Covid-19 Wage Theft: Debunking excuses from fashion brands

During the Covid 19 pandemic, garment workers in countries like Cambodia were denied millions of dollars in wage payments - many receiving only a portion of the already precarious minimum wage. Unions called on 25 international fashion companies to face up to their responsibility and ensure the payment of salaries. We analysed their disappointing excuses and show what the fashion companies should actually do.

Trade unions and labour rights activists have repeatedly called on international fashion brands to ensure that workers are protected and receive their wages during the pandemic. We evaluated the responses from a dozen fashion companies to an urgent letter from Cambodian trade unions. We found that companies are avoiding addressing the core issues. Most refused to provide a clear response to the unions’ demands to assess the wage gap and remedy the wage shortfall that workers have experienced during the pandemic.

In their responses, many brands played down their own individual responsibility for paying workers in their supply chain. Instead, they have chosen to hide behind the decisions of the Cambodian government and voluntary multi-stakeholder initiatives such as the ACT Memorandum of Understanding, or by referring only to the ILO Call to Action, their Code of Conduct or payment of outstanding seniority indemnity.

Here we present and assess the most frequently used excuses by brands.

More infos

  • 1. “We require our suppliers to abide to labour law.”

    What brands are saying:

     The most common argument used by brands in response to calls to remediate the wage gap is to underline that they require suppliers to pay their workers’ wages and benefits as required by law, presenting this as a sufficient response. However, most brands admit in their Corporate Social Responsibility (CSR) communication that legally mandated wages in most production countries are not sufficient to meet the human right to a living wage, and do not meet their own expectations on fair remuneration. In the midst of a global crisis, brands are backtracking away from language that refers to living or fair wages and simply referring to weak legal provisions. This already represents a spectacular failure on brands’ commitments to decent wages. But even when considering the legal requirements, it is questionable whether the pandemic related wage cuts in Cambodia meet the requirements under national and international labour law.

    Our Evaluation:

    One of the biggest causes of wage loss during the pandemic in Cambodia is the reduced or completely withheld wage compensation during full or partial lockdowns. Many national labour laws permit employers to temporarily reduce or suspend operations in a severe crisis, often in combination with governmental support for continued wage payments, or alternative benefit payments, to compensate for the income loss.

    In Cambodia, social protection systems as outlined above were not established before the onset of Covid-19. Instead of ensuring employers continued regular wage payments, the government issued a special regulation allowing them to only pay workers US$ 30 per month, with an additional US$ 40 contribution from the government.

    Whilst providing this combined payment to workers during the pandemic can be seen as a positive step to cover for the lack of social protection, the shortcomings are striking. The combined US$ 70 is equivalent to a meagre 36% of the legal minimum wage (US$ 192), which already falls far short of securing a decent minimum living standard. Brands stating that their suppliers should abide by the law implicitly refers to compliance with this regulation.

    Brands are willingly ignoring the fact that the governments emergency regulation does not just fail to protect workers from hunger and economic misery, but also falls short of meeting the minimum standards of the international labour rights framework, especially ILO conventions C102 on Social Security (Minimum Standards) and C168 on Employment Promotion and Protection against Unemployment. According to the framework, support in periods of unemployment or temporary suspension of work

    • ‘shall be sufficient to maintain the family of the beneficiary in health and decency’ (C102 Art. 67)
    • and ‘at a level which provides the minimum essential for basic living expenses’ (C168 Art. 15). [As an additional requirement, both conventions require that payments also meet at least 45% or 50% of the regular or minimum wage. While this requirement becomes relevant for workers with higher wages or in countries with high wage levels, for Cambodia’s poorly paid garment workers the basic living expenditure requirement is pertinent to set the minimum compensation level. Nonetheless it is noteworthy that the US$ 70 compensation would even fall short this second requirement.]

    In the Cambodian context, the legal minimum wage already fails to cover basic living expenses for a worker and her family. Therefore, in case of a suspension of regular wage payments, as in the current pandemic, any payment rate undercutting the legal minimum wage level fails to meet the standards of the international labour rights framework.

    What brands should do:

    Fashion brands cannot escape from their own responsibility to ensure wages are paid to the workers in their supply chain by referring to the inadequate emergency lockdown compensation scheme by the Cambodian government. Instead, they should respond to the trade unions' demand by making up the shortfall in wages. Furthermore, brands should agree to negotiate an enforceable agreement to cover wages, severance and basic labour rights as demanded by the #PayYourWorkers/ #RespectLabourRights campaign.

    In addition, several reports have evidenced that workers are being subjected to increased workloads without fair remuneration, unpaid overtime, severance theft in case of dismissals and the firing and re-hiring of temporary workers in lower seniority and pay grades. All of these indicate labour law violations, and as such brands should increase their due diligence efforts to identify and remediate rights violations.

  • 2. “We oblige all of our suppliers to strictly adhere to our code of conduct.”

    What brands are saying:

    Some brands referred to their Code of Conducts (CoC) in their responses to Cambodian trade unions. All international brands have their own CoC. These are usually annexed to ordering contracts and contain minimum requirements for working conditions the supplier is supposed to meet.

    Our evaluation:

    Concerning wage payments, all CoCs stipulate that at least legal minimum wages shall be paid. Acknowledging the prevalence of inadequately low minimum wage levels, most CoC go further and request that wages must be enough to meet the basic needs of workers and their families. For example, the Inditex CoC mandates: ‘Manufacturers and suppliers shall ensure that wages paid meet at least the minimum legal or collective bargain agreement, should this latter be higher. In any event, wages should always be enough to meet at least the basic needs of workers and their families and any other which might be considered as reasonable additional needs.

    Prior to the pandemic, wage levels in the Cambodian garment industry already fell far short of this requirement. During the pandemic, wages dropped even lower, sometimes below legal minimum wages. During factory lockdowns workers incomes were reduced to only 36% of the national minimum wage.

    What brands should do:

    Taking their own CoC as a basis, companies need to acknowledge that payments to garment workers during the pandemic in most, if not all, cases represent a CoC violation. As a consequence, remediating action to back pay missing wages to the levels required in the CoC need to start immediately. Wage shortfalls from periods of pandemic-related disruption to production cannot be shouldered by suppliers alone, as direct employers. Brands, as the primary profit makers in the supply chain must fulfil their obligations under the UN Guiding Principles on Business and Human Rights. Brands have the responsibility and ability to cover the largest part of the wage shortfall, be it through direct payments or adjusted purchasing prices that include pandemic-related additional costs.

  • 3. “We are already endorsing ACT on Living Wages.”

    What brands are saying:

    Some companies refer their endorsement of the initiative ACT on Living Wages in their response to trade union demands. By signing on to the ACT Memorandum of Understanding, brands commit to ensuring that purchasing practices facilitate the payment of a living wage. To fulfil this ambition requires, amongst other things, paying prices that include wage components set at (at least) living wage levels.

    Our evaluation:

    To date, ACT brands still fall short on ensuring that purchasing practices facilitate the payment of a living wage, using a lack of progress on collective bargaining as an excuse. While labour activists have expressed frustration about the slow progress on living wages from ACT in the past, in the current wage crisis ACTs ability to protect workers against cuts to current poverty wages is questionable. The Covid-19 pandemic provides an immediate reality check of the underlying ACT principle that purchasing practices and prices alone can protect workers’ wages.

    Pandemic-related measures, such as additional procedures for hygiene, barrier protection and social distancing, as well as continued wage payments throughout periods of lower production due to lockdowns, leads to an increase of labour costs for employers. Therefore, it should be expected that ACT brands increase purchasing prices accordingly.

    ACT admits that ‘at the outbreak of Covid-19, it was quickly apparent that ACT’s current global purchasing practices commitments did not take a crisis context into account.’ Whilst this acknowledgement could have initiated an adequate response, 18 months into the pandemic ACT still remains silent on the need of its member brands to increase purchasing prices to protect workers’ wages, even at the current poverty levels. Tellingly, ACT writes that ‘brands also committed to taking responsibility in cases in which a supplier has incurred a fabric liability as a direct result of order amendments,’ but does not mention brands' responsibility for labour costs resulting from the same situation. As a consequence, the reference to ACT as an example of a brands commitment to wage rights in this pandemic is an empty promise.

    What brands should do:

    For ACT to be more than a fig leaf and vague promise, now is the time to ensure that fair wages both during and after the pandemic are incorporated in higher purchasing prices. This refers not only to future orders, but also requires review and correction of past purchasing orders during the pandemic to incorporate additional costs.

    Failing to take adequate action will further impact employers and workers: suppliers’ narrow operating margins will continue to erode, in the worst case till bankruptcy, whilst workers face wage shortfall and severance theft. Attempts for employers to recover costs, will continue to result in excessive workloads for workers. The reports from workers and trade unions in Cambodia show that this is not a future risk but is already occurring. If ACT attempts to be part of the solution and not just a ready excuse for brands, real action to fill the wage gap and to put ACT labour costing principles into practice are urgently needed. Incorporating the proposed price premium of 1.5% on top of FOB by the #PayYourWorkers / #RespectLabourRights campaign is the most appropriate way to achieve this and complies with ACT principles on such agreements requiring direct negotiation with unions.

  • 4. We have endorsed the global Call to Action for garment industry workers.”

    What brands are saying:

    Some brands such as Bestseller, H&M and VF are referring to the ILO Call to Action. By endorsing the Call to Action (CtA), companies publicly commit ‘to take action to protect garment workers’ income, health and employment,’ amongst a broader set of commitments. The CtA outlines both collective and individual actions to work towards the realization of this commitment.

    Our evaluation:

    With reference to the wage loss crisis, living up the commitment of the CtA requires companies to actively secure workers incomes during the pandemic. Fifteen months after its establishment, the collective actions under the framework of the CtA have thus far failed to deliver income protection to the vast majority of workers. In Cambodia for example, just 1.95 million Euros has been committed for disbursement to workers, less than 1% of the estimated wage gap. Whilst this may bring some relief to few workers, the vast majority will see no support.

    What brands should do:

    Instead of hiding behind the collective actions which have clearly failed, companies must instead meet their individual commitments under the CtA to secure wages and severance, covering the existing wage gap as demanded by Cambodian trade unions. While the CtA does not dictate how brands should meet individual commitments, it provides an explicit example of what could be done: ‘Should financial circumstances permit, direct support to factories can also be considered.’ Direct support to factories in order to remedy workers’ shortfall in wages is an effective action in line with the CtA. Such support should come with oversight and negotiation to ensure that the financial support provided is used for the purposes of wages and severance as proposed by the #PayYourWorkers/ #RespectLabourRights campaign for an enforceable agreement.

  • 5. “We support the payment of the seniority indemnity.”

    What brands are saying:

    Some brands have chosen to react to the second demand in the union letter on outstanding seniority payments, saying that they support this payment.

    Our evaluation:

    Supporting the payment of the outstanding seniority indemnity is a positive step. At the same time, we emphasize that seniority indemnity addresses just a small fraction of the outstanding amounts, and that these payments are required from suppliers, not by brands. The success on seniority indemnity payments was primarily achieved as a result of huge worker protests in December 2020 and January 2021, which forced the government to order suppliers to pay back seniority payments from 2019-2020.

    What brands should do:

    Brand should not stand back and expect their suppliers to pay seniority indemnity. They must themselves contribute to remediate the full wage gap, publicly assuring that all apparel, textile, and footwear workers in their supply chain will be paid their legally-mandated wages and benefits throughout the pandemic and negotiate an enforceable agreement to this effect as proposed by the #PayYourWorkers/ #RespectLabourRights campaign. This will provide immediate income support for workers who remain employed but whose wages have been reduced, or those who have been temporarily suspended due to lack of orders. For more details see: www.payyourworkers.org

Textile workers cannot pay their rent on empty words.

We demand that fashion companies and retailers ensure wages and severance pay and respect labour rights!

Background: