Haglofs AB, Jack Wolfskin, Mammut Sports Group AG, Complaint 198

Payment of a living wage Reasonable hours of work
Evaluation of the complaint

The complainant claimed that from April to May 2016, workers in all workshops at the factory only had one day off per month. On Monday to Saturday workers worked until 21.00, on Sunday workers worked until 18:00. The complainant said all workers are exhausted. The workers were only paid by piece rate, and no overtime premiums were paid.
The complainant hopes that FWF this situation can be remedied and let workers have more rest time. The complainant used the internal grievance mechanism of the factory but to no avail.

Overview of the complaint investigation

2016-06-03 Investigation

FWF informed Mammut, Haglofs, Jack Wolfskin about the case on 1 June. The members contacted the supplier. On 3 June they received a reply that the workers who work on Sunday volunteer themselves to work this day.
According to the supplier, below list shows how many workers worked on Sunday in May:
May 8, workers attended: 623, workers not attended: 106
May 22, workers attended: 635, workers not attended: 94
May 29, workers attended: 578, workers not attended: 151
Further, the management informed its members that overtime until 21.00 will stop from 10 June onwards. The factory informed that many workers are willing to work overtime themselves as they wish to earn more money. According to them there has been a lot of fraud with the time punching; workers leaving the factory at 18.00 but coming back to only punch their time at 21.00. Management said that overtime premium is included into the piece rate to cover the hourly wage as required by law.
They stated that from 10 June onwards the work schedule will be as below:
Monday - Friday: 7:30-12:00, 1:30-7:30
Saturday: 7:30-12:00, 1:30-6:00
Sunday: Day Off
To check the response of the management and gain more insight into the situation, FWF sent a worker interviewer to the factory 11-13 June for offsite interviews. She interviewed 20 workers, from sewing, sampling and finishing departments.
Workers confirmed that before April they had one day off every week and they worked overtime until 19.30 every day. Only since April, workers are required to work overtime hours till 21.00 Mondays through Saturdays, and are only entitled to one day off a month. The interviewed workers expect this excessive overtime will lessen only after August. Workers are aware that in response to workers’ complaints, management has decided to reduce the overtime hours from 10 June onwards to daily work until 19.30. Most interviewed workers - also those being interviewed on Sunday after having left the factory premises - said they wish to have one day off a week. Some of the interviewed workers were okay with having working days until 21.00, while especially workers with small children hope to get off at least by 19.30. A small part of workers want to work on Sundays to earn more income.
The interviewed workers said that when they refuse overtime at night or take one day off a week, management deducts 30 to 40% of their production bonus. If the workers refuse overtime a second time, the entire production bonus is deducted. This measure gives a clear signal to not refuse overtime. According to the interviewees, none of the workers receive overtime premium, and they are only paid by piece rate.
The workers who are breastfeeding told the interviewer that they are allowed to refuse overtime and have one day off without deduction of production bonus.
The worker interviewer observed that on Saturday 11 June, at 18.00 only some workers were off, two of them because of their breastfeeding situation. At 19:30, more workers were off and the last employees left the factory at 20:30. On Sunday 12 June, workers left the factory at 18.00.

Payment of a living wage:
Some workers informed the interviewer they had not received their payment of April yet. Workers whose beneficiary account is Bank of China received their payment of April on 8 June. The workers who have an account with the Agriculture Bank of China received payment when on 12 June. The interviewed workers said they have not taken this issue up as an official complaint yet, and they regard this as occasional delay. The last time payment was late was in 2015.

On 2 August 2016 FWF received an update from the complainant. She believed that factory top management took the issue seriously and is willing to reduce overtime hours. The factory will communicate with workers beforehand if there are overtime hours arranged, and workers are consulted whether they are willing to support with productions to do overtime until 20:30 from 8 August onwards.
As informed by the complainant, the working hours from May to July are around 10 hours a day for 6 to 7 days a week. Since the complaint has been filed, workers have a rest day every two weeks.

On 12 august FWF received a second complaint from a different complainant, stating that workers again had to perform overtime later than 20:30.
According to this complainant, the factory requests all production workers (cutting, sewing, finishing) to do overtime hours till 22:00/00:00 Mondays through Saturdays, starting on 15 August. Workers will be able to have a rest day on Sunday.
The complainant informed that workers receive 14 RMB per day as an attendance bonus. They were informed that if they do not perform the overtime hours as requested by The factory, 7 RMB will be deducted from their attendance bonus. The complainant said that workers are willing to support the factory to do OT in peak months until, but they are not willing to do overtime until 22:00/00:00.
After informing FWF members on 15 August, the companies had contact with the factory management again. Coincidentally, Mammut met up with factory management on the same day, to discuss the follow up of the first complaint.
On 19 August, the FWF complaint handler called the complainant to check about the current situation. The complaint informed her that all production workers except office staff worked overtime hours till 22:00 from 13 August until 18 August. They were able to have a rest day on Sunday 14 August.
On 26 August, FWF’s China representative had a call with the factory manager to talk to discuss the overtime issue. In this call the manager admitted they had excessive overtime hours in August due to tight delivery, and that part of the attendance bonus was indeed deducted if workers did not perform the requested overtime. The manager said that he thinks the situation will be better after August, and they expect less excessive overtime. They will share the working hour records of August with FWF to cross check with the complaints.

Additional information for reference
There have been similar complaints filed to FWF by employees working at the factory.
FWF received a complaint about excessive overtime hours 18 Jun 2014. A worker left complain that they work every day till 22:00, plus additional 8 overtime hours on some Sundays.
Another worker called to complain about excessive overtime hours on 21 July 2014. The complainant said that every time after an audit, workers had less overtime hours. However some days after an audit, the factory starts again with excessive overtime hours.

2016-08-30 Conclusion of the investigation

Already after the investigation in June it was made clear that a majority of the workers is not happy with excessive overtime. It is unclear whether overtime premiums are paid as prescribed by law. To check this, FWF suggests a desktop analysis, based on wage records of the last 6 months. By deducting production bonuses, management makes it difficult for workers to refuse overtime.
Even while members agreed to change their production planning schedule and management promised less excessive overtime, a second complaint confirmed the occurrence of excessive overtime in peak month August. Although the expectation is that excessive overtime will become less needed after August, it will probably recur when production pressure increases again around April 2017.

2016-09-06 Remediation

After receiving the complaint, Mammut started to analyze how their production planning affects overtime. The factory appointed a special CSR person who informed Mammut about their percentage share of the factory’s capacity. The months of excessive overtime correspond with months that Mammut had significant production.
The member company discovered that they do not relate the capacity booking to the working hours, and have decided to rectify this in future seasons. Internally Mammut has agreed to ask all their suppliers to confirm capacity bookings based on a maximum of 60 hours per week. Mammut will continue to give forecasts and order plans and book capacity in advance. The factory has agreed to supply the standard minutes for capacity planning from now on. Mammut has shared this analysis and their decisions with FWF and the other members on 4 November 2016.
During the verification audit in November the audit team was informed by factory management that asking buyers for fabric confirmation during production also adds to excessive overtime. When during production the factory discovers (colour) deviations in the fabric, the factory needs to send a sample to the buyer and wait for confirmation before continuing production. This may cause a delay of five days during peak season and further tightens the capacity of the factory to deliver the orders at the agreed date. According to management, Jack Wolfskin allows more time for productions when fabric samples are being revised.
Haglofs and Jack Wolfskin are strongly encouraged to also analyze how their production planning affects overtime and which adaptions can be made to support reasonable working hours. They can ask the factory about the percentage share of the factory’s capacity during peak months.
In addition, FWF suggests that all members take into account the delay that can occur because of possible fabric deviations when planning their orders. When order dates cannot be postponed, members can consider offering airfreight to prevent that excessive overtime is needed to finish the orders on time.
Though Mammut has shown with its analysis that there is planning expertise in house, it may be advisable to reach out to a LEAN black belt expert. This case shows that there are many factors in play and there is no single solution to prevent excessive overtime. Therefore a LEAN expert may be able to offer a full picture and indicate where changes in production planning and other relevant processes are needed.
In this way the complaint can hopefully be reworked into a best practice. FWF can facilitate this approach, by scheduling a second verification audit after next peak season in May 2017 and sharing information about what has worked and what not.
The factory should consult and inform workers at least three days in advance about overtime, and workers should be free to decide whether or not to work overtime hours. The factory should reduce the excessive overtime hours and ensure that workers have one day off in a 7-day period.
To improve the internal grievance mechanism of the factory, FWF suggests the members to consider enrolling the factory for a new WEP communication module. This training will be piloted early 2017 and aims to enhance communication between workers and management.

2016-11-30 Verification

In November 2016 a verification audit was organized to check remediation. Based upon records of May, July and August 2016 the audit concluded that workers had 2-3 days off a month, some workers working up to 20 days consecutively. it could be concluded that workers work up to 78 hours a week in peak season. The audit further shows that the factory has set up a system to compare workers wage with their due hourly wage to ensure the proper payment of minimum wage and overtime premiums.
The audit team discovered that the factory has stopped deducting attendance bonus from workers for those who are not willing to work overtime hours after 18:00. Instead, the factory created a new regulation. If workers do not follow factory’s overtime arrangement for more than four times, the cooperation bonus (which is 10% of their piece wage) is deducted. Though this is a legal practice (the bonus is an incentive outside the framework of legal requirements) it makes workers less flexible to refuse overtime and prioritize rest time.
The 2017 brand performance check of the members will assess whether they have all analyzed their production planning and have worked together to make a new scenario for production planning for the coming year.
In May / June 2017 a second verification audit will be organized to evaluate the results of the actions of members and factory.

2016-11-30 Evaluation of the complaint

The complaint still needs to be evaluated.