Industrial Hana, a garment factory in Guatemala, permanently closed operations in October 2023. The factory shuttered operations on October 5, violating Guatemalan labor law by failing to pay severance to its 229 employees. Workers at the factory reported that, prior to its closure, the factory produced garments, under subcontracting relationships with other local manufacturers, for Lucky Brand, American Eagle Outfitters, Hanesbrands, and Gillz.
Calculations prepared by the Guatemalan Ministry of Labor show that the workers were owed approximately $1.4 million dollars in severance and other terminal benefits. When a factory closes and workers are terminated, Guatemalan law requires the employer to pay employees one month of wages for every year of service.[1] While, in January 2024, a third-party agent made a small payment to workers in exchange for machinery left behind at the factory, the workers estimate that the total amount of paid was less than one percent of the total amount owed to the workers. Industrial Hana owes its employees amounts averaging 14 months of wages per worker.
The Industrial Hana factory was run by the Korean businessperson, Sun Kyou Lee (known to workers as “Jesus Lee”). Workers report that, at the time of the factory’s closure, Mr. Lee informed them that the factory was no longer solvent and that he could not afford to pay the severance and other terminal benefits owed to them under the law.
Factory employees confirmed to the WRC that, while Mr. Lee represented himself to the workers as the factory owner, the name of the company that appeared on their paychecks and other employment documents was that of another local factory, K & K Trading. Employees at K & K Trading reported, in turn, that this factory also does business as KST International, which is a subsidiary of yet another Guatemalan-based company, KV Trading. The WRC contacted KV Trading to ask how it intended to respond to the wage theft from workers at Industrial Hana / K & K Trading but received no response.
Former employees at Industrial Hana informed the WRC that much of the factory’s production was done through subcontracting relationships, whereby orders that major US apparel brands placed at other factories in Guatemala were subcontracted to be manufactured at Industrial Hana. Manufacturers that subcontracted production to Industrial Hana before it closed included SAE-A, Hanah Trading, Primavera, Fashion, KCI, and INT.
While no university licensees disclosed Industrial Hana as a supplier of production of collegiate apparel, it is worth noting that three of the manufacturers that subcontracted orders to Industrial Hana have been disclosed as collegiate apparel suppliers: Hanah Trading is disclosed by Fanatics, KCI is disclosed by Gear for Sports (owned by Hanesbrands), and INT is disclosed by Manhattan Stitching Company.
As noted above, workers from Industrial Hana reported that, in the months leading up to the factory’s closure in October 2023, they sewed garments for Lucky Brand, American Eagle Outfitters, Hanesbrands, and Gillz.
Lucky Brand
Workers at Industrial Hana reported to the WRC that they sewed products for Lucky Brand, which is owned by SPARC Group, from 2019 to 2023. Shortly after the factory’s closure, the WRC contacted SPARC Group to notify them of the closure and the resulting severance theft violations. SPARC Group responded to the WRC by acknowledging that Industrial Hana’s conduct violated Lucky Brand’s and SPARC Group’s Code of Conduct for suppliers. SPARC Group informed the WRC that it had launched an investigation of these violations and that it had asked its vendor (intermediary buyer) to provide an appropriate response. However, following that initial communication, Lucky Brand and SPARC Group have provided no additional information with regard to what steps (if any) Lucky Brand will take to ensure that the violations are remedied.
American Eagle Outfitters
Workers at Industrial Hana reported to the WRC that they sewed garments for American Eagle Outfitters (AEO) from 2021 to 2023. In April 2023, six months prior to the factory’s closure, workers at Industrial Hana contacted AEO and asked the brand to engage with factory management to help resolve labor rights violations at the factory.
AEO informed the workers at that time that it did not have a buyer relationship with Industrial Hana; however, it was subsequently determined that AEO’s business partner, the Guatemalan factory, KCI, had been subcontracting AEO’s production to Industrial Hana without authorization to do so. AEO instructed KCI to discontinue the subcontracting, which it did. AEO reported to the WRC that it made efforts to locate the factory owner, Mr. Lee, so that he could be approached about his responsibility to pay the workers’ severance but that it had been unsuccessful in these efforts.
Hanesbrands
Hanesbrands confirmed to the WRC that production of its goods at Industrial Hana was likely the result of subcontracting without its authorization, through the Guatemalan factory, JC Trading. Workers at Industrial Hana reported that they sewed products for Hanes from 2021 to mid-2022. Hanes confirmed that it ended its relationship with JC Trading in early February 2023. The WRC notes that KCI, another factory that subcontracted production (for AEO) to Industrial Hana is disclosed as a collegiate supplier by Gear for Sports, a university licensee owned by Hanesbrands.
Hanesbrands informed the WRC that it did not have any direct contact with the factory owner, Mr. Lee, or any other way to contact him so that he could be approached about his responsibility to pay the workers’ severance.
Gillz
The factory, KCI, reported to other buyers that it placed orders with Industrial Hana on behalf of the brand, Gillz, which is owned by Outdoor Nation. According to KCI, the last orders sewn for Gillz at Industrial Hana were placed in mid-2022. Workers reported to the WRC that they sewed t-shirts and other shirts for Gillz from 2018 until August 2023, just two months prior to the factory’s closure.
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As noted above, the former operator of Industrial Hana, Mr. Lee, reported to workers that he is unable or unwilling to pay them the approximately $1.4 million they are legally owed in terminal benefits. The apparent owner of Industrial Hana, KV Trading, has been unresponsive to the WRC’s communications. Therefore, given the failure of both the factory’s operator and its owner to pay the Industrial Hana workers the money that they are owed under the law, the WRC calls on those factories that subcontracted orders to Industrial Hana including SAE-A, Hanah Trading, Primavera, Fashion, KCI, and INT and on those brandswhose apparel was produced at the facility, Lucky Brand, American Eagle Outfitters, Hanesbrands, and Gillz, to uphold these brands’ codes of conduct for ethical labor conditions in their supply chains by ensuring that these workers who made their products are paid the estimated $1.4 million that they are owed in severance and other terminal benefits.
[1] Guatemalan Labor Code, Article 82.