2017 ANNUAL REPORT 2016 BOARD OF DIRECTORS

The following representatives from each of the Fair Labor Association’s three constituent groups — companies, universities, and civil society organizations (CSOs) — served on the FLA’s Board of Directors in 2016, along with an independent chair.

CHAIR Kathryn “Kitty” Higgins Former U.S. Deputy Secretary of Labor

Company Representatives University Representatives CSO Representatives

Karen Daubert Marsha Dickson Cara Chacon Washington University in Educators for Socially Patagonia St. Louis Responsible Apparel Business

Monica Gorman Bob Durkee Linda Golodner New Balance Princeton University National Consumers League ABOVE: A worker in Ivory Coast dries cocoa beans destined for products made by FLA Participating Company Nestlé. ON THE COVER: A worker operates a manual fabric cutting machine at a garment factory in El Salvador owned and operated by FLA Participating Company League Collegiate.

The 2017 Annual Public Report for the Fair Labor Association Brad Grider Richard Fairchild Meg Roggensack Hanesbrands Georgetown Law School covers program and financial activity for 2016. University of Utah

TABLE OF CONTENTS Gregg Nebel Kathy Hoggan Jim Silk adidas Group University of Washington Yale Law School 2016 Board of Directors ...... 3 Foreword ...... 4 Maureen Riedel Letter from the President ...... 5 Marissa Pagnani Nina Smith Pennsylvania State PVH GoodWeave The Social Responsibility Journey ...... 6 University Upholding International Labor Standards in Factories Worldwide ...... 14 Special Investigations: The FLA Third Party Complaint Process ...... 22 Protecting Workers in Agricultural Supply Chains ...... 24 Tammy Rodriguez Craig Westemeier* Karen Tramontano Esquel Group University of Texas Global Fairness Initiative Tracing Supply Chains Beyond the First Tier ...... 28 Advocacy and Collaboration to Advance Workers’ Rights ...... 32 Financial Review ...... 38

2 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 3 FOREWORD LETTER FROM THE PRESIDENT Michael Posner Sharon Waxman

Trust is the most important attribute of any to a high industry Since assuming the duties of president of the Our long-standing successful institution. Yet according to the Edelman standard. This Fair Labor Association, I have been consistently third-party complaint Trust Barometer, “[t]rust is in crisis around the commitment sets them inspired by the solutions-oriented spirit of procedures (p. 22) also world. The general population’s trust in all four key apart and deserves to be recognized by investors, cooperation I have seen among our affiliates demonstrate how a process that values the institutions — business, government, NGOs, and consumers, and the media. across all three major stakeholder groups — civil contribution of each stakeholder’s voice can media — has declined broadly.” In today’s highly society, universities, and businesses, both brands reinforce the strength of our core work and competitive global marketplace, this decline I was an active participant in the creation of the and suppliers. safeguard workers’ rights. In 2016, three universities in confidence presents a serious challenge for FLA in the late 1990s and served on the Board and seven unions reached out to the FLA to companies, whose long term success depends on until 2009 when I joined the State Department as Among the success stories of 2016 recounted initiate investigations that ultimately resulted in the trust of customers, investors, employees and Assistant Secretary for Democracy, Human Rights in this report, perhaps the most encouraging improved conditions — including back pay and people in the communities where they operate. and Labor. As the newly elected Board Chair, I are those that describe the ways that our restoration of work, where applicable — for nearly Companies can build trust by offering quality am very excited to be succeeding Kitty Higgins, affiliates collaborate to achieve common goals — 20,000 workers, over and above the 180,000 goods and services, operating with integrity, and and to be working with Sharon Waxman and her building fair supply chains and solving systemic workers affected by the FLA’s 2016 factory and treating well the workers they rely on. But these excellent team. problems. farm assessment cycle. The process depends on practices alone are not always enough. An increasingly universities committed to selling products made skeptical public, wary of company promises, wants This is a pivotal time to be addressing the roles For example, our ongoing cooperative agreement fairly, unions and civil society keeping workers’ proof that companies are indeed walking their talk. and responsibilities of businesses. There is a with the US Department of Labor (p. 31), voices at the forefront, and brands and suppliers growing demand for reliable information on how demonstrates how diverse collaborators can unafraid of transparency in implementing strong For a growing number of leading apparel, companies are tackling the challenges inherent come together to develop lasting solutions for social compliance programs. footwear, and agricultural companies, the Fair in the globalized economy. In the last decade difficult supply chain issues. To test approaches Labor Association fulfills this role. With nearly governments around the world have enacted for mitigating the risks of child and forced I’m proud of the results that we see in this report, two decades of experience, the FLA is helping legislation requiring company reporting on issues labor, the FLA is working closely with a brand while we also work toward a future with even companies to address global supply chain labor like forced labor. Simultaneously, labor and human and its primary suppliers, local civil society greater impact. Global companies and suppliers issues in a manner that is both operationally rights activists are using technology and social organizations, agents and farmers, and local from 20 countries around the world are now are effective and publicly credible. Every FLA company media to call attention to rights violations with and national governments. Together, we are involved with the FLA, and an increasing number adopts the organization’s rigorous Code of greater speed and reach, presenting unprecedented identifying the steps each should take to improve have successfully achieved FLA accreditation. Our Conduct, which covers issues ranging from wages reputational risks to companies. Women and workplace practices and ensure that children commitment to promoting high standards and and hours to forced and child labor to workplace millennials are pressing the investment community spend their days pursuing education and play continuous improvement is the engine that drives safety, discrimination, and freedom of association. to identify and recognize companies with strong rather than working in the fields. progress. As we build an even more effective FLA, Companies are assessed on their adherence to the environment, social, and governance practices. we keep dignity and fairness for workers as our Code using strict benchmarks, and these evaluations We are working to find similar solutions in our North Star, remaining mindful that each product are made public on the FLA’s website. Remediation The FLA provides an ambitious but practical projects to trace supply chains for raw materials we buy and sell is made from the labor of women strategies are put in place. To strengthen response to this ever-changing landscape with its used by the apparel and footwear industry, and men around the world, stitching seams, performance over time, companies also receive unique accreditation program, a reflection of the like cotton and leather (p. 28), drawing on sewing buttons, weaving fabric, spinning yarn, technical support and benefit from shared learning FLA’s leadership in the field. Nearly two decades some of the lessons we learn through our work tanning leather, growing and harvesting crops, of best practices among industry competitors. since its inception, the FLA is the gold standard improving conditions in agricultural commodities. and pursuing a better life for themselves and for industry-level commitment and accountability. As always, for lasting solutions, we find trust, their families. Appreciation for their hard work Not surprisingly, many of the most committed relationship building, and strong collaboration motivates our own, each and every day. and best brands and suppliers are affiliated with are key. A problem that might appear daunting the FLA. They demonstrate their leadership both or intractable to one stakeholder working alone through the resources they devote to addressing can become more manageable when all voices challenges in their supply chains and through Board Chair, Fair Labor Association (as of May 2017) are heard, and stakeholders come together in a Jerome Kohlberg Professor of Ethics and Finance, and their willingness to be held publicly accountable Director, NYU Stern Center for Business and Human Rights shared commitment. FLA President and CEO

4 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 5 THE SOCIAL RESPONSIBILITY JOURNEY: Committing to Continuous Improvement

Companies working with the FLA — across all categories “Achieving accreditation of affiliation — commit to building and maintaining strong and sustainable social responsibility programs that shows that we value continuously pursue improved working conditions across social compliance on their supply chains. par with other aspects of our business, in terms Among many positive developments in 2016, the FLA of our commitment and celebrated two encouraging indicators of progress within two different affiliation categories, with a number of international priorities.” suppliers and US-based collegiate licensees making significant Workers inspect completed garments for shipment at a Chenfeng manufacturing facility in Jiangsu Province, China. – Mike Rodgers, advancements in their social compliance commitments. General Manager of The three Participating Suppliers achieving commitment and priorities, and in terms of Brooklyn Manufacturing First, three FLA Participating Suppliers — Brooklyn accreditation in 2016 were the most ever in how we present ourselves to customers and Manufacturing, Textiles Opico, and Chenfeng Group — achieved one year, demonstrating clear progress for to the world,” says Mike Rodgers, General accreditation of their social compliance programs by the FLA the FLA’s supplier program, since its launch Manager of Brooklyn Manufacturing, which Board of Directors, and second, three Category C Licensee in 2006. Accredited Participating Suppliers earned accreditation in 2016. “So, in addition affiliates1 chose to deepen their engagement with the FLA by are able to demonstrate that they have put to quality, development, service, and becoming Participating Companies. Participating Companies effective systems in place to prevent violations competitiveness, our commitment to social and Suppliers pursue the most rigorous version of the FLA of the FLA Workplace Code of Conduct, compliance is at the forefront.” program, allowing the FLA to publicly report the findings from and have made a strong commitment to independent assessments of workplace conditions in their remediating any violations that occur. Similarly, three collegiate licensees made supply chains, and working to develop a headquarter-level social their social compliance commitment a compliance program strong enough to earn FLA accreditation. “Achieving accreditation shows that we high priority by committing to the strong value social compliance on par with other accountability measures required of 1 See box on page 9 for a description of licensee engagement with the FLA. aspects of our business, in terms of our Participating Companies.

NEW PARTICIPATING COMPANIES IN 2016: ● League Collegiate Outfitters – Based out of ● MV Sport – Family-owned and -operated MV Bridgeport, PA, League Collegiate Wear specializes Sport sources blank products directly from ● Burton Snowboards – A producer of outdoor ● Fanatics Apparel – California-based Fanatics Apparel in producing collegiate apparel and accessories. manufacturers – including FLA-affiliated Participating sporting gear, Burton originally sold handmade became a Participating Company in 2016 after several The company manufactures its products at two Companies Gildan and Hanesbrands – and products by founder Jake Burton, before opening a years of engaging with the FLA as a Category C owned facilities in the US and El Salvador, and subsequently embellishes these products at its production facility in 1978 employing five workers in Licensee. Fanatics is a producer of licensed “fangear” at an FLA-affiliated Participating Supplier based Bay Shore, NY screen-printing facility. The southern Vermont. Since then, Burton has achieved for universities and professional sports associations, in Pakistan. The League facility in El Salvador company’s licensing program, which has developed almost 50 percent of the global snowboard market, including the NFL, the NBA, and Major League maintains a commitment to providing employment over the course of ten years of FLA engagement and now manufactures in one owned US production Baseball and Major League Soccer. The company for at-risk populations. Prior to 2016, League as a Category C licensee, includes many FLA- facility and contract factories in 19 countries. manufactures in two owned US production facilities Collegiate engaged with the FLA as a Category C affiliated universities as well as the United States Burton launched its sustainability program in 2012. and contract facilities in 11 countries. licensee for more than ten years. Marine Corps.

6 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 7 2016 Accreditations “FLA standards and of harassment or abuse, methods are comprehensive and strengthen workplace Brooklyn Manufacturing communication skills. and of very high quality, Brooklyn Manufacturing, but it doesn’t end there. which runs one wholly Textiles Opico owned-and-operated The program provides Participating Supplier manufacturing facility in San the tools and roadmap to Textiles Opico (“TexOps”) Salvador, became the first continuously assess and owns and operates a FLA Participating Supplier improve in the future.” manufacturing facility in in the Americas region to San Juan Opico, El Salvador. – Juan C. Zighelboim, earn accreditation for its On campus at the facility, President, Textiles Opico social compliance program in TexOps offers a certified February 2016. Montessori school for workers’ children, and In addition to Brooklyn’s overall commitment maintains a project in partnership with the to social responsibility, the FLA has recognized Secretary of Social Inclusion of El Salvador Sewing operators manufacture clothing at the Textiles Opico facility in San Juan Opico, El Salvador. a number of features of the company’s that teaches sewing skills to young women. program that make the factory a better The factory offers a notable housing benefit “Fanatics has been strengthening its social compliance program place to work for its employees, including to workers, providing no-cost building SUPPLIERS WITH over the many years of its affiliation with the FLA as a collegiate English and technical classes for workers, and materials to any employee who requests ACCREDITED licensee,” said Michaela Corr, Compliance Manager for Fanatics. a women’s empowerment program known financial support for home improvements. SOCIAL COMPLIANCE “Our company feels that as students and consumers become as “Mujeres en Fábrica.” Implemented in PROGRAMS more eager to understand where and how their clothing has partnership with the civil society organization TexOps has also invested in a number of been made, we wanted to demonstrate a stronger public World Vision, “Mujeres en Fábrica” is designed social and recreational projects that benefit commitment, by publicly disclosing the FLA’s assessments of to increase workers’ self-confidence and the factory’s local community, such as our factories and pursuing FLA accreditation as a Participating self-esteem, train workers to identify signs providing space for workers and their families Company.”

A Participating Company’s accreditation signifies that it COLLEGIATE LICENSEE ENGAGEMENT WITH THE FLA: understands and takes into consideration the consequences of its business practices on workplace conditions at its supplier Colleges and universities that affiliate with the FLA Three new Category B Licensees affiliated with the require the producers of their collegiate-logoed products FLA in 2016: factories, and has aligned its sourcing and purchasing practices to affiliate with the FLA. Some of these licensees with its commitment to improve conditions for workers in its affiliate at the Participating Company level and pursue ● CamelBak – Petaluma, CA supply chain. accreditation of their social compliance program. ● Life is Good – Boston, MA Others, based on the size of their business, affiliate with ● Panini – Irving, TX Along with the three newly accredited suppliers, FLA the FLA in one of three categories: B, C, or D. Participating Company Dallas Cowboys Merchandising also The FLA also provides all collegiate licensee earned accreditation for its social compliance program in 2016. Annually, the FLA assesses working conditions in categories with support for continuously improving five percent of the factories producing university their social compliance programs. Resources Select exemplary features of each company’s program are products for “Category B Licensees.” These, and all, available to licensees include online training courses, noted below; full accreditation reports explaining the depth and factory assessment reports from the FLA appear educational opportunities via FLA webinars and in- breadth of each company’s social compliance program appear online at www.fairlabor.org/transparency/workplace- person meetings, and published guidance materials on the FLA website. monitoring-reports. distributed to all FLA affiliates.

8 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 9 to play soccer and softball, “The accreditation process work to bring its production and an off-road track for helped us to improve practices in line with BMX racing and bike riding. our CSO-engagement Chinese national law, with the company on target to strategy, and has Chenfeng Group, Ltd. achieve a weekly maximum Chenfeng Group, which helped to refine and average of no more than 49 became the FLA’s first-ever improve the process hours of work by 2019. Participating Supplier upon its of production plan affiliation in 2006, owns and management.” Dallas Cowboys operates six manufacturing Merchandising (DCM) – Yin Guoxin, facilities in Jiangsu Province, Dallas Cowboys Chief Executive Officer, in China. The company’s Merchandising’s achievement Chenfeng accreditation report to the of accreditation earned FLA Board of Directors notice for demonstrating A worker reads the Brooklyn Manufacturing Code of Conduct (Codigo de Conducta), posted publicly in Brooklyn’s recognized significant that even smaller companies facility in San Salvador, El Salvador. improvement over time on a number of key without a very large social compliance staff issues for suppliers operating in China, such can find support and guidance for their work investigate a factory’s working conditions and and Suppliers in 2016. For companies working as ensuring payment of all five forms of social from the FLA and build strong and effective the willingness of a factory’s leadership to toward FLA accreditation, assessors visit five insurance benefits for workers and compliance social compliance programs. meet DCM’s labor rights requirements. Once percent of all first-tier facilities. Companies with the Chinese disability-employment quota. DCM begins a relationship with a factory, DCM with accredited social compliance programs One way that DCM enacts its commitment staff track that factory’s performance over receive assessments at one percent of their The FLA also noted Chenfeng’s continuous to social responsibility at the headquarter time on a scorecard that measures adherence owned or contracted first-tier facilities. If a progress on reducing excessive hours of level is by conducting pre-sourcing audits to to the FLA Workplace Code of Conduct and company operates or sources from a small responsiveness to the company’s expectation number of facilities, achieving the required to remediate any violations found. The FLA threshold of participation may not require an BRANDS WITH ACCREDITED SOCIAL COMPLIANCE PROGRAMS also recognized DCM’s proactive efforts to assessment every year. communicate effectively with unions, to protect workers’ In cases where FLA-affiliated freedom of association, and “We found it helpful to brands publicly disclose to engage with factories — the names and locations of have the FLA as both a and other brands sourcing factories from which they from those factories — to thought partner and a source their products, the resolve and remediate third critic. The FLA encouraged charts below indicate how party complaints filed with us to confront complex to find these lists. As more the FLA. issues, such as fair companies move toward this level of transparency — and compensation, and our 2016 Factory Assessments with some even disclosing program is more robust suppliers beyond the first The following charts for the experience.” tier — the FLA commends * demonstrate where the FLA – Audrey Ogawa Johnson, companies that have chosen conducted assessments for Head of Compliance, Dallas to provide this type of all Participating Companies Cowboys Merchandising (DCM) information to the public. * The FLA accredited Syngenta’s social compliance program in India.

10 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 11 UNIVERSITY PUBLIC 2016 PARTICIPATING SUPPLIERS WITH THE FLA PARTICIPATING COMPANY 2016 ASSESSMENTS LICENSEE? FACTORY LIST? PARTICIPATING COMPANY 2016 ASSESSMENTS PRODUCTION COUNTRIES #OF SITES/FACTORIES Forty-Seven Brand China Haiti No assessment conducted Fruit of the Loom Brooklyn Manufacturing El Salvador 1 (not due) (Russell Brands) www.fotlinc.com/pages/supply-chain.html

Chenfeng Group China China 6 Indonesia GFSI, Inc. www.gearforsports.com/social-responsibility/index.php/factory-disclosure/ Bulgaria, Egypt, Israel, Jordan, Delta Galil Industries Ltd. Thailand 7 Thailand, Turkey Bangladesh Gildan Activewear, Inc. China, Malaysia, Mauritius, Owned facilities: www.gildancorp.com/location Esquel Group Sri Lanka 23 Sri Lanka, Vietnam Vietnam No assessment conducted Owned facilities: hanesforgood.com/content/uploads/2017/04/2017-HBI-Self-Owned.pdf Forward Sports, Ltd. Pakistan 1 Hanesbrands (not due) Contractors for collegiate market: hanesforgood.com/content/uploads/2017/04/2017-HBI-Collegiate-Market.pdf No assessment conducted Grupo Miguel El Salvador 1 (not due) Bangladesh, China (3), India, Sri Lanka, Turkey Hugo Boss Kay & Emms Pvt. Ltd. Pakistan Pakistan 1 group.hugoboss.com/en/sustainability/partners/ J. America Inc. China No assessment conducted KTC Limited China, Laos 2 (not due) Kathmandu China (3), Indonesia, Vietnam (2) Liz Fashion Bangladesh Bangladesh 1 Lakeshirts, Inc. China, Pakistan

Mainland Headwear Bangladesh Bangladesh, China 2 League Collegiate New in 2016; no assessment due

Maxport Ltd. Vietnam Vietnam 8 Mountain Equipment Taiwan Co-op (MEC) www.mec.ca/en/explore/factories/ Bangladesh, Cambodia, China, Pou Chen Group Bangladesh 26 Indonesia, Mexico, Myanmar, Vietnam MV Sport New in 2016; no assessment due No assessment conducted Indonesia Textiles Opico El Salvador 1 New Balance (not due) Athletic Shoe, Inc. www.newbalance.com/about-new-balance-content-assets/inside-nb-investing-in-people.html VT Garment Co. Ltd. Myanmar Myanmar, Thailand 3 New Era Cap Co., Inc. Vietnam Yee Tung Garment Co. Ltd. Cambodia Cambodia, China, Jordan, Vietnam 8 China (3), Georgia, India, Indonesia, Vietnam (2) Nike, Inc. manufacturingmap.nikeinc.com 2016 PARTICIPATING COMPANIES WITH THE FLA Sri Lanka Outerknown UNIVERSITY PUBLIC www.outerknown.com/suppliers PARTICIPATING COMPANY 2016 ASSESSMENTS LICENSEE? FACTORY LIST? Outerstuff, Ltd. Pakistan ABC Gruppen Poland Sri Lanka Patagonia Bangladesh, India, Thailand www.patagonia.com/us/footprint adidas Group www.adidas-group.com/en/sustainability/compliance/supply-chain-structure/ prAna China arena Group Malaysia, Thailand Georgia, India, Malaysia, Turkey, Vietnam Puma SE Burton Snowboards New in 2016; no assessment due about.puma.com/en/sustainability/supply-chain/public-factory-list Colosseum Athletics Vietnam Bangladesh, Brazil, China (2), India (2), Indonesia, Corporation Italy, Mexico, Philippines, Sri Lanka, Taiwan, Thailand, PVH Corp. Tunisia, Turkey, Vietnam Cutter & Buck Peru pvh.com/~/media/PVH/Files/PVH_Factory_List%20Disclosure.ashx?la=en Dallas Cowboys Guatemala Merchandising, Ltd. s.Oliver Group China, Indonesia Delta Apparel, Inc. China, El Salvador, Mexico SanMar Corporation China Fanatics New in 2016; no assessment due. Bangladesh, China, Indonesia, Peru, Philippines Under Armour Bangladesh (2), Cambodia, China (10), India, www.uabiz.com/company/sustainability.cfm Indonesia, Pakistan, Peru, Turkey, Vietnam (2) Fast Retailing Volcom China For the UNIQLO brand: www.fastretailing.com/jp/sustainability/business/pdf/UniqloCorePartnerFactoryList_20170228.pdf W.L. Gore & Associates GmbH Myanmar China (3), Vietnam (2) Bangladesh Fenix Outdoor AB Zephyr Graf-X www.fenixoutdoor.se/hallbarhet/ www.zhats.com/blogs/csr/updated-supplier-disclosure

12 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 13 POLAND TURKEY GEORGIA PAKISTAN CHINA TAIWAN Assessments: 1 Assessments: 5 Assessments: 1 Assessments: 4 Assessments: 47 Assessments: 3 Workers: 244 Workers: 2,462 Workers: 590 Workers: 2,700 Workers: 38,695 Workers: 589

UNITED STATES ITALY VIETNAM Assessments: 10 Assessments: 2 Assessments: 18 Workers: 1,881 Workers: 189 Workers: 42,139

MEXICO TUNISIA PHILIPPINES Assessments: 4 Assessments: 1 Assessments: 3 Workers: 3,062 Workers: 550 Workers: 2,412

INDIA GUATEMALA JORDAN Assessments: 6 CAMBODIA Assessments: 1 Assessments: 1 Workers: 8,006 Assessments: 2 Workers: 182 Workers: 3,000 Workers: 1,884

SRI LANKA EGYPT Assessments: 4 EL SALVADOR MALAYSIA Assessments: 1 Workers: 3,717 Assessments: 2 Assessments: 1 Workers: 1,300 Workers: 490 Workers: 679 BANGLADESH Assessments: 13 Workers: 38,730 MYANMAR THAILAND INDONESIA Assessments: 2 Assessments: 5 Assessments: 8 Workers: 1,790 Workers: 4,052 Workers: 22,245

HAITI PERU BRAZIL Assessments: 1 Assessments: 2 Assessments: 1 Workers: 1,200 Workers: 1,437 Workers: 491 NUMBER OF ASSESSMENTS CONDUCTED, AND WORKERS AFFECTED, BY COUNTRY, 2016

UPHOLDING INTERNATIONAL LABOR With both forms of evaluation, FLA assessors ✓ 149 assessments measure a factory’s success at fulfilling STANDARDS IN FACTORIES WORLDWIDE each of the nine elements of the FLA Workplace Code of Conduct. To elaborate 27 countries In-Depth Assessment of Adherence to the FLA Workplace on the specific requirements for each code Code of Conduct element, and to guide assessors’ reporting 175,472 workers affected on working conditions in each facility, the In 2016, the FLA conducted a total of 149 The FLA conducts two forms of Sustainable FLA has developed a comprehensive list of assessments of facilities owned or contracted Compliance Initiative (SCI) assessment. In 2016, 162 benchmarks,2 delving deeper into the Low Incidence of Child and Forced by Participating Companies, Participating FLA field staff conducted 136 “foundational” conditions an employer must fulfill to succeed Labor Findings Suppliers, and Category B collegiate assessments at contract facilities used by FLA- in implementing each of the nine broad labor licensees. FLA assessors conducted these affiliated brands, with 13 “baseline” assessments standards. The chart on page 16 shows the top Consistent with FLA reporting from recent site visits in facilities employing more than (a more in-depth evaluation) conducted three benchmarks for each code element that years, the chart illustrates the relative success 175,000 workers in 27 countries, including at facilities owned and operated by FLA- FLA assessments indicate most often require most assessed factories have achieved in fully factory visits in Myanmar, Poland, and the affiliated brands and suppliers. Foundational improvement. This chart also indicates the implementing FLA standards on child labor Republic of Georgia for the first time. FLA assessments include FLA recommendations frequency with which FLA assessors report non- and forced labor. For example, FLA assessors staff chose these factories for assessment on how to remediate each finding requiring compliance with each of the top benchmarks. found no underage workers during their site from a total of 4,750 facilities within the immediate action; baseline assessments visits, and reported that around 85 percent of scope of the FLA program, which together include a root-cause analysis and FLA all facilities violated no child- or forced-labor 2 Find the complete FLA Workplace Code of Conduct and employ more than 4.65 million people. recommendations for each and every finding. benchmarks at www.fairlabor.org/our-work/labor-standards benchmarks whatsoever.

14 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 15 TOP THREE BENCHMARCK VIOLATIONS PER CODE ELEMENT, 2016

35 32

30 150 27 99% 25 24 95% 91% 91% 20 19 19 87%

15 82% 120 12 11 10 77% 10 8 74%

5

0 90 Employment Health, Safety Freedom of Compensation Hours of Non-Discrimination Harassment Forced Labor Child Labor Relationship & Environment Association Work or Abuse 56% 52% Number of Benchmarks for Each Code Element 50% 46%

60 36% 37% 38% 36% Workers in Myanmar conducting a fire drill at a facility assessed by the FLA. The FLA conducted assessments in Myanmar, Poland, and the Republic of Georgia for the first time in 2016. 28% 28%

30 19% 17% 12% In facilities with a violation of the forced-labor 2016. To assess for full compliance with this 7% 7% 8% code element, the most common benchmarks benchmark, FLA assessors check for posting 4% 5% 5% triggered — in a total of 18 facilities — involved of evacuation plans, maintenance of alarm 0 F.8 CL.8 CL.4 F.7 F.4 H/A.10 CL.1 H/A.2 H/A.1 ND.8 FOA.10 C.5 FOA.11 ND.1 HOW.5 FOA.2 HOW.8 C.17 ND.2 C.1 HOW.1 HSE.14 HSE.5 ER.25 ER.16 HSE.1 ER.1 interference with workers’ freedom of and emergency lighting systems, worker movement, due to physical barriers like locked training on evacuation procedures, and other EMPLOYMENT RELATIONSHIP FREEDOM OF ASSOCIATION ER.1 General/Human Resource Management FOA.2 Right to Freely Associate doors, or practical barriers like the holding of indicators. Of the 19 facilities assessed as fully Systems FOA.10 Employer Interference in Formation or legal documents by factory management, or prepared for emergency evacuation, eight ER.16 Terms and Conditions/Communication Operation of Unions the imposition of fees or deposits that hold were US facilities operated or contracted by ER.25 Industrial Relations (Grievance Procedures) FOA.11 Employer Interference in Election and Administration of Unions workers in debt to an employer or recruiter. Category B licensees. Four facilities in China, NON-DISCRIMINATION Under the child labor code element, a total of two in Mexico, and one each in Bangladesh, ND.1 General Compliance, Non-discrimination HOURS OF WORK ND.2 Recruitment and Employment Practices HOW.1 General Compliance, Hours of Work 13 facilities fell short of full compliance with Cambodia, Taiwan, and Thailand also ND.8 Protection and Accommodation of Pregnant HOW.5 Protected Workers/Record Keeping legal protections for young workers (those achieved full compliance with the emergency Workers and New Mothers HOW.8 Forced Overtime of legal working age, but younger than 18), preparedness benchmark. HARASSMENT OR ABUSE HEALTH, SAFETY & ENVIRONMENT or for workers participating in apprentice or H/A.1 General Compliance Harassment or Abuse HSE.1 General Compliance, Health, Safety & H/A.2 Discipline/Monetary Fines and Penalties Environment vocational education programs. Also in 2016, FLA assessors found more H/A.10 Security Practices/Body Searches HSE.5 Evacuation Requirements and Procedures than three-quarters of all facilities in need of HSE.14 Machinery Safety, Maintenance and FORCED LABOR Worker Training Emergency Preparedness, Hours of improvement regarding excessive hours of F.4 Freedom of Movement Work, and Minimum Wages work. To be in full compliance with the FLA F.7 Workers’ Ability to Terminate the Employment COMPENSATION Workplace Code of Conduct, facilities must Relationship C.1 General Compliance, Compensation F.8 Forced Overtime C.5 Calculation Basis for Overtime Payments Also consistent with recent FLA reporting, for base their production planning on a regular C.17 Record Maintenance the third year in a row the need to improve workweek of no more than 48 hours, and CHILD LABOR CL.1 General Compliance Child Labor evacuation preparedness appears among total hours per employee must not exceed 60 CL.4 Employment of Young Workers the top-five areas requiring factory attention, per week, or legal limits, whichever is lower, CL.8 Apprenticeships and Vocational Training/ Legal Compliance as found in 87 percent of all assessments in with special hours-of-work considerations for

16 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 17 young, elderly, or pregnant workers, where FLA COMMITMENT TO COMPARISON OF CODE ELEMENT VIOLATIONS BY REGION required by law. In addition, the FLA code FAIR COMPENSATION requires all overtime work to be voluntary, 20 This graph compares the average number of findings per assessment under each although in half of all facilities visited in 2016, FLA-affiliated companies commit not only to FLA Code element, grouped by the regions where the FLA conducts assessments. remediating all wage-related violations of the assessors found that overtime work was FLA Workplace Code of Conduct, but also to mandatory. More than a third of all facilities progressively pursuing fair compensation for also failed to provide one rest day in every all workers. In 2016, FLA assessors continued 15 seven to their workers, or to provide annual to collect wage data during each factory leave in accordance with local law. visit, as part of a process launched in 2015 to help companies, civil society, universities, While the FLA has been finding minimum and other stakeholders better understand the 10 wage violations declining in recent years, compensation landscape for workers, and data for 2016 show an uptick over 2015, prioritize areas for improvement. Data collected with 13 percent of facilities worldwide falling in 2016 will inform a series of FLA reports on the production countries where higher compensation short of full compliance. In some cases, these is most urgently needed. 5 violations arise from factories outsourcing work (security, maintenance, food service) to outside vendors not paying the minimum wage, as assessors found in Malaysia, Sri place that can help ensure that individual 0 Lanka, and China. In other cases, assessors instances of non-compliance with other code Employment Non-Discrimination Harassment or Forced Labor Child Labor Freedom of Health and Hours of Compensation Relationship Abuse Association Safety Work found facilities following outdated minimum elements and benchmarks do not recur. For wage rates, failing to make up the difference example, FLA assessors check that factories to piece-rate workers whose earnings fall maintain proper proof-of-age documentation SOUTHEAST ASIA: Cambodia, Indonesia, Malaysia, Myanmar, Philippines, Thailand, Vietnam (40 assessments) below the minimum wage, or unable to to safeguard against child labor. Likewise, SOUTH ASIA: Bangladesh, India, Pakistan, Sri Lanka (27 assessments) provide records to confirm that minimum factories are evaluated on whether they

EAST ASIA: China, Taiwan (50 assessments) wages were paid. Facilities in Myanmar and maintain a comprehensive system for tracking Vietnam were found to pay regular workers at and recording hours of work, to control EMEA: Egypt, Georgia, Italy, Jordan, Poland, Tunisia, Turkey (12 asssessments) least the minimum wage, but to pay a lower excessive overtime. Factories must also MEXICO, CENTRAL & SOUTH AMERICA: Brazil, El Salvador, Guatemala, Haiti, Mexico, Peru (10 assessments) rate to temporary workers. provide regular training for workers on legal

UNITED STATES: (10 assessments) wages and factory compensation procedures, Employment Relationship: so that greater worker awareness might prove Assessing Policies and Procedures a check on future pay errors.

To better help brands and suppliers address Complete reports on all FLA factory workplace issues like those identified above, assessments, including improvement plans FLA assessors also provide a comprehensive submitted by brands or suppliers, are review of factory policies and procedures, available on the FLA website, under the against the 32 benchmarks related to the “Transparency” and “Workplace Monitoring “Employment Relationship” code element. Reports” tabs. Below, brief summaries Success with these benchmarks indicates present noteworthy findings from the top- that a factory has strong management four countries where the most workers were systems and communications functions in affected by FLA assessments in 2016. On

18 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 19 NOTABLE FEATURES: despite the FLA Workplace Code of Conduct termination and retrenchment or for workplace compensate workers correctly for their Exceptional factory performance mandate to provide all legally required health and safety. Consistent with the lack overtime. In some cases, factories calculated reported by FLA assessors social benefits. In China, all assessments of health and safety procedures, all factories overtime using an outdated minimum wage also include at least one finding under the in Bangladesh were found to have gaps in as base pay; in other cases, factories did not In 2016, assessors noted the active support for the “Freedom of Association” code element due provide the legally required 200 percent employment of disabled or elderly workers by a their management of hazardous chemicals, factory in Mexico, resulting in its recognition by to government restrictions on union activity. and the high majority of facilities were premium wage rate for overtime conducted the Mexican Secretary of Labor for company-wide found to require improvement in evacuation on a scheduled rest day. Furthermore, working commitment to diversity. A factory in Bangladesh VIETNAM: preparedness, machinery safety, fire safety and through a rest day without a compensatory was recognized for paying higher base wages to 18 assessments, first aid training, and use of personal protective day off within any seven-day period violates textile workers, who can legally be compensated 42,139 workers equipment. All facilities required improvement FLA hours-of-work standards, which assessors less than higher-paid garment workers. And Similar to assessments conducted in China, in avoiding excessive hours of work, and in one found in two of the factories with overtime assessors noted two factories in China that provide in Vietnam each assessment includes at facility assessors recorded that not all workers pay issues. In addition, under the “Harassment free-of-charge recreational opportunities to workers, least one freedom of association finding, were earning the minimum wage. or Abuse” element, the FLA code forbids including billiards, ping pong, basketball, and as all recognized unions are required by compulsory body searches or pat downs, weekend film screenings. law to affiliate with the Vietnam General INDONESIA: and requires that all security practices must Confederation of Labor (VGCL). Among the 8 assessments, be gender appropriate and non-intrusive. 18 factories visited by the FLA in Vietnam, 22,245 workers One-fourth of all pat-down violations (3 of the FLA website, greater detail on findings assessors recorded that 13 failed to provide Among the more common widespread 12) recorded worldwide by FLA assessors in these and other countries can be found at workers with one day of rest in every seven, findings in Indonesia, FLA assessors found occurred in Indonesia, second to only the fairlabor.org/2016-findings and half of all facilities required workers that seven of eight factories failed to Philippines in frequency of incidence. to work overtime. Additionally, assessors CHINA: recorded discriminatory recruitment practices Workers sewing clothing in Bangladesh. 47 assessments, in 11 factories, where some male workers 38,695 workers were forced to undergo tattoo checks as a FLA assessors in China reported progress in condition of hire, and some migrant workers employer provision of all five types of social were required to undergo mandatory insurance for the third year in a row. In 2016, health screenings. In five facilities, assessors assessors found 69 percent of workers receiving recorded that not all workers were earning retirement benefits, 66 percent receiving the minimum wage. medical insurance, 75 percent covered by work-related injury insurance, 68 percent BANGLADESH: covered by unemployment insurance, and 72 13 assessments, percent receiving maternity benefits. Twelve 38,730 workers of 47 facilities were providing all five kinds In Bangladesh, assessors flagged several of social insurance for all workers, though workplace communications or policy issues only three of these facilities were found to as requiring improvement under the FLA’s be calculating all benefits from the correct “Employment Relationship” benchmarks. legal contribution base. No facility was For example, no factory was found to have providing full contributions to China’s legally functioning workplace disciplinary procedures mandated Housing Provident Fund, a social that were accurately communicated to workers. program designed to help workers with the Similarly, only 12 of 13 facilities had developed rent, maintenance, or purchase of a home, and communicated adequate procedures for

20 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 21 9 investigations resolved SPECIAL THIRD PARTY COMPLAINTS RESOLVED IN 2016 INVESTIGATIONS: 20,000 workers affected FLA AFFILIATE INVESTIGATION CODE ELEMENT(S) OR FACTORY COUNTRY The FLA Third Party INVOLVED REQUESTED BY PRINCIPLE 175 workers received Complaint Process F&D Hanesbrands El Salvador Union Hours of Work, Compensation back-pay or reinstatement To safeguard against workplace violations Resolved: The factory revised its paystubs to better demonstrate payment of overtime hours, and reviewed its that may go undetected by company or FLA February 2016 production bonus system in dialogue with the union to ensure that targets are achievable during work hours. HANSAE assessment processes, the FLA’s Third Party Complaint process allows any worker, union, Mongru Neckwear Vineyard Vines United States Union Remediation VIETNAM: university, civil society, or other stakeholder to Comprehensive Factory Assessment to Resolved: FLA assessors returned to this previously assessed facility to verify progress on remediation of violations, request an investigation into violations of the FLA February 2016 after the brand ceased its oversight of this process, and shifted its production to another facility. Resolve Repeat Complaints Workplace Code of Conduct or the Principles of In 2016, the FLA received two investigation requests Fair Labor and Responsible Sourcing. Troon adidas Group Nicaragua Union Freedom of Association from FLA-affiliated universities concerned about reports of sub-standard working conditions at a Because violations related to workers’ fundamental Resolved: Improperly dismissed workers were reinstated with back pay, and the factory revised its procedures to supplier to Nike and producer of collegiate goods — March 2016 explicitly forbid termination of workers while they are pregnant, on short-term disability, on vacation, or while rights — such as systemic freedom of association afforded any other legal protection from termination. the 12-factory Hansae complex in Vietnam. violations — may be more difficult to detect After conducting an initial investigation in March, on a single site visit by a workplace assessor, NBG Too PVH Guatemala Union Compensation limited to the scope of the original complaint, the FLA the complaint process is an important tool to determined that the issues in question were broad Resolved: NBG Too had closed its operations while performing unauthorized subcontracting for a PVH licensee. PVH help ensure safe and fair working conditions June 2016 intervention in the case caused the licensee to contribute to the welfare fund for workers who were owed six enough to warrant conducting a comprehensive factory at factories and farms. The process requires weeks of wages, bonuses, severance, and other benefits; the union agreed to this solution. assessment upon receiving the second complaint in companies to develop and implement meaningful July. The FLA conducted a subsequent factory visit in Han Embroidery Zephyr Graf-X Bangladesh University Compensation collaboration with the Worker Rights Consortium (WRC), remediation for each violation confirmed by the and published a complete assessment report (available FLA investigation. Resolved: Zephyr Graf-X and its supplier Han Apparels committed to pay the amount of $72,157 in severance pay to on the FLA website) in December. The assessment July 2016 the affected 168 former workers of Han Embroidery, a Han Apparels subcontractor that abruptly closed. identified 30 specific findings and 177 sub-findings, In 2016, the FLA’s complaint process improved Hugo Boss Izmir Hugo Boss Turkey Union Freedom of Association across all nine elements of the FLA Workplace Code of working conditions for nearly 20,000 workers over Conduct. Some findings had already been addressed a total of nine investigations that led to several by the time the investigation was concluded. For Resolved: This complaint was terminated when the complainants filed legal cases against the factory in local courts July 2016 that supersede the authority of the FLA to help negotiate a solution between the brand, its owned facility, example, factory management organized a training for overall workplace improvements such as revised and the union. supervisors to ensure workers were not being charged pay systems, revised termination systems, and recruitment fees, and took a number of immediate training for workers and management on the right Troon Freedom of Association, adidas Group Nicaragua Union steps to ensure health and safety for workers. to freedom of association. At least 175 workers (Second Investigation) Harassment or Abuse received payment of wages or severance pay owed As the FLA prepared this annual report, Nike and Resolved: During the investigation of this complaint, the Troon factory closed due to a sharp reduction in orders over Hansae continued to work together to remediate other to them or were reinstated in their jobs as a direct December 2016 the course of 2016. Staff at adidas confirmed that Troon workers received payment of their outstanding wages and all severance-related benefits by the end of November 2016. findings. They were working to find an agreeable way result of FLA investigations. to provide back-pay for work conducted during mid-day Fast Retailing, Aydinli Deri Turkey Union Freedom of Association breaks, continuing to investigate the cases of workers The following chart summarizes complaints resolved Hugo Boss who may have been fired for becoming pregnant, and by the FLA in 2016. Detailed reports of each testing new cooling systems to control for excessive Resolved: The investigation was unable to confirm that workers had resigned from the union under pressure from investigation are linked from a complaint tracking heat. Updates on their progress can be found among December 2016 factory management. In response to the complaint, factory management conducted a training on freedom of chart on the FLA website at www.fairlabor.org/ association for workers and managers, and released a statement recognizing workers’ rights to freedom of Nike’s assessment reports on the FLA website. association and collective bargaining. third-party-complaint-tracking-chart.

22 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 23 In Argentina, Brazil, and Hungary, assessors child labor and health and safety protections primarily visited farms with formal labor for workers. Awareness of minimum-wage structures, where hired workers are covered and hours-of-work requirements remained by employment contracts and workplace low, however, and assessors reported that protections. In Thailand, India, and the Ivory some workers — primarily women — were Coast, assessors primarily encountered still not earning the minimum wage, a small-holder farms or cooperative farm violation that FLA assessors find repeatedly structures, with fewer formal employment in agricultural supply chains in some states in systems and workplace protections, and India, including Andhra Pradesh, Karnataka, higher proportions of seasonal, migrant, or and Maharashtra (see sidebar, p. 26). family labor involved in production. In Turkey, assessors visited both formal and informal Ivory Coast, cocoa: Returning to workplaces. The FLA Workplace Code of three cocoa-farming communities Conduct applies in all workplace settings. previously visited in 2013, the FLA confirmed the successful remediation 2016 Verification of Company of the two child labor cases reported on the Remediation previous visit, and encountered no current child workers on any of the farms visited. Among the 42 farm-level assessments completed in 2016, the FLA conducted 2016 AGRICULTURAL SUPPLY CHAIN ASSESSMENTS PROTECTING WORKERS IN five verification visits, returning to previously assessed villages or farms Argentina 2 assessments AGRICULTURAL SUPPLY CHAINS to review and report on progress in correcting past violations. Assessors Brazil 2 assessments FLA Monitoring and Verification conducted one verification in Andhra Hungary 2 assessments Pradesh, in India, visiting a total of 4 assessments, Following the FLA’s 2015 adoption of enhanced crops including hot peppers, sweet peppers, 28 rice farms; two verifications in the India 1 verification monitoring benchmarks for agricultural squash, soybeans, sunflowers, and corn. Guitry region of Ivory Coast, visiting a 18 assessments, Ivory Coast assessments, in 2016 the FLA conducted total of 60 cocoa producers; and two 2 verifications comprehensive training for all assessors who Diversity of Farms Visited by verifications in the Düzce and Sakarya Thailand 3 assessments would be visiting farms over the course of the FLA Assessors regions of Turkey, visiting a total of 30 6 assessments, year. The subsequent 2016 farm assessments hazelnut gardens. Key findings from Turkey 2 verifications were the first to adhere to these new benchmark The enhanced monitoring benchmarks allow these verification visits include: TOTAL 42 standards, resulting in stronger and more assessors to adapt their inspections to both detailed reporting on issues facing farmworkers. formal and informal working environments, India, rice: Comparing Farms visited 680 producing reports that help companies 2016 findings with the Total workers 3790 The FLA conducted these assessments at design remedial solutions to code violations results of 2013 farm visits, Young workers farms in seven countries, visiting producers of that are applicable to the workplace setting assessors observed significant progress 413 (15 – 18) cocoa, hazelnuts, vegetable seeds, and field where they have occurred. in worker and farmer awareness of Child workers 105 the Code of Conduct requirements (younger than 15) ABOVE: In 2016, the FLA assessed working conditions at farms in seven countries, visiting producers of cocoa, hazelnuts, governing conditions at the farms, vegetable seeds, and field crops including hot peppers, sweet peppers, squash, soybeans, sunflowers, and corn. Seen Workers 2090 here, hot peppers in India. especially related to prohibitions on interviewed

24 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 25 Turkey, AVERAGE CODE OF CONDUCT VIOLATIONS PER FARM, BY COUNTRY hazelnuts: Assessors Argentina confirmed a continued need for improvement in Brazil

a number of issues facing Hungary migrant workers in hazelnut 15 India supply chains, after comparing results from Ivory Coast 2014 and 2016 assessments. Thailand 12 Migrant workers must Turkey often work longer hours for less money than local workers, sometimes without 9 An FLA assessor conducts a worker interview at a farm one rest day in seven, resulting in several in Thailand. violations of the FLA Workplace Code of Conduct governing compensation, hours of 6 The visit also confirmed cooperatives’ progress work, and discrimination. Although assessors in developing strong health-and-safety continued to report instances of child labor,

policies and procedures, and in conducting they cited company progress in establishing 3 trainings to communicate this information and implementing child labor prevention and to workers. Assessors reported that record remediation systems. keeping at cocoa cooperatives still required 0 improvement to help assessors verify proper Find complete verification reports, and full Employment Non-discrimination Harassment or Forced Labor Child Labor Freedom of Health and Hours of Compensation payment of workers’ wages, and full payment reports of all FLA agricultural assessments at Relationship Abuse Association Safety Work of cocoa-certification premiums to farmers. fairlabor.org.

TACKLING SYSTEMIC ISSUES IN AGRICULTURE supplier farms in Andhra Pradesh and Maharashtra to MIGRANT LABOR ISSUES: In addition to internal migrant raise wages levels. labor discrimination in Turkey (see above left, p. 26), Despite significant progress in recent years raising farmer deduct their commission. In Thailand, FLA assessors in 2016 FLA assessors found migrant workers from and worker awareness of the labor standards companies encounter the challenge that minimum wages are not CHILD LABOR: In general, FLA assessors find instances Myanmar facing special challenges on farms in Thailand. must uphold at the farm level, FLA-affiliated agricultural defined for the agriculture sector, and that workers are of child labor in agricultural supply chains more frequently These workers often face health and safety issues, such companies continue to encounter some repeated earning around half the minimum wage for other sectors. than in inspections of tier-one manufacturing facilities, as lack of access to protective equipment and exposure systemic issues that require special efforts to improve. And in areas of rural India, while the minimum wage is particularly in cocoa supply chains in Ivory Coast and to hazardous chemicals, and no instructional materials By establishing strategic projects with the FLA, working defined by law, assessors regularly find that prevailing hazelnut supply chains in Turkey. However, assessors have available in their native language. Farms often fail to verify with local civil society and government stakeholders, and agricultural wages across a given region fall below legal seen a clear commitment to reducing these instances, ages of young workers, leading to the risk of child labor enhancing the efforts of their own social compliance limits. To work toward correcting this, in January 2016 the with the progressive expansion of Nestlé’s Child Labor among the migrant Burmese population. Often these programs, companies are working to tackle these issues. FLA and Syngenta held a multi-stakeholder consultation in Monitoring and Remediation System (CLMRS) in Ivory workers are not permitted legally to work in Thailand and Hyderabad with a group of peer companies, civil society, Coast, and similar efforts by Nestlé, Olam, and Balsu in therefore lack any legal recourse for any violations they MINIMUM WAGES: In some cases, especially in Turkey, and government to discuss pilot projects for ensuring Turkey. In 2016, Nestlé reported that its CLMRS system face. Furthermore, migrant workers sometimes accept FLA assessors have determined that while farmers may minimum wages. Later in 2016, in cooperation with had extended to 69 cooperatives, and FLA assessors cash advancements to cover moving costs, or pay labor be paying at least minimum wages, workers’ take-home the FLA and Glocal Research & Consultancy Services, confirmed that they observed no child labor in cooperatives recruiters to help them find employment, resulting in risks pay falls below the legal minimum after labor contractors Syngenta began planning for 2017 interventions in select covered by this system. of forced labor violations.

26 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 27 TRACING SUPPLY CHAINS BEYOND THE FIRST TIER Improving Conditions at Farms and Informal Workplaces

Garment and footwear manufacturing are complex processes, “In the coming years with workers facing diverse labor-rights environments at each we hope to see the step of production. Socially responsible brands understand that their commitment to human rights must extend throughout their results on the ground entire supply chains — that no worker should be exploited along with fewer children a product’s journey from its original raw materials, through the working in the cotton various levels of processing and production, and into the hands supply chain of consumers. and more children To help brands enact their commitments to fair supply chains — going to school.” and to help governments, civil society, and consumers better – Gerard Oonk, understand the issues that need to be addressed — the FLA Senior Advocacy Officer, collaborates on research projects that examine working Stop Child Labour Coalition conditions prior to the final assembly of brands’ products. In 2016, the FLA and its project partners in business and civil A young worker pauses while picking cotton in Şanlıurfa in southeastern Turkey. Project staff reported that the worker’s society completed work on two rigorous studies on conditions father owns this farm and she will return to school after the harvest is complete. in workplaces supplying raw materials — cotton and leather — for the apparel and footwear industries. child labor risks in garment supply chains. spinning mills (tier two), ginning mills (tier The FLA intends these projects as catalysts to help multiple Project results will also help companies meet three), and cotton farms (tier four). stakeholders working together devise innovative strategies for their goals under the Dutch Agreement on improving conditions for all the workers whose labor plays a a Sustainable Garment and Textile Sector, a In the final tier — the cotton farms — part companies’ success. voluntary social responsibility initiative that researchers documented instances of child six of the seven companies have signed. labor, but these farms were not directly linked Cotton and Garment Supply Chains in Turkey to cotton supplied for garments sold in the The pilot team found that comprehensive Netherlands by the participating brands. Over the course of 2016, the FLA and the Development supply chain tracing in this sector was Visiting five medium-sized cotton farms on the Workshop Cooperative, a civil society organization based in challenging, with traceability breakdowns at Syrian border, the team encountered Syrian Turkey, implemented a pilot project to trace the garment and deeper levels of the supply chain, where it is refugee children and Turkish children working cotton supply chains of seven multinational companies sourcing common for companies to interact through alongside relatives to increase family income. from Turkey and doing business in the Netherlands. agents, keep few records, and maintain no The team found that child labor was most direct business relationships. Despite this, the prevalent in farms with little mechanization, The Stop Child Labour Coalition, UNICEF Netherlands, and researchers were able to document working where cotton is picked by hand, and where the seven garment companies (including FLA-affiliated PVH) conditions through four supply-chain tiers — weak regulation and lack of government initiated the project to help companies identify and prevent garment manufacturers (tier one), textile and oversight exacerbate the problem.

28 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 29 Overall, the project team recommended The goals of the project were to measure the children begin to work in the footwear further efforts between brands and suppliers prevalence of child labor in this sector, detect industry between the ages of eight and 14. to collaborate on supply chain tracing where child labor is used most often, and The project team found that while boys may and overcome the traceability challenges determine root causes of the instances of travel to informal workshops to make shoes, experienced on this project, along with child labor uncovered. Three locally sourcing most girls help with stitching projects brought collective advocacy for governmental footwear brands and one retailer participated into the home. Three-fifths of those surveyed solutions at deeper supply chain levels. Full in the project, supporting supply-chain research reported poverty as the root cause of child recommendations appear in the project early in the process with Agra-based exporters labor, explaining that parents alone are not report at www.fairlabor.org/cotton-2016. and committing to participate in a project-end able to earn enough from making footwear HAZELNUT SUPPLY meeting in 2017 to discuss next steps. to adequately provide for their families. Leather and Footwear Supply Chains CHAINS IN TURKEY in India In May, the project team conducted an in-depth In August, the team examined risks of The FLA’s long-term project on strategies to mitigate survey for 200 households across four Agra child labor in ten tier-one suppliers. All ten child and forced labor in the hazelnut supply chain Also in 2016, the FLA and implementing shoe-manufacturing communities and hosted suppliers stated that the minimum age to in Turkey, funded by the US Department of Labor, partner iMentor continued work on a second eight focus group discussions — two in each be hired in their facilities was 18. However, continued in 2016, with a first round of site visits to project commissioned by the Stop Child community, one for child workers, and one for nine of ten also confirmed that the majority 28 hazelnut-producing communities covering 1000 hazelnut gardens participating in the project. Labour Coalition — an investigation of the use adults. Of the total school-age children in the of their workforce is composed of informal, of child labor in the footwear industry in the families surveyed, just over half were attending piece-rate workers, rather than regular During the year, the project team completed a baseline city of Agra, India. school; respondents reported that most hired workers, and the team could not survey of partner companies’ capacities to implement independently confirm the factories’ age- USDA guidelines on child and forced labor, and profiled verification of piece-rate workers. Half worker demographics during the harvest season at Half of factories surveyed by FLA project staff in Agra, in northern India, indicated some level of subcontracting, the farms supplying to FLA affiliates Nestlé, Olam, including to household workshops and other informal workplaces. of the factories indicated some level of and Balsu. The survey results and community profiles subcontracting, such as the subcontracting comprise a baseline report, against which the success of of hand-stitching work to households. the project will be measured. During initial site visits, a local civil society partner on the project, the Young Life While this sub-contracting represents a risk Foundation (Genç Hayat), also began to test intervention to international companies sourcing from Agra, strategies for child labor cases found, such as raising the project did not document any connections awareness among migrant hazelnut pickers about local between child labor and international brands. educational opportunities for their children and piloting The project team did find child labor to be summer schools for the children of the workers’ families.

widespread in the informal sector producing The project will return to the hazelnut gardens for mainly for the domestic market. The project the 2017 harvest season to build on the previous team recommended that any brands sourcing year’s remediation report on conditions and measure from Agra closely assess their supply chains improvement. When the project concludes in 2018, the for the use of child labor in factories, among FLA will release guidance for agricultural companies piece-rate workers, or among subcontracted based on lessons-learned in Turkey, to help any company informal workplaces. Brands should foster implement USDA guidelines on child and forced labor across its supply chains. direct collaboration with their supplier factories

to build trust and clearly communicate brand ABOVE: Following baseline reporting of conditions in hazelnut expectations about the use of child labor. Full gardens in 2016, the FLA project began piloting intervention strategies, such as referring working parents to local recommendations appear in the project education centers and other safe spaces for their children. report at www.fairlabor.org/leather-2016.

30 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 31 overview on topics like minimum working age and minimum ADVOCACY AND COLLABORATION TO wage, the Turkish social security system, the right to refuse “At our meeting in ADVANCE WORKERS’ RIGHTS: unsafe working conditions, and other aspects of national Istanbul, brands, suppliers, labor law. The materials were distributed through Turkish government, and civil Protecting Refugees, Women, and Children in Supply Chains Ministry of Labor offices in many manufacturing cities society came together to across the country. Throughout 2016, the FLA continued its supported by the FLA and its affiliates and collaborate on decent work work on several productive collaborations allies), the FLA collaborated throughout the In October, the FLA followed up with distribution of guidance for refugees in Turkey. with civil society organizations, governments, year on several initiatives to safeguard against for employers (developed in collaboration with the Ministry Working with the FLA companies, and others working to protect the exploitation of Syrian refugees working of Labor, the UN High Commission for Refugees [UNHCR], has been a great example vulnerable populations in supply chains, in Turkey. and adidas) on the risk of child labor in the Turkish ready- of how multi-stakeholder producing guidance on these issues for made garment industry, a risk heightened by changes to the FLA-affiliated companies. Together with FLA brands sourcing from labor market in Turkey due to a growing refugee population. engagement can succeed.” Turkey, the Ethical Trading Initiative, and These materials included guidance for suppliers on the —Damla Taskin, Helping Refugees Gain Access to the Business Social Compliance Initiative, employment of young workers (older than 15 and younger UN High Commission on Work in Turkey in April the FLA distributed guidance — in than 18), and the penalties associated with various violations Refugees Turkish and Arabic — for suppliers seeking of national law related to child labor and young workers. Following the January 2016 announcement of to help refugees obtain legal employment. a new work permit option for Syrians seeking The guidance documents explain the steps ABOVE: The FLA and UN High Commission on Refugees brought together a diversity of perspectives to strategize how to employment in Turkey (a reform sought and to obtain work permits, and provide an better integrate Syrian refugees into the labor market in Turkey.

32 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 33 ISSUE BRIEFS: Finally, in December, the FLA and the UNHCR jointly hosted a roundtable FLA Guidance on meeting in Istanbul, to discuss the Global Supply Chain Issues challenges and opportunities of integrating

The FLA publishes regular issue briefs for affiliated Syrian refugees into the Turkish labor companies on conditions in specific countries that market. The roundtable attracted 120 might pose special challenges in complying with the FLA participants from international brands Workplace Code of Conduct. Among the issues covered sourcing from Turkey, local manufacturers, in 2016: international and local trade unions,

1) Minimum Wage Setting in non-governmental organizations Indonesia – In February 2016, workers (NGOs), workers’ rights organizations, in Indonesia engaged in strikes and municipalities, and representatives from demonstrations to protest new limits on workers’ partic- Turkish Ministries of Labor and Social ipation in national minimum wage-setting procedures. Security and the Interior. A refugee The FLA explained the details of the government’s working for a local supplier of an FLA- changes, and reiterated brands’ responsibility to protect affiliated brand shared his story as part of workers’ collective bargaining rights and to pursue fair the meeting, and roundtable participants compensation, even where national minimum-wage-set- identified several high-priority steps for ting mechanisms may fall short. brands sourcing from Turkey, and others, 2) Limit on Temporary Workers in to take to help more Syrian refugees find China – To address excessive use of pre- decent work in the garment industry. carious labor, as of March 1, 2016, the Chinese government mandated that temporary workers Women participating in the FLA’s gender equality dialogues received copies of the code of conduct outlining the The complete list of priorities and a full labor-rights standards Nestlé requires of its cocoa suppliers. must no longer exceed 10 percent of the total employ- report from the meeting appear on the ees at any workplace. Factory assessors report whenever FLA website at fairlabor.org/Dec-2016- over-reliance on temporary work results in other Code of Conduct violations, such as discriminatory wages, or refugees. community, helping to lift families out of side-businesses raising pigs, sheep, goats, lack of social benefits. As of March 2016, brands must poverty and to curtail the use of child labor. and fish; farming field crops; and trading in also evaluate for factory compliance with the new legally Raising the Status of FLA staff based in Abidjan partnered with Dr. apparel, footwear, and prepared food. mandated 10 percent cap. Women in Ivory Coast Linda Mayoux, a globally recognized expert on economic development and women’s In addition, project staff established and 3) Independence of Trade Unions in In 2016, the FLA completed work on a two- empowerment, to promote equality and implemented two “dialogue platforms” — one Egypt – In March of 2016, the Ministry of the Interior in Egypt took actions that year project designed to empower women economic independence for women in the in each community — designed to encourage many interpreted as revoking the right of independent and make progress toward gender equality Ivorian communities of Yaokouakoukro and gender equality in families. FLA assessments trade unions to negotiate and publish collective bargain- in two cocoa-producing communities in Zaranou. have found that often when families work ing agreements (CBAs). The FLA urged brands sourcing Nestlé’s supply chain in Ivory Coast. together to harvest cocoa, women’s work may from Egypt to ask their suppliers to honor all CBAs The project team in 2016 reported on the go unrecognized, unreported, or insufficiently negotiated by any unions representing workers in their More than five years of reporting on achievements of local women in maintaining compensated, with men controlling the factories, including those unaffiliated with the state-con- working conditions at cocoa farms and small-scale entrepreneurial enterprises money the family earns. The dialogue trolled Egyptian Trade Union Federation (ETUF). cooperatives in the Ivory Coast have developed with project support in 2015 to platforms facilitated conversations within Find all FLA issue briefs online at demonstrated to FLA assessors how supplement families’ cocoa income. Over households about how to overcome the www.fairlabor.org/global-issues/issue-briefs. improving conditions for women can the course of the project, women in cocoa- constraints of gender stereotypes and norms, result in positive change throughout the producing families have developed successful and how to achieve greater equality.

34 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 35 This work included strong collaborations Protecting Children in India and with local women’s associations in each Bangladesh community, helping them to strengthen their functions and to raise awareness about After passage of a new child labor law in grievance channels women can turn to within India in the summer of 2016, civil society their communities, when problems arise. organizations raised strong concerns that Nestlé used the partnership with these local child labor – especially in industries like associations to distribute information about garment and footwear production and labor standards to women working in cocoa, agriculture – would be likely to increase due especially highlighting the importance of to at least three loopholes that would allow protecting women’s health and safety during more children legally to work. the cocoa harvest. Prior to the law’s passage, the FLA advocated Based on the project’s results, the World for the government of India to maintain Cocoa Foundation (WCF) invited the FLA to its existing protections against child labor; facilitate community-based workshops for afterward, the FLA published guidance for women in five additional cocoa-producing how affiliated companies can guard against communities in Ivory Coast in 2017, and to the heightened risk of child labor in their train WCF brand partners to implement a supply chains. Especially when suppliers are similar approach in their field interventions. known to subcontract production to informal or family-based workplaces, the FLA recommends that brands strengthen their assessment mechanisms, by monitoring Advocating for a Fair Changes to India’s child labor law have increased the likelihood of children being employed in informal workplaces. Minimum Wage in Georgia supply chain tiers beyond the The FLA has provided guidance to companies and is working with others on collaborative solutions. direct supplier and bolstering age verification. As a safeguard, brands Following the FLA’s first-ever factory assessment in the Republic of Georgia, the FLA hosted a multi-stakeholder should also develop procedures In neighboring Bangladesh, the FLA also hours so that working parents have more meeting in December 2016 in Tbilisi to discuss the issue of for managing child labor cases, collaborated in 2016 with UNICEF and the time with their children, providing breast- private sector minimum wages in Georgia. The current mini- establishing local civil society Centre for Child Rights & Corporate Social feeding facilities for working mothers, mum, set in the 1990s, is so low as to be meaningless for contacts for company managers to Responsibility (CCRCSR) on a program and support for fair compensation and workers, and the FLA brought together apparel suppliers, the consult for assistance in remediating to implement the Children’s Rights and benefits. Georgian Trade Union Congress, government representatives, any cases found. Business Principles (CRBP) in apparel the International Labour Organization, brands sourcing from factories. In this context, protecting The FLA and CCRCSR developed assessment Georgia, and other stakeholders to discuss a way forward on To develop a more robust and “children’s rights” encompasses more modules, progress indicators, and training meaningful and inclusive minimum wage setting for the pri- coordinated response to the new than ensuring that children are not working materials on how to maintain a child-friendly vate sector in general and the garment industry in particular. FLA-affiliated companies sourcing from Georgia continue to law, the FLA began preparations in the factories, but also that working workplace. With UNICEF’s support, a local pursue their fair compensation goals, working with their sup- to host a 2017 roundtable meeting conditions for parents and pregnant women service provider provided no-cost training pliers to establish decent wages in the absence of meaning- in Delhi with 35 civil society will support a decent life for their children. based on these materials ten garment ful national minimum. Find more on the Georgia minimum organizations from different parts of Factory-level child-friendly policies covered suppliers in Dhaka seeking to improve wage at www.fairlabor.org/georgia-minimum-wage. India all working to protect children by the CRBP include the provision of working conditions for parents and improve from workplace exploitation. on-site childcare, limiting excessive working the lives of children.

38 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 39 FINANCIAL REVIEW

In 2016, the Fair Labor Association received just over $8 million in revenues, including $730,000 2016 AUDITED REVENUES: $8,007,716 2016 AUDITED EXPENDITURES: $7,736,818 from a $4.87 million cooperative agreement awarded by the Department of Labor (see p. 31). Assessment fees fully fund the corresponding expenditures related to performing assessments. $328,030 Affiliate dues, strategic project fees, and grant revenue provide additional funding for FLA $1,158,251 $5,257,390 $2,210,026 $3,693,431 programs and supporting services.

FAIR LABOR ASSOCIATIONCONSILODATED STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS FOR THE YEAR ENDING DECEMBER 31, 2016 WITH SUMMARIZED FINANCIAL INFORMATION FOR 2015 $1,264,045 Unrestricted

2016 2015 $337,955

REVENUE AND SUPPORT

Affiliate fees $3,983,144 $4,457,383

University affiliation fees 1,274,246 1,035,449 $1,495,406 Assessments fees 647,386 788,154

Monitoring management fees 616,659 698,410 Affiliate Dues Accountability and University Programs Redirects 154,527 245,021 Assessment & Monitoring Fees Fair Labor Association Europe, Hong Kong, & China Special projects 274,893 226,576 Redirects, Special Projects & Grants Third Party Complaints & CSO Engagements Contribuited services 182,302 184,407 Other Supporting Services Rental income 111,678 98,975 Grants 728,831 79,478 Escrow forgiveness — 45,833 Workshop fees 22,075 39,957 FAIR LABOR ASSOCIATION CONSILODATED STATEMENT OF FINANCIAL POSTION AS OF DECEMBER 31, 2016 Other income 2,016 22,272 2016 2015 Investment income 9,959 969 ASSETS TOTAL REVENUE AND SUPPORT $8,007,716 $7,922,884 Cash and cash equivalents $5,119,524 $5,033,497 EXPENSES Investments 362,140 354,964 Program Services: Accounts receivable, net of allowance for doubt accounts of Accountability $3,151,596 $2,628,613 819,649 595,340 $68,920 for 2016 and 2015, respectively University 541,835 451,922 Prepaid expenses 94,235 105,725 Fair Labor Association — Europe 811,170 676,563 Fixed assets, net of accumulated depreciation and amortization of 59,083 351,462 Fair Labor Association — Hong Kong and Fair Labor Association — China 684,236 570,692 $1,512,800 and $1,280.854 for 2016 and 2015 Third-Party Complaint 142,881 119,171 Other assets 61,890 51,988 CSO Engagement 195,074 162,703 TOTAL ASSETS $6,516,521 $6,492,976 Total program services $5,526,792 $4,609,664 LIABILITIES Supporting Services: Accounts payble and accrued expenses $527,890 $684,629 Management and General 2,210,026 1,843,289 Deferred revenue 813,934 912,672 TOTAL EXPENSES $7,736,818 $6,452,953 Agency payable 1,924,585 1,878,064 Change in net assets before other item 270,898 1,469,658 Capital leases liability 28,479 12,516 OTHER ITEM Subtenant deposit payable 15,889 15,889 Foreign currency translation loss (6,992) (69,970) Deferred rent 237,218 284,496 Change in net assets $263,906 $1,399,961 TOTAL LIABILITIES $3,547,995 $3,788,266 Net assets at beginning of year $2,704,710 $1,304,749 Net Assets — Unrestricted $2,968,616 $2,704,710 NET ASSETS AT END OF YEAR $2,968,616 $2,704,710 TOTAL LIABILITIES AND NET ASSETS $6,516,611 $6,492,976

38 | FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT FAIR LABOR ASSOCIATION ANNUAL PUBLIC REPORT | 39 JOIN THE FAIR LABOR ASSOCIATION IN IMPROVING WORKERS'LIVES WORLDWIDE. To learn more about affiliating with the FLA, visit www.fairlabor.org or contact [email protected].

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