Remediation of Severance Pay Violations at MDR/CCC (El Salvador)

Dear Colleagues,

I write to apprise you of the positive resolution of a case of unpaid severance in El Salvador, which is described in further detail in this memo. In January 2014, two factories in a single building in El Salvador, Manufacturas del Rio (MDR) and the Central American Cutting Center (CCC), closed without providing severance pay to their 1,200 employees. The Argus Group, which operated the factory, gave workers no advance notice of the closure and made no arrangements to provide workers the US$1.8 million they were owed in terminal benefits under Salvadoran law. At the time of closure, MDR/CCC was producing university-licensed apparel for Russell Brands, which is owned by Fruit of the Loom, and non-licensed apparel for Hanesbrands, Lacoste, and Levi Strauss & Company.

Over the past year, the WRC has engaged extensively with Hanesbrands and Russell/Fruit of the Loom to achieve a remedy in this case. In July 2014, these buyers successfully pressed the Argus Group to provide US$650,000, just over one third of the amount owed, to workers. This week, Hanesbrands and Fruit of the Loom are implementing the distribution of an additional US$1.1 million, provided primarily by these two firms with a small contribution from the Levi licensee Hampshire. Lacoste was alone among the factory’s major buyers in failing to make a contribution towards the workers’ severance pay.

The distribution that began on Monday, April 27, will make the workers whole for the nominal amount they were denied when the factory closed in January 2014. While this does not include interest for the time workers were denied the funds to which they were legally entitled, which the WRC considers to be part of the appropriate remedy, the WRC is optimistic that workers will receive additional funds from the sale of the company’s assets, which is being conducted by the Salvadoran government. Given this, the WRC considers the case closed with respect to Hanesbrands and Fruit of the Loom.

This case represents an important step forward in the effort to ensure that workers at collegiate factories, when they are denied legally mandated compensation at the time of factory closure or mass dismissal, are, through the efforts of licensees, made whole for all monies legally owed – and that the university code violations are thereby remedied. Without any pressure from universities, students, or other parties, the responsible licensee in this case, Fruit of the Loom/Russell, and another key buyer, Hanesbrands (which is the parent of two university licensees, but was not producing university logo product at these facilities), stepped forward at the request of the WRC and took the steps necessary to ensure that the employees received the compensation they legally earned. Their efforts are appreciated and are, we believe, a sign of a growing recognition on the part of licensees that it is appropriate and necessary for them to take responsibility for correcting code violations involving denial of legally mandated compensation, even where direct payment to workers proves necessary.

Best,

Scott and Jessica

Scott Nova
Worker Rights Consortium 
5 Thomas Circle NW, 5th Floor
Washington, DC 20005 
ph 202 387 4884 
fax 202 387 3292 
[email protected] 
www.workersrights.org

Jessica Champagne
Worker Rights Consortium 
5 Thomas Circle NW, 5th Floor
Washington, DC 20005 
ph 202 387 4884 
fax 202 387 3292 
[email protected] 
www.workersrights.org