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Jakarta Post

Local Nike shoe factory scrutinized for mass layoffs amid COVID-19

  • Made Anthony Iswara
    Made Anthony Iswara

    The Jakarta Post

Jakarta   /   Tue, August 25, 2020   /   12:31 pm
Local Nike shoe factory scrutinized for mass layoffs amid COVID-19 A man wearing a face mask passes a Nike store in Beijing on March 2, as the country is hit by the COVID-19 outbreak. (Reuters/Thomas Peter)

The reputation that sports giant Nike has gained from taking a labor-friendly stance in navigating the pandemic hangs in the balance, as a labor union complains of mass layoffs, salary cuts and underhanded politicking in one of the world-famous brand’s manufacturing partners in Indonesia.

Indonesian Labor Association Movement (GSBI) secretary-general Emelia Yanti Siahaan criticized PT Victory Ching Luh for reducing workdays and slashing the salaries of over 17,000 workers since July despite opposition from the unions.

PT Victory Ching Luh is a Taiwan-based shoe factory in Tangerang, Banten, that has solely produced footwear for Nike since 2018. GSBI and four other labor unions had rejected the company’s recent pay cuts, Emelia said.

“The off-days are not what workers want, but that’s the company’s decision. So [money lost from] salary cuts due to the off-days should be given back to workers,” she said recently, noting that Nike had yet to respond to a letter the union sent to it questioning the matter.

She also condemned the lack of the union’s involvement in the layoffs; the company told unions in early April that it would let go 564 workers who were still under probation.

It then told them again that it would lay off some 4,988 workers on April 21 who worked for less than a year, which made up less than a quarter of Victory Ching Luh’s 23,000 workers at the time, Emelia said.

Now, the management had threatened to lay off a further 7,000 workers if the labor unions still refuse the pay cut.

PT Victory Ching Luh finally responded in a letter on Aug. 31 stating that it had “taken a difficult decision and undergone organization restructuring and working-days adjustment to ensure the company’s business sustainability”, and that the steps taken “were carried out carefully with thoughtful consideration”.

“We coordinated [...] with all the company’s trade unions and consulted with relevant government agencies [...] to ensure compliance with Indonesian labor regulation and the company’s Collective Bargain Agreement set by the bipartite committee,” the company said in a statement issued by its strategy and communication department.

“We responded openly to all aspirations from employees conveyed through official and relevant platforms.”

Among the points the company raised in its bipartite agreement with the unions is that it would “indicate in employees' reference letters that the termination was due to the impact of COVID-19”.

Yet even with COVID-19 as the reason for its decisions, Emelia said the company had yet to assert that its losses were caused by order payment cancellations from Nike, which would constitute a violation of its past commitments to pay in full both completed orders and those in production.

“Don’t put the burden of COVID-19’s impact solely on the shoulders of workers,” Emelia said.

The pandemic, which is still spreading like wildfire in Indonesia, has taken not just lives but also the earnings of millions of workers.

In Tangerang, local unions attempted to get workers to sign a petition to protest salary cuts, but they were met with legal intimidation and signatories were threatened with termination warning notices (SP3), the GSBI official said.

The Tangerang factory’s head of the labor union coalition, Suwandi, confirmed that intimidation had taken place.

“The [factory’s] industrial employee relations staffer would sit in the union’s secretariat offices from morning until afternoon, and would hand out SP3s whenever [union] leaders tried to get their members to sign the petition,” he told The Jakarta Post last weekend.

Suwandi said that Victory Ching Luh has not been transparent about the condition of its orders, even as the company recruits new employees, procures new machines and purchases land in Cirebon, West Java.

He claimed that the firm did not consult with the unions when it laid off workers and had merely informed them of the decision. Victory Ching Luh insists it had reached an agreement with one of the five unions on the basis that it employed the majority of workers.

The latest union report has put a spotlight on the treatment of Nike suppliers toward its workers.

The brand came under heavy criticism in the early 2000s for its use of overseas “sweatshops” and child labor, which prompted it to take steps to improve conditions in its thousands of overseas factories.

Nike Global Communications wrote to the Post last Wednesday saying it was working with its suppliers to support their efforts to respond to the COVID-19 situation. It said it expected them to consider their employees’ health and livelihoods while complying with legal requirements and Nike’s code of conduct as they navigated the current circumstances.

“The evolving and challenging marketplace dynamics mean that Nike and our suppliers must make some difficult decisions in the short term, as we work together to mitigate longer-term impacts and develop sustained viability for their businesses and employees,” the global company wrote.

Nike added that it would continue to place orders while taking into account the impacts of market dynamics. It would also continue to pay in full for finished products from all its suppliers globally, while honoring previously agreed payment terms for products in production.

“In the case of canceled orders, our policies and agreements with suppliers are, and have always been, that Nike will pay the appropriate amount of the order, depending on the stage of production as communicated by our supplier, to enable the supplier to recover costs associated with the canceled order,” it wrote.

Nike also mentioned that it was working with industry and other global stakeholders to develop “broad-based approaches” to help address the current situation.

Responding to the issue of layoffs, Indonesian Footwear Association (Aprisindo) executive director Firman Bakri said on Aug. 14 that past layoffs affected only some of the workers in the factory.

“There are many others that are still being kept [as employees]. Hopefully [Victory Chingluh] can recover soon and recruit their [former] employees again,” he said.

Editor's Note: Article updated to include response from PT Victory Ching Luh and some minor corrections.