Haglofs AB, Schoffel Sportbekleidung GmbH, Complaint 716

CONCERNING LABOUR STANDARDS
Payment of a living wage Legally binding employment relationship
STATUS
Remediation
DATE
2019-05-02

1) On 2 May 2019, a first worker, who worked at the factory from 2008 and resigned on 8 January 2019 (by following legal procedure and notice)contacted Fair Wear. The worker did not receive severance allowance for the working time served before 2009 as well as including maternity leave (1 time in 2013) and working time before January 2009.
2) On 14 May 2019, a second worker contacted Fair Wear. She had resigned lawfully in April 2018 but had not received the severance allowance for the working time served before 2009 as well as maternity leave. She took maternity leave one time.
3) On 16 May 2019, a third worker contacted Fair Wear. This complainant had worked since 6 March 2005 and resigned lawfully on 13 April 2019 had not received the severance allowance for the working time served before 2009 as well as maternity leave and working time before January 2009.
4) On 31 May 2019, a fourth worker raised a complaint. She had worked at Poongshin since 3 April 2004 and resigned in Oct 2018 lawfully. The worker did not receive severance allowance for the working time served before 2009, as well as maternity leave and working time before January 2009.
5) On June 30, another worker called Fair Wear. She had worked since 2004 and resigned lawfully on 13 March 2016. She had not receive the severance allowance for the working time served before 2009 as well as maternity leave (one time in 2010). She had contacted the HR officer to ask the severance allowance and the HR officer let her know that the severance allowance is only paid to workers who resign since 1 April 2018 onward.
6) Another complainant reached out to Fair Wear’s complaint handler. He/she had worked from 2004 to April 2017. He/she had not received the severance payment from 2004 to end of 2008
7) Another worker called on 6 October 2019. She worked at factory from 2005 to 2017 and did not receive severance payment for maternity leave for 2016 and severance allowance before 2009.
8) Another worker called on 5 November 2019. She worked at the factory from 2007 to 2017 and did not receive severance payment for maternity leave for 2009 and severance allowance for worked time before 2009

All complainants were advised that they should contact the HR officer to check the payment then call back the Fair Wear helpline if they need further help. After contacting the HR officer, all of them said that the HR officer informed them that they were not entitled to severance allowance.

Overview of the complaint investigation

2019-06-18 Investigation

Sourcing members informed the factory about the complaint on 18 June 2019.

Law reference:
1) Article 48 of Labour Code
[Article 48. Severance pay
1. When the labour contract terminates as prescribed in Clause 1, 2, 3, 5, 6, 7, 9 and 10 Article 36 of this Code, the employer is responsible to give the severance pay to the regular employees that have been worked for 12 months or more. A half- month salary shall be paid for each working year.
2. The working time for severance pay calculation is the total duration that the employee has actually worked for the employer excluding the time the employee has taken the unemployment insurance as prescribed in the Law on Social insurance and the time the employer paid the severance pay.
3. The salary for severance pay calculation is the average salary under the labour contract of the preceding 06 months before the employee is dismissed.]
2) Article 14 of Decree No.05/2015/ND-CP and Decree No.148/2018/ND-CP.

The calculation of severance allowance and job loss allowance is based on the
total time the employee has actually worked for the employer minus the period
for which the employee has contributed unemployment insurance and the period
that the employer paid severance allowance as required by law. Therefore:
• The employer must pay severance allowance and job loss allowance for the
number of years the employee has worked up to 31 December 2008.
• From 01 January 2009: The employer must pay severance allowance, job loss
allowance for the period that an employee has not participated in the UI scheme:
probation period, internship and apprenticeship that take place at the employer’s
enterprise; time employee is sent on courses by the employer; paid leaves of an
employee as mentioned in the provision of the Law on Social Insurance.

2019-06-20 Investigation

The factory said they are complying with the law. However, the complaint handler indicated that for severance allowance: workers who resigned between March 2016 and April 2019 should receive due payments.
This is a legal requirement so the factory should follow the labour code which took effect from 1 May 2013.

2019-07-25 Investigation

On Fair Wear's advice, the brands agreed that an on-site investigation could be conducted at the production location.

2019-09-14 Investigation

One more worker who resigned in 2018 called to complain about the same issue, bringing the number of complainants to six people.

2019-09-19 Investigation

An on-site investigation was conducted by two FWF staff at Poongshin on 19th of September.
It was found that:
- 3/6 complainants have received severance allowance
- 3/6 Complainants haven’s received severance allowance for maternity leave and working before 2009
- The factory said they have paid the severance allowance for working period before 2009, in 2009. However non of interview workers including existing workers and resigned workers confirmed to have received this payment. If unpaid, it violates the law. The working time for severance pay calculation is the total duration that the employee has actually worked for the employer excluding the time the employee has taken the unemployment insurance as prescribed in the Law on Social insurance and the time the employer paid the severance pay.; The salary for severance pay calculation is the average salary under the labor contract of the preceding 6 months before the employee is dismissed
- The factory only pays for the lawful resignation from 1 Apr 2018
- Inconsistency in information of lawful and unlawful resignation
- There are many resignations workers (>157 cases) in 2019 haven’t received severance allowance. The reasons could be (i) The workers don’t know information; the factory did not inform workers in the reasonable way. The date of payment for working days is a different date than the day of payment for severance allowance which is confusing for workers
- The workers are not aware of the severance allowance
- Difficult to get resignation form or approval from management with prior notice required

2019-10-18 Remediation

Fair Wear members asked Fair Wear to organise a meeting at the factory together with a lawyer in order to be able to clarify the law, and discuss remediation of the issues linked to severance payments and other benefits of all resigned workers.

2019-11-05 Remediation

The mediation meeting took place on 5 November 2019.
25 people attended the meeting, including: the country representative of Fair Wear, a lawyer, representatives of member brands, directors of two factories owned by the same owner, workers and union leader, other staff of both factories and translators.

After analysing the complaints, we divided into two types of severance payment:

A. Severance allowance for the working duration before 2009:
(1) According to Labour code 2012 (Article 48):
- The severance payment should be paid when the labour contract is terminated lawfully as prescribed in Clause 1, 2, 3, 5, 6, 7, 9 and 10 of Article 36 of this Code. The employer is responsible to give the severance payments to the regular employees that have been working for 12 months or more. A half- month salary shall be paid for each working year.
- The working time for severance calculation is the total duration that the employee has worked for the employer, excluding the time the employee has taken the unemployment insurance as prescribed in the Law on Social insurance and the time the employer paid the severance pay.
- The salary for severance allowance is the average salary under the labour contract of the preceding six months before the contract is terminated.
- Since 2009, the factory joined the unemployment insurance, therefore the factory should pay severance insurance for the period of working before 2009.
(2) The factory confirmed that they paid severance allowances for all workers in 2009. The original of financial documents are not available because they were made 10 years ago.
(3) Most of workers interviewed said that in 2009 they received seniority allowance. Some workers did not remember what kind of payment they received. The complainant attended the meeting confirmed that they have received an amount of money in 2009 but did not remember for what.
(4) The factory showed 2 inconsistent documents: (i)In printed list of workers for the payment (2009) is: a List of workers with seniority payment (Not mentioning of “severance allowance”); (ii) In the announcement letter about this payment in 2009 it said that: The seniority allowance (and mentioning “severance allowance”).Therefore workers’ misunderstanding with regards to the payment is understandable. The factory did not clearly communicate/explain the payment and policy.

Recommendations A:

- Seniority allowance and severance allowance are two different kinds of benefits. The severance allowance is a compulsory payment while the Seniority allowance is not.
- However, since the workers confirmed that they had received some money in 2009. Therefore, it was assumed during the meeting that the factory had paid the severance allowance for workers back in 2009 for the work done before 2009. However, the factory needs to explain this clearly to all workers.
- The time and amount of severance allowance paid while the workers were working are not compliant with the law; because the wage after 2009 was higher it affects the workers’ benefits. Fair Wear highly recommends the factory to pay the difference between amount between the wage in 2009 and the wages on the date of resigning. This payment should apply for both resigned workers and future resignation.

B. Severance allowance for maternity leaves:
- According labour code 2012, maternity leave, and sick leaves give rights to severance allowances. Those allowances should be paid by factory because during this working time the workers did not have an unemployment insurance. The workers having maternity leave and sick leave should receive these severance allowances when they terminate their contract lawfully.
- The announcement No04TB/PSVN on paying severance allowance which was issued on 24 March 2018: The factory only pays the severance allowance for the lawful resignation since 1 April 2018. Fair Wear team asked why they set the date 1 April 2018, the factory responded that this was a corrective action implemented after a Fair Wear audit in late 2017. Fair Wear explained that the date of the findings don’t mean that the date of effective action. We request the factory to remediate all the actions when the issues are found.

Recommendations B:

- The factory should pay severance allowance for all lawful resigned workers who took maternity leaves during their working time at Poongshin Vina. It doesn’t matter whether it was before or after April 2018. The factory should make a written announcement and inform all workers including existing workers or resigned workers.
- The announcement No04TB/PSVN on paying severance allowance which was issued on 24 Mar 2018: should be cancelled because it did not reflect the Fair Wear’s recommendations (audit 2017) and it is in violations with the provisions of law. At the same time, the factory should inform widely and make payment to all workers who resigned lawfully and took maternity leave before 1st Apr 2018. The factory should send Fair Wear the list of those workers.

Social insurance books have to be returned to all resigned workers according to the law.

During the meeting the following points were discussed and agreed upon:

- The factory should make consistent the criteria of lawful and unlawful resignation according to the law, and inform clearly all workers about the resignation policy
- Develop clear process of receiving and solving resignation requests. In case the workers violate the agreements/contract, the factory need to organise a meeting with worker and trade union to identify their faults ; how the final decision is made and discuss the level and timeline for paying a fine when it applies.
- Many workers did not return to work for more than 12 months but the employers still reports to the social insurance agency in unpaid leave, not terminated contracts. The factory explained that this action is giving a chance for worker to come back. However we suggest that the factory should discuss with trade union about the time after which such cases should be considered resignations (less than 3 months for waiting list) and include it in CBA. Over proposed time, the factory should follow the government procedure on informing social department or issue of disciplinary decision.
- The factory should make clear that the cases when workers have to pay a fine and returning social insurance books are two different things. Either employer or employee can sue to the court if the other party does not comply with the law.
- Missing severance allowance during maternity leave should be paid to all pregnant workers who already resigned
- Severance allowance should be paid to all pregnant workers during maternity leave from now on according to the law.