FLA investigation into Foxconn finds 'significant issues'

In the first findings of its investigations into labor practices at the facilities of Apple supplier Foxconn, the Fair Labor Association said it found “significant issues” at three of the company’s factories in China. At the same time, in a report released Thursday, the organization said it also secured “groundbreaking commitments” from Foxconn to reduce the hours workers put in and better health and safety conditions for employees.

During its more than 3000-staff-hour investigation, which included a worker-satisfaction survey of more than 35,000 randomly selected Foxconn employees, the FLA uncovered a number of problems at plants in Guanlan and Longhua in Shenzhen, and at Chengdu. In its investigation, the organization looked to get at the root causes of the issues that employees report, as well as issue remedial actions that Foxconn can take.

Among the issues that the FLA identified were frequent examples of overtime exceeding both the Chinese government’s legal limit of 40 hours per week and 36 hours of overtime per month, as well as the FLA’s own Workplace Code of Conduct limit of 60 hours per week, including overtime. In some cases, workers were found to have put in more than seven consecutive days without 24 hours off.

In its most recent supplier report, Apple described reducing excessive overtime as “a top priority for our supplier responsibility program in 2012.” The company had identified 108 facilities that didn’t meet legal requirements for overtime wages, such as pay for working holidays. Apple requires offending facilities not only to adjust their payment systems to fix the issue, but also to repay the wages employees are due from those historical miscalculations.

The FLA said Foxconn intends to correct this practice by committing to meeting legal overtime standards by July 1, 2013. In order to do so without reducing output or dropping pay, the company plans to recruit “tens of thousands of extra workers” as well as build new housing and canteen facilities for them.

In addition, accidents at Foxconn facilities—many of which went unreported—foster a concern for health and safety at the facilities, according to the FLA. The FLA report did find that Foxconn had improved safety measures for processes that involve aluminum dust, a substance that led to an explosion in the Chengdu factory in 2011; Apple’s supplier report mentioned the accident, stating that it caused the death of four employees, as well as injuring 18 others.

There are still strides to be made, however: Foxconn has already mandated that supervisors and workers report all accidents that involve an injury, as opposed to its previous policy, which only required reports in the case of accidents that created work stoppages.

According to the FLA, one of the roots of that problem lies in the lack of employee input into health and safety procedures. The members of committees that oversee those procedures are nominated by the management; going forward, Foxconn told the FLA that it will ensure that worker representatives are involved in the process.

During its investigation, the FLA also immediately corrected a number of safety hazards, including blocked exits, poor protective equipment, and missing permits.

Compensation was another area of worry in the report, particularly in relation to overtime. The FLA found that 14 percent of workers were not fairly compensated for unscheduled overtime. Though wages at Foxconn are above Chinese averages, concerns persist that they may not be sufficient to meet the cost of living, especially in Chengdu, which has a lower minimum wage.

The FLA report also explained that China’s insurance system is tied to provinces and cities, which causes problem for the large percentage of migrant workers at some of Foxconn’s factories. For workers, claiming insurance benefits in their hometowns upon retirement or unemployment can be difficult, depending on whether or not the necessary infrastructure exists between the two provinces.

To combat these issues, Foxconn told the FLA it will adjust pay to compensate workers fairly for overtime, investigate alternative private insurance options for migrant workers, and engage the government to help transport benefits from one region to another. The FLA also plans to conduct a own survey of cost of living in Shenzhen and Chengdu to determine if workers are compensated at appropriate levels.

Workers will also be better educated about union activities, including collective bargaining. As with the health and safety committees, the workers’ representatives for unions largely consist of management or supervisors nominated by the management. Foxconn told the FLA it will attempt to improve worker participation in the union and its committees.

The FLA intends to verify both Apple’s and Foxconn’s plans for improving the situation and continue issuing public reports on their progress.

Apple annually releases its own supplier reports, but the company announced in January that it would be joining the FLA; in February, it asked the organization to conduct its own independent audit. In addition to assembling products for Apple, Foxconn also contracts with many other U.S. technology firms.

Apple CEO Tim Cook was in China as the FLA released its report, where he met with Beijing’s mayor, China’s vice premier, and other government officials. Speaking at an investor conference in February, Cook said that “Apple takes working conditions very, very seriously, and we have for a very long time.”

This story was updated at 2:18 p.m. PT with more details from the FLA’s report.

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