the amount stated in the excel overview shared by the factory (to the brand).

2019-06-06 Verification

the complaint handler managed to talk with 10 complainants:
- 3 cases are back to work and they said that the factory will pay the remaining salary in June 2019. They want to stop their complaint
- 2 cases received an amount lower than the overview from factory but they said they are OK, and want to stop the complaint.
- 5 cases could not remember the amount they received and they want to stop the complaint since they received their social insurance.

From 31 complainants;
Sept 2018: 5 cases were resolved
6 June: 10 cases were resolved or stopped.

There are 16 pending verifications to make if workers can be reached by phone.

2019-08-09 Evaluation of the complaint

Workers which cases were resolved said that workers of other companies cannot receive insurance books and must pay a fine equal to about 2 months' salary if they want to receive their social insurance. They feel they are still luckier than other workers. They want to thank FWF for helping them.

2019-08-09 Closed

Not all complainants could be reached to check remediation. So although it seems that most cases were solved, this complaint case is marked as closed and not resolved. An audit will take place in some months and will be the opportunity to follow-up on policies of the factory and how workers are informed of those.