New WRC Report – Freetrend

To: Primary Contacts, WRC Affiliate Colleges and Universities
From: Ben Hensler
Date: November 10, 2009
Re: New Factory Assessment Report: Freetrend (Dean Shoes, Ltd.)
Working in collaboration with a leading U.S. athletic footwear company and one of the major shoe manufacturers in South China, the WRC has secured back-pay and offers of reinstatement for twenty-nine improperly laid-off workers, and has conducted broader worker rights training and outreach, at the Freetrend shoe factory in Guangdong, China.

With cooperation from one of Freetrend’s major customers, Massachusetts-based New Balance Corporation, the WRC was able to help resolve complaints of unlawful layoff and termination originally brought in February by workers at the factory complex in Shenzhen City , which also supplied Crocs and K-Swiss among others. Both had disclosed Freetrend as a producer of collegiate licensed apparel. A report about the WRC’s assessment and remediation work at this facility is available here.

The dismissals which sparked workers’ complaints to the WRC occurred at Freetrend’s FTB plant, which employs roughly 2,000 employees and manufactures shoe components for New Balance. FTB is part of a larger Freetrend factory complex which employs roughly 10,000 employees, and has supplied K-Swiss, Crocs and other brands, including Nike. In the course of its investigation, the WRC found that Freetrend had violated China ’s new Labor Contract Law by involuntarily dismissing twenty-nine FTB workers without adequate cause and by conducting this lay-off without following the process that the law prescribes in such circumstances.

The WRC shared its findings with both Crocs and K-Swiss, as university licensees supplied by Freetrend, and New Balance, since the dismissals occurred at the FTB facility, where New Balance is the exclusive customer. Although the WRC engaged in significant dialogue with the two licensees, New Balance had greater influence over labor practices at FTB and a more significant compliance presence at Freetrend as a whole. Much to its credit, New Balance worked consistently and constructively with the WRC over a period of several months and provided the essential encouragement to Freetrend to adopt the WRC’s remedial recommendations.

Freetrend management, albeit with some delay, implemented the WRC’s recommendations in a thoroughgoing and cooperative fashion. As a result, all of the involuntarily dismissed employees received back-pay for their lost wages and offers of reinstatement – though only one ultimately returned to the company. In addition, to promote compliance with the labor law in any future lay-offs and dismissals, Freetrend published an article discussing the matter in its company newsletter articulating the law’s requirements, and the WRC conducted an on-site seminar for FTB workers on their legal rights in such situations.

Although the number of workers directly affected by the layoff and dismissals is quite small in relation to the hundreds of thousands of jobs lost in the apparel sector in Guangdong over the past year, this case is significant for several reasons: First, it illustrates the challenges workers have faced in asserting their rights under the Labor Contract Law in the midst of the ongoing global economic downturn. Second, the case shows the vital importance of the rights provided under this law to workers in situations of layoffs and downsizing.

Third, the outcome at Freetrend suggests that with the with constructive engagement by both the WRC and a responsible buyer that has significant ongoing business relations with factory management, workers’ rights under the new law can be vindicated. Finally, as a more general matter, this case underscores, once again, the need to provide reinstatement and compensation for lost wages as an essential element of remediation of improper dismissals and layoffs wherever they may occur.

Benjamin Hensler
General Counsel and Deputy Director
Worker Rights Consortium
(415) 503-0465 (phone/fax)
(415) 640-8850 (mobile)
[email protected]
www.workersrights.org