As the WRC reported previously, Industrial Hana, a garment factory in Guatemala, permanently closed operations in October 2023, without paying its approximately 250 employees $1.5 million in unpaid severance and other terminal benefits owed to them in accordance with Guatemalan law. The WRC’s investigation found that, in the months leading up to the factory’s closure, Industrial Hana was supplying goods to Lucky Brand, American Eagle Outfitters, and Puma.[1]
American Eagle Outfitters and Puma Help Correct Wage Theft from Workers
The WRC engaged with all factory buyers regarding the findings of our investigation; both American Eagle Outfitters (AEO) and Puma reported that their production orders at Industrial Hana had been placed through third-party suppliers and that these suppliers subcontracted the AEO and Puma orders to Industrial Hana without the brands’ knowledge or authorization.
However, the WRC’s investigation, which included worker testimony and a review of factory records, confirmed that both AEO and Puma garments were produced at Industrial Hana. Subsequently, and in recognition of the seriousness of the violations, both apparel brands agreed to participate in efforts to correct the wage theft from workers.
To their credit, AEO and Puma have each ensured contributions to workers of $500,000—for a total of $1 million—toward the $1.5 million owed to the former employees of Industrial Hana. In the case of Puma, it ensured that its direct supplier factory—which had subcontracted to Industrial Hana without Puma’s authorization and in violation of Puma’s production standards—will take responsibility for the contribution made to workers.
The WRC recognizes the positive impact that these contributions will have on the lives of workers at Industrial Hana, who have been owed this money for a full year, and credits AEO and Puma for making this possible. Thanks to these contributions, the workers will begin to recover from hardships that they experienced since the factory closed and failed to pay them what they were owed.
Lucky Brand Failing to Join Other Brands in Helping Workers
The WRC continues to call on Lucky Brand, the third major brand whose products were produced at Industrial Hana during the months leading up to the factory closure, to join AEO and Puma in correcting the wage theft from workers. Specifically, the WRC calls on Lucky Brand, which is owned by SPARC Group (33% owned by Shein) and Authentic Brands Group to contribute the outstanding amount of $500,000 still owed to the 250 former employees of Industrial Hana.
The WRC has made repeated attempts to engage with these companies and encourage them to join in the remediation efforts. Other than one communication in November 2023 from SPARC Group, in which it informed the WRC that it had launched an investigation of the violations, the WRC has received no other response from any of the owners of Lucky Brand. To date, Lucky Brand, SPARC Group, Authentic, and Shein have expressed no willingness to join other responsible buyers in efforts to remedy this wage theft from the workers who made its products.
Former workers at Industrial Hana report facing considerable hardship in the year following the factory’s closure as a result of its failure to pay them their legally required severance. Workers are unable to pay for vital health services, rent, and groceries.
Some workers report that they have had to withdraw their children from school because they cannot afford even modest, required school fees. Many of the workers affected by the closure also have had to take out loans from banks or street lenders at high interest rates in order to pay for their most basic necessities. All of the workers interviewed by the WRC reported that their financial situations are dire, and the continuing nonpayment of severance is having devastating consequences for them and their children. The WRC strongly urges Lucky Brand, SPARC Group, Authentic, and Shein to follow the lead of brands like AEO and Puma, that are acting ethically and living up to the standards outlined in their supplier codes of conduct, by making a contribution to workers that will fully remedy the wage theft from workers at their Guatemalan supplier factory, Industrial Hana.
[1] The WRC’s initial investigation named other factory buyers, including Hanesbrands and Gillz. However, further investigation determined that the majority of the factory’s production at the time that the closure occurred in October 2023 was for these three buyers.