Update: Positive Resolution at Rio Garment (Tailgate Clothing)
We write to update you with good news about the Rio Garment factory, located in San Pedro Sula, Honduras. The Rio Garment workers will now be paid all of the money they are legally owed, fully resolving university code violations at this factory. We want to recognize the essential contribution of Tailgate Clothing to this positive outcome: Tailgate has contributed $450,000 to a fund, established by the WRC, to compensate the Rio workers and this contribution was crucial to making the workers whole.
Rio Garment, a supplier of university-licensed apparel, unexpectedly closed in August of last year. The factory failed to pay $1.3 million in legally mandated compensation to more than 500 employees, including wages, severance and other benefits. To make matters worse, the factory owner had been deducting money from workers’ paychecks, to be paid to the government insurance fund, and pocketing it instead. Extensive efforts to compel the owner to pay proved fruitless. As we reported to you late last year, the WRC has been working with Tailgate, the licensee that produced at Rio Garment, and with other buyers, to secure financial support sufficient to get the workers the money they are legally owed.
I am pleased to report that sufficient contributions have now been made to pay workers 100% of the amount they were due when the factory ceased operations. The WRC is finalizing preparations to distribute the funds to the employees. We have targeted April 27 to 29 to carry out this work.
Central to the favorable resolution of this case was Tailgate’s response to the WRC’s call for corrective action: Tailgate recognized its obligation, under university labor codes, to ensure that workers are paid the compensation they are legally owed and honored that obligation. Tailgate was not the largest customer of Rio Garment, but it made the largest contribution to the workers.
Fortunately, the WRC was able to secure substantial commitments from other, non-collegiate buyers, so that the entire burden did not fall on Tailgate. This includes a contribution from Gap, Inc. of $419,000 and $120,000 from Gildan Activewear. Gap and Gildan also deserve credit for stepping up to aid the workers and correct the violations committed by their supplier. In addition, workers received $321,000 in proceeds from the liquidation of assets (mainly sewing machines) remaining in the factory building after the closure. In total, $1,310,000 will be paid to the workers (less legal fees the workers agreed to pay to the attorney who handled the liquidation and modest payments to factory managers also owed compensation).
This fully remedies the code violations at Rio Garment. Workers will receive an average of more than US$2,500 (about ten months’ pay), money that will enable the workers and their families to escape destitution and move forward in their lives with a modicum of economic security.
As we’ve reported in the past, failure of employers to pay legally mandated compensation is a chronic and widespread problem in the garment industry, especially in cases of sudden factory closure. Often, the violations go unaddressed and workers never receive the compensation they earned. In countries like Honduras, which have no unemployment insurance, and where wages are too low for most workers to build savings, legally mandated severance is all workers have to fall back on. When workers are robbed of these earnings, the consequences for them and their families are often severe and long-lasting.
As you know, it is a priority of the WRC to ensure that workers in these cases are paid what they are owed, even when the factory owner cannot be compelled to pay. Because of the strength of university labor codes, we have increasingly been able to achieve this goal. In total, the WRC has now helped workers around the world secure more than $24 million in various forms of back pay – worth the equivalent of $70 million in local purchasing power in the countries where these workers live.
It should be noted that Rio Garment also marks the first time that Gap, one of the world’s most important garment retailers, has agreed to contribute money to make workers whole in a case involving a contract factory. This shows how the leadership of universities, in maintaining and enforcing strong labor standards, is helping improve the practices of corporations in the broader garment industry.
Once the distribution of funds to the Rio Garment workers is completed, we will issue a more detailed report on this case. In the meantime, please let us know if you have any thoughts or questions.
Scott Nova
Executive Director
[email protected]