CODEOF CONDUCT GUIDEBOOK PART TWO: EMPLOYMENT STANDARDS GUIDELINES

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1 CODEOF CONDUCT GUIDEBOOK : EMPLOYMENT STANDARDS GUIDELINES

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3 TABLE OF CONTENTS : EMPLOYMENT STANDARDS GUIDELINES CHAPTER 1 INTRODUCTION 42 CHAPTER 2 PROMOTING LABOUR COMPLIANCE IN THE FACTORY 44 1 Step one: Defining the expectations a Worker-management communication b General management practices c Recruitment and human resources practices d Documents and record keeping practices e Payroll f Working hours and overtime 2 Step two: Picking the internal team and defining their activities 3 Step three: Self-monitoring CHAPTER 3 GENERAL PRINCIPLE 49 1 Common terms 2 Relevant international documents / principles 3 Identifying some common examples of non-compliance a Company / business obligations b Duty to employees c Transparency d Third party relationships 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Factory Systems and Procedures standard a Maintaining reference materials for local laws, regulations and codes Attachments 37 TABLE OF CONTENTS Version 2

4 TABLE OF CONTENTS CHAPTER 4 EMPLOYMENT IS FREELY CHOSEN 56 1 Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Indentured labour b Bonded labour c Prison labour d Contracts e Recruitment fees f Overtime g Retention of documents h Freedom of movement 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Forced Labour standard a Prison labour b Indentured labour and migrant workers c Involuntary overtime Attachments CHAPTER 5 FREEDOM OF ASSOCIATION AND THE RIGHT TO 71 COLLECTIVE BARGAINING ARE RESPECTED 1 Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Unions and associations b Collective bargaining c Effective communication 38 TABLE OF CONTENTS Version 2

5 TABLE OF CONTENTS 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Freedom of Association and Collective Bargaining standard a Opportunity to meet and organise b Communication channels Attachments CHAPTER 6 CHILD LABOUR SHALL NOT BE USED 81 1 Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Child labour b Juvenile labour 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Child Labour standard a Child labour Attachments 39 CHAPTER 7 LIVING WAGES ARE PAID 90 1 Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Basic wage and reasonable savings b Benefits c Deductions d Overtime e Training wages f Home workers TABLE OF CONTENTS Version 2

6 TABLE OF CONTENTS 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Wages and Benefits standard a Piece rate wages b Deductions c Benefits Attachments CHAPTER 8 WORKING HOURS ARE NOT EXCESSIVE Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Regular hours b Overtime hours c Excessive hours d Rest day e Annual leave / public holidays 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Hours of Work standard a Documented working hours b Working before or after scheduled working hours c One rest day in seven Attachments 40 CHAPTER 9 NO DISCRIMINATION IS PRACTISED Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Recruitment b Post-hiring TABLE OF CONTENTS Version 2

7 TABLE OF CONTENTS c Pregnancy testing / medical conditions d Termination 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Discrimination standard a Pregnancy testing b Job channelling c Recruitment Attachments CHAPTER 10 REGULAR EMPLOYMENT IS PROVIDED Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Home workers b Fixed term contracts c Apprenticeship schemes d Effective communication 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the Regular Employment is Provided standard a Home workers Attachments 41 TABLE OF CONTENTS Version 2

8 TABLE OF CONTENTS CHAPTER 11 NO HARSH OR INHUMANE TREATMENT IS ALLOWED Common terms 2 Relevant legal documents a United Nations b ILO 3 Identifying some common examples of non-compliance a Physical abuse b Sexual abuse c Psychological abuse d Verbal abuse e Combinations of the above forms of abuse f Documentation and management systems 4 Systems and documentation a Some suggested solutions b Documentation, procedure and systems 5 Case study for unacceptable, acceptable and best practices in the No Harsh or Inhumane Treatment is Allowed standard a Verbal and physical threats b Harassment Attachments 42 TABLE OF CONTENTS Version 2

9 CHAPTER 1: INTRODUCTION The main purpose of the Employment Standards Guidebook is to improve factories by helping managers to understand and take action on each of the standards. Furthermore, if factories have workers who are happy and are able to express their views on how the factory works and how the product is made, the workforce is more stable, the quality of the product improves and there is a better chance of delivery on time. This can result in consistent or increased orders being given to factories. In short the Code of Conduct (CoC) is good for business and good for workers. While the Code of Conduct is based on internationally accepted standards, it does not say anything practical about how the standards can be made real in a factory. That is the purpose of this Guidebook, and the guidelines mean that you now have practical ideas on how to implement all the standards. The Employment Standards guidelines will help when you are making your Code of Conduct action plans, establishing your own factory Code of Conduct training programme, or meeting with auditors during audit visits. We will update the Guidebook, so please give us your comments and ideas for future versions. Please note that the Code of Conduct does not necessarily reflect the national laws of the country in which you are operating. It is the responsibility of individual suppliers to ensure that they comply with all the relevant legal requirements relating to labour, health, safety and environmental matters. Where the Code of Conduct imposes higher standards than the local law, we expect our suppliers to follow the Code of Conduct. ACKNOWLEDGEMENT Arcadia Group believes in a common approach to improving standards in our industry. After a significant review of available standards and guidelines we have found that the adidas Group s Standards of Engagement were complete, comprehensive and concise. We would like to extend our sincere acknowledgement and recognition to adidas Group for taking the initiative to prepare these guidelines and for making them publicly available on the internet. In particular, our thanks go to Mr Frank Henke, Global Director Social and Environmental Affairs, for allowing the Arcadia Group to use these guidelines. The adidas standards have not been modified by Arcadia Group except for: Arcadia Group Brand names; CHAPTER 1 43 the Arcadia Group Code of Conduct; INTRODUCTION Version 2

10 INTRODUCTION specific Arcadia Group business terminology and business model; and the chapter Regular Employment is Provided, which has been written by Arcadia Group. (Where the provisions of the Arcadia Group Code of Conduct and these Employment Standards address the same subject, you must apply the provision which affords the greater protection.) CHAPTER 1 44 INTRODUCTION Version 2

11 CHAPTER 2: PROMOTING LABOUR COMPLIANCE IN THE FACTORY Our ultimate objective is to raise factory conditions to a standard whereby the ethical audits are no longer needed. Factories will maintain high standards without external monitoring. The best examples of compliance are where the partner factory internalises the Code of Conduct (CoC) and implements a programme of self-monitoring. A total quality management approach to human resources and personnel policies, procedures and management systems will ensure long-term effective compliance with the CoC. Rather than address compliance on a problem by problem basis, factories which have internalised the CoC view it from a big picture management perspective. Worker organisations have an important role to play in this process of self monitoring, and management must create communication channels which allow workers to identify problems and help find solutions. Good communication is essential to the internalisation process. The benefits for factories and suppliers of establishing a self-monitoring team are: building expertise in the area of compliance and developing best practices; greater and faster success with the CoC because responsibility for compliance efforts are internal rather than being driven from outside the factory; solutions are appropriate to the factory and the local environment; action plans and projects are managed by someone who has a strong understanding of, and interest in, the factory or supplier business, and not by an external third party; working directly with sub-contractors to ensure their compliance; and the buyer and other stakeholders will have a proper contact for CoC compliance, just as they do in relation to production or marketing issues. This streamlines the communication process and minimises misunderstandings. There are some simple steps to follow when developing an internal programme. They are set out below in three parts. 1 STEP ONE OF THE INTERNALISATION PROCESS: DEFINING THE EXPECTATIONS a Worker-management communication CHAPTER 2 45 There must be a clear and transparent system of worker and management communications. This might include suggestion boxes, workers committees and meetings between management and workers representatives. There should be a system for resolving workplace disputes. PROMOTING LABOUR COMPLIANCE IN THE FACTORY Version 2

12 PROMOTING LABOUR COMPLIANCE IN THE FACTORY There should be a system that enables workers to provide input to management. There should be a mechanism that allows workers to report harassment and other worker grievances in a confidential manner. Where trade unions exists in the factory, a copy of the collective bargaining agreement should be available to all workers and other interested parties. There should be an area designated for employee meetings. b General management practices A senior manager from the factory should be designated as the internal compliance manager. This person should be senior enough to accept responsibility for the CoC and make management decisions regarding the implementation of local laws and, where required, investments in CoC programmes and projects. Written policies which address all parts of the CoC need to be adopted by management. The factory rules, health and safety information, and laws regarding workers rights in respect of wages, working hours and any other legally required information should be posted in local languages throughout the factory. New employees should receive an orientation at the time of hiring which includes explanations of the factory s rules, benefits and other entitlements, the factory personnel policies, and health and safety information. All supervisors should be trained in local laws and standards, and the appropriate practices to ensure compliance. c Recruitment and human resource practices Good recruitment and human resources practices include but are not limited to: a written manual on employment practices; a manager who is directly responsible for the administration of human resources; an employee handbook that explains terms and conditions of employment; employment applications which should be completed by all job applicants; CHAPTER 2 46 written job descriptions for all positions in the factory or supplier business; an effective system to verify ages of job applicants and employees; PROMOTING LABOUR COMPLIANCE IN THE FACTORY Version 2

13 PROMOTING LABOUR COMPLIANCE IN THE FACTORY if a recruitment agent is used, a guidebook should be provided to the agent so that the agent is aware of the business s recruitment expectations and practices of the factory or other supplier; if a recruitment agent is used, then there should be a written agreement with the agent that fully explains the hiring practice; recruitment agents should be able to provide written details of all their labour sources; clear records and vendor descriptions for all suppliers of raw materials should be maintained; and clear records and vendor descriptions for all suppliers and sub-contractors should be maintained. d Documents and record keeping practices Good documentation and record keeping includes but is not limited to: employment applications which do not make unlawful requests for personal information; centralised employee files; copies of all documents used to verify employee ages; records of disciplinary actions; current editions of labour codes and local government regulations and requirements; financial records especially concerning payroll, tax and benefits disbursements; insurance records which show current coverage; all applicable local licences for operating a business, and the appropriate inspection reports from the relevant regulatory agencies; first aid training records; accident and safety logs; fire drill and evacuation practice logs and reports; machinery inspection reports and preventative maintenance records; and CHAPTER 2 47 Arcadia Group CoC audit reports and action plans. e Payroll Good payroll record keeping includes but is not limited to: PROMOTING LABOUR COMPLIANCE IN THE FACTORY Version 2

14 PROMOTING LABOUR COMPLIANCE IN THE FACTORY current documents from the local government stating the requirements for minimum wage, overtime payments and legally mandated benefits; a system that evidences accurate payment to workers for all hours worked, such as time cards, computer records, piece rate tickets or other formal time recording systems, preferably mechanical or computerised; a regular and consistent pay period and schedule; computer generated wage slips or receipts for all employees which include details of all hours worked, regular wages, overtime wages, other allowance and benefits, and any deductions; and payroll records on site which are archived for at least three years or the period required under local law where such period is more than three years. f Working hours and overtime Good working hours record keeping includes but is not limited to: a posted schedule of the factory working hours; a posted policy stating that any overtime should be performed on a voluntary basis; a method for tracking the working hours of juvenile employees, that is those employees who are younger than 18 and whose working hours are restricted for their health and safety; and there should be a clear system to record overtime hours and to make sure wages for those hours include the overtime premium. 2 STEP TWO OF THE INTERNALISATION PROCESS: PICKING THE INTERNAL TEAM AND DEFINING THEIR ACTIVITIES An important part of internal compliance is choosing the correct person(s) for managing the process. An internal compliance team should have the ability to communicate the standards in a manner that is understandable by all employees. The internal team members should have the trust, confidence and respect of the management and other employees. Finally, they should have a familiarity with the operations, practices and policies of the partner factory or supplier. CHAPTER 2 48 To ensure success with the internal compliance programme, the internal compliance team need the support of management. The team will need to involve co-workers in the compliance process, document all of its activities and findings, know the internal processes of the factory, and be knowledgeable about local laws and the Arcadia Group CoC. PROMOTING LABOUR COMPLIANCE IN THE FACTORY Version 2

15 PROMOTING LABOUR COMPLIANCE IN THE FACTORY Management should delegate an appropriate level of authority and support to the members of the internal team and allow them enough time to successfully complete the compliance effort. An internal team s activities include but are not limited to: conducting reviews of workplace practices; identifying both non-compliance and best practice in the workplace; developing and implementing action plans to resolve instances of noncompliance, and then following-up on the progress of the action plans; identifying areas where the supplier can develop proactive systems that promote compliance and then implementing those systems; working with Arcadia Group and third party independent monitors reviewing external audits and action plans, and following up on the external action plans; communicating the suppliers best practice policies to all stakeholders; educating management and employees in the relevant laws and regulations, the Arcadia Group CoC and how to conduct risk assessments; and auditing suppliers, sub-contractors and raw material suppliers. 3 STEP THREE OF THE INTERNALISATION PROCESS: SELF-MONITORING Tools and resources that are needed to do the job of self-monitoring include: staff responsible for CoC compliance; the national labour code and any local employment laws and regulations; the Arcadia Group CoC; an audit tool; an employee interview template setting out questions that should be asked of employees regarding the terms and conditions of their work; the Arcadia Group Employment Standards guidelines as a reference guide; a template form that the factory may use to regularly report on internal compliance activities, for instance an annual report to Arcadia Group; and CHAPTER 2 49 training materials for compliance staff regarding monitoring and auditing methods and techniques, together with frequent exposure to training courses which will keep the staff up-to-date on compliance issues. PROMOTING LABOUR COMPLIANCE IN THE FACTORY Version 2

16 CHAPTER 3: GENERAL PRINCIPLE Our Code of Conduct states: At all times you must meet the legal requirements of the countries you are working in. The employer must only employ workers who are legally entitled to enter into employment under national immigration law. 1 COMMON TERMS Legal requirements: Any laws or regulations which apply to the factory. For example, the corporate and commercial laws of the country where the factory business was legally established, or the local labour laws and health and safety regulations where the factory is located. Conduct of business: The management of every aspect of the factory business (see Section 4: Systems and documentation). 2 RELEVANT INTERNATIONAL DOCUMENTS / PRINCIPLES Universal Declaration of Human Rights 1948 ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy 2000 Amnesty International Human Rights Principles for Companies 1998 OECD Guidebooks for Multinational Enterprises IDENTIFYING SOME COMMON EXAMPLES OF NON-COMPLIANCE a Company / business obligations The factory avoids its obligations to pay tax, obtain the necessary licences, or comply with any special financial or reporting requirements for companies. These legal obligations depend on the local laws of the country in which the factory operates. The factory does not have government commercial registrations posted or on file. The factory does not keep current records of fire safety inspections, accidents or social security payment schedules, as required by law. The factory does not have proof of liability insurance or other commercial insurances or certificates. CHAPTER 3 50 The factory recruitment or human resources department is not informed of the current labour laws. GENERAL PRINCIPLE Version 2

17 GENERAL PRINCIPLE b Duty to employees The factory does not brief workers on the company rules and regulations on wages and benefits. The factory does not have a mechanism for workers to acknowledge and sign their understanding of the company s internal labour practices and policies. The factory does not issue an employment contract to workers, does not give a copy of the contract to the workers, or does not give them a copy of the contract in a language they understand. The factory dismisses workers without proper notice to the labour bureau and without paying proper benefits according to law. c Transparency A CoC auditor is not given access, or is restricted in access, to all facilities and relevant documents. The factory prohibits workers from talking openly to visitors. There are no centralised, individual personnel files or records for each worker which may be inspected. Time cards are kept for a limited time period (two to three months) and not made available to auditors or labour inspectors. d Third party relationships The factory does not investigate and monitor the conditions of their subcontractors for compliance with CoC standards. The factory hires workers through an employment agency but does not monitor the agent for labour compliance. The factory has failed an inspection by a government labour, health or safety officer or agency. 4 SYSTEMS AND DOCUMENTATION It is not possible for a factory to comply with the General Principle unless the factory uses a total quality management approach to the establishment and running of the factory. This applies to: CHAPTER 3 51 establishing the business according to law; seeking business or joint venture partners; construction of the factory buildings; GENERAL PRINCIPLE Version 2

18 GENERAL PRINCIPLE obtaining the necessary business licences and registrations; insurance and protection of the business; recruiting employees; sourcing of raw materials; production, marketing and shipping; sub-contracting production or services such as cleaning and catering; research and development; supervision and treatment of employees; long term business planning; and any necessary termination or closure of business. a Some suggested solutions i) Company / business obligations Seek reliable legal and financial advice regarding the corporate obligations for running a factory business. Find out what taxes should be paid and if there are any special periodic company or business reporting requirements. Check what business licences, registrations or other permits are required by the local authorities. If the company intends to run a factory in a foreign country, seek advice about the laws of that country, in particular any foreign investment laws. Make sure that there is a system for tracking and accessing all registrations, fire safety and other inspections, insurance renewal certificates, social security payments and any other national payment schemes. Keep a list of all relevant national local government services and contacts so that up-to-date copies of labour, health and safety and environmental laws may be easily obtained. ii) Duty to employees CHAPTER 3 52 Provide orientation to new employees. Give them copies of the factory policies and work rules. Provide training in their basic rights and benefits. GENERAL PRINCIPLE Version 2

19 GENERAL PRINCIPLE Follow the local legal requirements regarding the signing of employment contracts. Make sure that contracts are in the local language, are signed by both parties, and that employees are given a copy of the contract. Follow the law in respect of all aspects of employment, working hours, wage payments, leave and other benefits, termination and dispute resolution. iii) Transparency You must grant access to the auditors for audits. Make sure that staff, including factory security guards are aware of this. This will ensure good cooperation during audits. Allow your employees to speak freely with authorised visitors to the factory. Do not discipline or punish workers for discussing factory conditions. Organise the support services in your factory, such as human resources, personnel, administration and office management. Make sure that they implement well organised systems and procedures such as centralised filing systems. Maintain personnel, financial and other business records documents on site. iv) Third party relationships Check the conditions at your sub-contractors businesses or factories before giving them orders or contracting their services. Use reliable recruitment and other agents. Be responsible for their fees and charges. Don t pass these business costs onto your workers. Maintain relationships with local government departments and seek their assistance and advice on work place laws and requirements. b Documentation, procedure and systems are evidence of good management i) Factory document check list National and local labour codes National and local health and safety regulations National and local environmental requirements CHAPTER 3 53 Liability insurance documents Business registrations and certificates Government registrations or permits GENERAL PRINCIPLE Version 2

20 GENERAL PRINCIPLE Taxation and other financial records Inspection records (for example fire safety and building inspection reports) Standard contracts Factory guidebook, policies and workplace rules ii) Sample factory documents Attachment 1: Cover of Vietnamese Labour Code iii) Management flowchart GENERAL PRINCIPLE LEGAL FINANCIAL ADVICE BUYER / COC AUDITOR SUPPLIER FACTORY LOCAL GOVERNMENT DEPARTMENTS WORKFORCE SUB-CONTRACTORS AND AGENTS CHAPTER 3 54 GENERAL PRINCIPLE Version 2

21 GENERAL PRINCIPLE 5 CASE STUDY FOR UNACCEPTABLE, ACCEPTABLE AND BEST PRACTICES IN THE FACTORY SYSTEMS AND PROCEDURES STANDARD a Maintaining reference materials for local laws, regulations and codes A foreign investment factory has been operating for seven years outside the capital city. The factory receives a visit from an auditor who would like to examine original company payroll, time records, statements of the local social security authority, certificates relating to fire safety inspections, and other health and safety related systems. Additionally, the auditor requests to see any copies of the national labour code, foreign investment legislation and environmental regulations in the factory s possession. The factory manager and human resources department are not able to supply any copies of the laws, and almost all financial records have been moved off-site, back to the headquarters in the home country of the factory owners. The auditor suspects breaches of the national labour code and interviews employees during a physical inspection of the premises about health and safety practices. However, the auditor is not able to carry out a proper investigation due to lack of records and materials. i) What did the factory do wrong? Since the factory managers remain largely ignorant of the company s legal obligations, they are in breach of basic local laws regarding employees minimum pay, maximum working hours, and health and safety regulations. The factory does not comply with the General Principle under the CoC. Simply explained, the factory management system operates without regard to all of the local laws and regulations. ii) What should the factory do? The factory owner should instruct the human resource department to obtain copies of the local labour laws and any regulations relating to health, safety and environmental requirements. The human resource manager researches the basic methods available for updating regulations by contacting the local government departments and consulting with the Arcadia Group CoC auditor. The factory management is aware that they have to make regular appointments for any necessary certifications to be carried out in respect of health regulations, fire safety or insurance claims. CHAPTER 3 55 The factory management system should include a guidebook on basic systems of record keeping and personnel filing. All records are maintained on site and can be accessed in a convenient and timely manner. Human Resources and Personnel are made responsible for supervising the labour and health, safety and environment (HSE) management systems. GENERAL PRINCIPLE Version 2

22 GENERAL PRINCIPLE iii) A best practice The factory management system includes a total quality management (TQM) approach to all human resources and personnel systems. A TQM approach integrates all of the points mentioned above so that all relevant laws and regulations, financial information and other records, certificates and registrations, and employee profiles can be accessed as necessary at any time. The factory owner makes a commitment to the ongoing training and development of the support services in the factory, for example, Human Resources. This will ensure that management systems and legal compliance remain up to date. ATTACHMENTS Attachment 1: Cover of Vietnamese Labour Code CHAPTER 3 56 GENERAL PRINCIPLE Version 2

23 CHAPTER 4: EMPLOYMENT IS FREELY CHOSEN Our Code of Conduct (CoC) states: i) There is no forced, bonded or involuntary prison labour. ii) Workers are not required to lodge deposits or their identity papers with their employer and are free to leave their employer after reasonable notice. 1 COMMON TERMS Forced labour: Workers do not provide their labour voluntarily. Indentured labour: Workers are bound to the factory under agreement and are not able to leave at will. Slave holding is a form of indentured labour. Bonded labour: Workers provide labour without payment in order to repay the debts of a third party to the factory owner. Workers are not free to leave the factory at will. 2 RELEVANT LEGAL DOCUMENTS a United Nations Universal Declaration of Human Rights 1948 International Covenant on Civil and Political Rights 1966 International Convention on the Protection of the Rights of Migrant Workers and Members of Their Families 1990 United Nations (UN) Code of Conduct for Law Enforcement Officials 1979 b ILO Forced Labour Convention 1930 Abolition of Forced Labour Convention IDENTIFYING SOME COMMON EXAMPLES OF NON-COMPLIANCE a Indentured labour Any form of slave labour. CHAPTER 4 57 A worker receives wages as agreed with the worker or a third party, but the worker is not free to leave the factory. For example, the use of servants is not allowed under the CoC, because their freedom of movement is usually limited. Use of apprentices or trainees who work without pay under training agreements. EMPLOYMENT IS FREELY CHOSEN Version 2

24 EMPLOYMENT IS FREELY CHOSEN b Bonded labour Providing unpaid labour, in particular child workers, in payment of a debt owed to the factory owner by another person, usually the worker s parent or relative. Reaching agreement with the head of a local community to use locals as unpaid workers in return for goods or services which the factory can provide, for example, accommodation, food, protection or weapons. c Prison labour Sending work out to a sub-contractor which uses prison workers, regardless of whether the work is done in a prison or at a factory. Participating in any kind of paid or unpaid community work programme for prisoners. d Contracts Direct or indirect contracting of workers forced to work against their will, including government sanctioned work programmes. For example, work for unemployment benefits schemes. The terms and conditions of employment are not regulated. For example, delayed payment of salaries amounting to non-payment; not providing leave or public holidays as required by law; binding workers under multiple, short term contracts without proper benefits. e Recruitment fees Workers must stay at the factory in order to repay a debt such as transportation fees or recruitment fees. Usually, the factory has paid the fees on the worker s behalf directly to the agent and then keeps the monthly wages of the worker until the debt is re-paid. In some cases, workers spend from six months to three years working to re-pay the debts of recruitment agents. f Overtime Involuntary overtime. Increasing the production targets during peak season and requiring workers to work long hours. Workers work overtime without pay in order to reach production quotas. CHAPTER 4 58 Workers work overtime due to severe financial hardship because their wages do not meet the legal minimums or do not provide enough money to live on. EMPLOYMENT IS FREELY CHOSEN Version 2

25 CHAPTER 4 EMPLOYMENT IS FREELY CHOSEN 59 g Retention of documents Requiring workers to surrender original identity documents, such as birth certificates, passports, work visas or residence visas. In the case of migrant workers or workers who live at the factory, keeping (or restricting access to) personal and financial documents which would allow a worker to seek other employment, return home, or access a bank account. h Freedom of movement Use of heavily armed security guards, in particular public security forces such as police or military personnel. Restricting or unreasonably regulating workers access to basic facilities such as bathrooms, drinking water or the factory canteen. Preventing workers from leaving the factory or unreasonably restricting movement around and out of the factory. 4 SYSTEMS AND DOCUMENTATION It is not possible for a factory to comply with the standard on Employment is Freely Chosen unless the factory uses a total quality management approach to the running of the factory. This approach should extend to factory regulations; HR and Personnel policies and procedures; factory security; use of sub-contractors; and production and planning. a Some suggested solutions i) Indentured and bonded labour Only make agreements regarding the employment of a person directly with that person, and not another party. Provide all wages and other benefits directly to workers and not to any other person. Pay trainees and apprentices at least the legal minimum wage. Provide remuneration to workers in cash, or where there is agreement with the worker, by cheque or direct transfer and not payment in kind, that is other goods or services. EMPLOYMENT IS FREELY CHOSEN Version 2

26 EMPLOYMENT IS FREELY CHOSEN ii) Prison labour Sub-contract work to factories and suppliers whose facilities you have visited and which guarantee that no prison labour in any form is being used. Look closely at the terms of any local community work programmes that the factory or your sub-contractors become involved in. iii) Contracts Ensure that all workers are employed: with standard labour contracts (supplied by the local labour department); under a collective bargaining agreement which has been endorsed by the union and the local labour department; or by agreement with the factory where the terms and conditions of employment, such as wage payments and working hours, are in accordance with the local labour laws. iv) Recruitment fees Ensure that there is a clear policy that the factory is responsible for recruitment fees. Ensure that there are clear factory guidelines prohibiting the charge of introduction fees by supervisors or other employees. Charging new recruits a commission to help them find a job in the factory should be grounds for disciplinary action against the person charging the commission. Use reliable recruitment agents to hire foreign or migrant workers. Reach agreement with the agency regarding reasonable recruitment fees, transport and other charges, and the method of payment by the factory to the agent. Ensure that workers are paid their wages in full, without deduction for recruitment fees or any other agency charge for services, such as obtaining residency permits or work visas on behalf of workers. Include in factory application and interview forms questions which deal with and investigate the payment of any recruitment fees by workers to another party. v) Overtime Ensure that there is a clear policy which states that all overtime must be voluntary. Educate workers and supervisors in the policy. CHAPTER 4 60 Establish reasonable and clear production targets which can be met within regular work hours. EMPLOYMENT IS FREELY CHOSEN Version 2

27 EMPLOYMENT IS FREELY CHOSEN vi) vii) Any overtime work necessary to reach production quotas or meet orders should be paid according to proper overtime rates (that is based on legal or government standards) and must be performed on a voluntary basis. Retention of documents Keep photocopies of personal ID documents on file, and not the original documents. Provide workers with access to any of their personnel records or files. If payment of wages is by bank transfer, workers should have their own accounts which they may access free of interference from the factory. Freedom of movement Allow workers to freely exit the factory at any time. Create a system for tracking workers in the event that they leave without explanation during regular work hours. Ensure that there is a policy preventing supervisors and guards from using force against workers or restraining workers to prevent them from leaving production areas or the factory grounds. Provide unrestricted access to bathroom facilities, drinking water and other basic facilities. b Documentation, procedure and systems are evidence of good management i) Factory document check list Employment advertising List of reliable recruitment agents Standard agreement with recruitment agent Worker employment contract or collective bargaining agreement Policies regarding freedom of movement in and out of the factory Overtime work forms (that is the record of voluntary work) Payroll records Personnel files CHAPTER 4 61 HR / Personnel procedures (that is forms such as annual leave applications) ii) Sample factory documents Attachment 1: Notice regarding recruitment fees (Chinese owned factory) Attachment 2: Photocopy of the national ID card (Vietnamese) EMPLOYMENT IS FREELY CHOSEN Version 2

28 EMPLOYMENT IS FREELY CHOSEN Attachment 3: Standard voluntary overtime request form Attachment 4: Front page contract (Malaysian) iii) Management flowchart AVOIDING FORCED LABOUR RECRUITMENT CONTRACTS NO FORCED LABOUR VOLUNTARY OVERTIME FREEDOM OF MOVEMENT 5 CASE STUDIES FOR UNACCEPTABLE, ACCEPTABLE AND BEST PRACTICES IN THE FORCED LABOUR STANDARD a Prison labour The local government announces a rehabilitation programme for the prison system. Prisoners will be chosen to work in local businesses as part of the process of re-entering society after completing their sentences. The prisoners will not be paid but their sentences will be reduced by one day for each day worked. The programme receives popular support in the media. A local manufacturer enlists in the programme and receives the first group of prisoners. The prisoners start working in the factory s shipping warehouse and are recognised as excellent employees. CHAPTER 4 62 i) What did the factory do wrong? The owner employed prisoners. EMPLOYMENT IS FREELY CHOSEN Version 2

29 EMPLOYMENT IS FREELY CHOSEN ii) What should the factory do? The factory must not hire prison labour of any kind, regardless of whether the labour is paid or unpaid, or forms part of a government community or rehabilitation scheme. iii) A best practice The factory manager discusses with local government the prisoner work programme. The factory manager does not enlist the factory in the programme but does propose an alternative programme offering jobs at competitive wages to newly released prisoners. Within the year, the programme has become a successful pilot project and is used as a model for implementation in other factories in the region. b Indentured labour and migrant workers A factory needs additional production workers and decides to recruit them from other regions or provinces. The factory contracts with a local agent to hire and transport the new workers to the factory. The workers are required to sign a contract with the local agent, but they are not given any opportunity to review the contract terms and conditions before signing. The factory pays the agent a commission for each new worker and sends the agent money for the new workers transportation costs. When the new workers arrive at the factory, the personnel department takes their original identity cards for safekeeping. The new workers are told that they will receive their first pay after the transportation costs and the agency commission are deducted from the first few months wages. In some cases, the workers will not receive any wages for more than six months. Then the new workers are told that the neighbourhoods around the factory are dangerous and employees are not allowed to leave the factory grounds at any time. Security staff guards the factory gates 24 hours a day and it is considered safe and secure inside the factory grounds only. The factory has a market, a cinema and an athletic field for the use of the employees when they are not working. The factory also houses workers in dormitories on the factory grounds. i) What did the factory do wrong? CHAPTER 4 63 The workers original identity documents are taken away from them. This has the effect of restricting their ability to move about freely or provide proof of identity when, for example, looking for a new job. Likewise, workers are not allowed to leave the factory grounds. Workers will not be paid until the agency commission and transport costs are repaid to the factory through wage deductions. EMPLOYMENT IS FREELY CHOSEN Version 2

30 EMPLOYMENT IS FREELY CHOSEN ii) What should the factory do? When the new workers arrive at the factory, photocopies of their identity cards are taken by the personnel department and filed on the employees personnel folders. All employees keep their original identity documents. The factory pays the agency fees as part of the cost of doing business. The factory human resources department explains to the new workers that the neighbourhoods around the factory are dangerous and caution is necessary when workers leave the factory grounds during their free time, especially at night. iii) A best practice The factory selects recruitment agents who have a good reputation and charge reasonable fees. The factory pays the recruitment agency fees as agreed with the agent on behalf of workers. The factory also subsidises the total cost of round trip transportation for new workers. No transportation costs are deducted from workers wages. As part of its total quality management system, the factory develops guidelines which facilitate workers freedom of movement in and out of the factory, but maintain a safe and secure work environment. For example, to help reduce the danger, the factory provides secure access to the athletic fields, a food market, and a cinema for use by employees in their free time. The factory also provides a bus service between the factory and town. c Involuntary overtime The factory has worked overtime on four consecutive days this week. The supervisor informs workers that they will have to work overtime again today. Two of the workers tell the supervisor that they will not be able to work overtime due to personal and family obligations. The supervisor tells both workers that they will have to work anyway because there is an important order to complete and their attendance is crucial to its completion. If they refuse, they could be fired. i) What did the factory do wrong? All overtime work must be performed voluntarily. Involuntary overtime work is not in compliance with the Forced Labour employment standard. ii) What should the factory do? CHAPTER 4 64 The supervisor asks each of the workers in the production line to volunteer to work overtime that day. Two of the operators state that they cannot work due to personal and family obligations. The supervisor tells them that they should leave at the end of the regular shift. The rest of the line volunteers for the overtime. EMPLOYMENT IS FREELY CHOSEN Version 2

31 EMPLOYMENT IS FREELY CHOSEN The supervisor passes an overtime work list down the production line. The list states that overtime is requested for that day, and any workers interested in volunteering should sign up. This list is then sent to the personnel department as a backup for timecard and overtime calculations. iii) A best practice The factory s leadership guidebook for supervisors is updated. The update explains the company s policy on overtime, and stresses that any overtime hours are voluntary for all employees. Factory managers develop cross training programmes so that workers are capable of performing different tasks and functions. Therefore, workers from the same and different departments are able to perform overtime in various positions when their work-mates are not able or not willing to work overtime. The management system is revised so that it now includes a tracking system alerting managers when workers approach the 60 hour weekly maximum. In addition to this, the factory analyses its capacity, work schedules, total workforce population and the nature of orders each season in order to determine how the maximum number of orders can be completed within a 60 hour week based on the current workforce numbers and skills levels. CHAPTER 4 65 EMPLOYMENT IS FREELY CHOSEN Version 2

32 EMPLOYMENT IS FREELY CHOSEN ATTACHMENTS Attachment 1: Notice regarding recruitment fees (Chinese owned factory) CHAPTER 4 66 EMPLOYMENT IS FREELY CHOSEN Version 2

33 EMPLOYMENT IS FREELY CHOSEN Attachment 2: Photocopy of the national ID card (Vietnamese) CHAPTER 4 67 Attachment 3: Standard voluntary overtime request form EMPLOYMENT IS FREELY CHOSEN Version 2

34 EMPLOYMENT IS FREELY CHOSEN CHAPTER 4 68 Attachment 4: Front page contract (Malaysian) EMPLOYMENT IS FREELY CHOSEN Version 2

35 EMPLOYMENT IS FREELY CHOSEN CHAPTER 4 69 EMPLOYMENT IS FREELY CHOSEN Version 2

36 EMPLOYMENT IS FREELY CHOSEN CHAPTER 4 70 EMPLOYMENT IS FREELY CHOSEN Version 2

37 EMPLOYMENT IS FREELY CHOSEN CHAPTER 4 71 EMPLOYMENT IS FREELY CHOSEN Version 2

38 CHAPTER 5: FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING ARE RESPECTED Our Code of Conduct (CoC) states: i) Workers, without distinction, have the right to join or form trade unions of their own choosing and to bargain collectively. ii) The employer adopts an open attitude towards the activities of trade unions and their organisational activities. iii) Workers representatives are not discriminated against and have access to carry out their representative functions in the workplace. iv) Where the right to freedom of association and collective bargaining is restricted under law, the employer facilitates, and does not hinder, the development of parallel means for independent and free association and bargaining. 1 COMMON TERMS To organise: This refers to the process of forming a trade union or workers association. Collective bargaining: The process by which union officers or worker representatives negotiate with management, on behalf of the entire workforce. A formally negotiated collective bargaining agreement ( CBA ) often replaces, or makes unnecessary, individual employment agreements between the employer and the employee. The terms of the CBA become the accepted workplace terms and conditions. 2 RELEVANT LEGAL DOCUMENTS a United Nations Universal Declaration of Human Rights 1948 International Covenant on Economic Social and Cultural Rights 1966 International Covenant on Civil and Political Rights 1966 b ILO Freedom of Association and Protection of the Right to Organise Convention 1948 Right to Organise and Collective Bargaining Convention 1949 Voluntary Conciliation and Arbitration Recommendation 1951 CHAPTER 5 72 Collective Agreements Recommendation (No 91) 1951 The Collective Bargaining Convention 1981 Collective Bargaining: ILO Standards and the Principles of the Supervisory Bodies 2000 FREEDOM OF ASSOCIATION... Version 2

39 FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING ARE RESPECTED 3 IDENTIFYING SOME COMMON EXAMPLES OF NON-COMPLIANCE a Unions and associations Factory management restricts workers from joining unions, associations, committees or other forms of workers group. Management fails to recognise, or obstructs, attempts by employees to form alternative unions in favour of the majority union, or gives preferential treatment to the majority union. Management refuses to facilitate or join in the discussions or meetings between different worker organisations and unions which exist in the factory. Workers who participate in legal union activities are punished or discriminated against. For example, they are required to clean toilets, denied access to the canteen or clinic, transferred randomly between departments, or dismissed with no valid cause. Factory management prevents workers from participating in legal strikes. Factory management dismisses workers who lead strikes. Management fails to consult with, or report to, the unions in the factory matters which management is required to disclose by law. For example, factory closure, mass lay-offs, restructure of the business. b Collective bargaining Workers are not allowed to challenge the management regarding work terms and conditions. Management refuses to bargain collectively with workers, either formally under the terms of the local laws or informally. Factory management does not comply with the terms of the CBA. Management insists on the use of individual employment contracts or agreements over the CBA. Management fails to have the CBA endorsed by the labour department or other authority as required by law. CHAPTER 5 73 FREEDOM OF ASSOCIATION... Version 2

40 FREEDOM OF ASSOCIATION AND THE RIGHT TO COLLECTIVE BARGAINING ARE RESPECTED c Effective communication There are no proper formal or informal communication channels between factory management and workers. Factory management refuses to meet with or communicate regularly with worker representatives. Methods of communication are not properly used. For example, anonymous suggestion boxes are not placed in the common areas, dormitories or bathrooms, or they are placed around the factory, but provide no instructions or information about how suggestions will be answered. Supervisors are not adequately trained in the correct management approach to ensure workers rights and freedom of association within the factory. There is no formal grievance or appeal system which would allow workers to bypass their supervisors when necessary and speak directly with HR or senior management. The factory refuses to invest any time or energy in those processes which help improve communication between management and workers, such as on the job training, group meetings, worker development programmes, job performance assessments and social activities. Communications by management are inappropriate. For example, supervisors rely on written instructions to workers without verbal explanations, especially where literacy levels are low or there are migrant workers employed in the factory. 4 SYSTEMS AND DOCUMENTATION It is not possible for a factory to comply with the standard on Freedom of Association and Collective Bargaining unless the factory uses a total quality management approach to its communication with employees. This approach should extend to both formal and informal systems of negotiation, communication and relations, at every level of management and workers, and between every level of management and workers. CHAPTER 5 74 It will be necessary for the factory to examine all the methods by which management communicates with employees regarding workplace terms and conditions, production issues, relations between workers and supervisors, development of the factory business, how to improve productivity and efficiency and reduce waste, and how to ensure long term stability. If management fails to take positive action in this area the results are well documented: work slowdowns, strikes, poor job performance and loss of business. Management needs to capture and make use of the constructive ideas and suggestions of its employees. FREEDOM OF ASSOCIATION... Version 2