The National Labor Committee

February 4, 2010

Chi Fung, S.A. de C.V.

Carretera Troncal del Norte Km. 12 ½

Apopa, San Salvador

El Salvador

Phone: (503) 2216-1060

Fax: (503) 2216-6048

Taiwanese-owned: Mr. Wen Ling Tsao

[email protected]

Workforce: Approximately 550 workers, 80 percent of whom are women.

NFL jerseys have been sewn under illegal sweatshop conditions at the Chi Fung factory in San Salvador for at least the last four years. In 2006 and 2007, it appears that the NFL jerseys being sewn at Chi Fung were a subcontract order from another garment factory called Partex. In 2008 and 2009, it is unclear if Reebok placed the orders for its exclusive line of NFL jerseys with Chi Fung directly, or whether production continued under subcontract agreements. At any rate, according to Chi Fung’s website, they are an “approved Reebok producer.”

Payton Manning Reebok NFL jersey which was produced at Chi Fung and sold at Dick’s Sporting Goods.

In the year 2000, Reebok agreed to pay the NFL $250 million over the next ten years to be the exclusive apparel distributor for the National Football League. However, the NFL-Reebok mega-deal has done nothing to lift workers across the developing world who sew NFL jerseys out of poverty.

In 2008 and 2009, two production lines at Chi Fung were dedicated to NFL jerseys. The workers could easily rattle off the names of the team jerseys they have sewn—Colts, Vikings, Cowboys, Patriots, Ravens, Jets, Steelers, Giants, Green Bay Packers, Dolphins, San Francisco 49ers, Panthers and Raiders. Most of the jerseys they sewed carried the names and numbers of NFL star players such as Peyton Manning, Number 18, of the Superbowl-bound Indianapolis Colts.

In fact, the workers did not have much time to think about the players whose jerseys they were sewing. An assembly line of 28 workers had a mandatory production goal of completing 2,300 NFL jerseys in the regular nine-hour shift—from 7:00 a.m. to 5:00 p.m. with an hour off (a 20-minute morning break and 40 minutes for lunch). The production goal was 255 jerseys per hour, which meant that each of the 28 workers, in effect, had to sew nine jerseys per hour, or one jersey every 6.6 minutes. The workers were paid just 10 cents for each $80 Peyton Manning NFL jersey they sewed. This means that their wages amounted to just a little more than one-tenth of one percent of the jerseys’ retail price!

[At the Dick’s Sporting Goods store in Carmel, Indiana—about 30 minutes north of downtown Indianapolis—there were at least 230 screen printed Colts jerseys, about a quarter of which were sewn in El Salvador. The labels and style number (7009A 07) of the NFL jerseys exactly matched labels smuggled out of the Chi Fung factory. The remainder of the NFL jerseys were made in Guatemala and Honduras.]

The regular work week in El Salvador is 44 hours, with 7:00 a.m. to 5:00 p.m. shifts Monday through Thursday and a 7:00 a.m. to 4:00 p.m. shift on Friday. This puts the workers at the factory 49 hours a week, while toiling 44 hours after taking into account the one hour a day of breaktime.

However, for the NFL workers at Chi Fung, the mandatory workweek is actually 61 to 65 hours. Not only is all overtime obligatory, it is unpaid!

NFL/Chi Fung Actual Workweek

Monday – Thursday 7:00 a.m. – 7:00 p.m. Friday 7:00 a.m. – 4:00 p.m. Saturday 8:00 a.m. – 12:00 noon or 4:00 p.m

The workers are at the factory 61 to 65 hours a week, while actually working 56 to 59 hours, including 12 to 15 hours of obligatory overtime, which is unpaid. Management tells the workers that they will receive a $3.00 daily incentive bonus if they reach their assigned production target, but even working from 7:00 a.m. to 7:00 p.m. the workers can only reach the goal about half the time.

Under this scheme, the workers are routinely cheated of $10.44 each week, or 18 percent of the wages legally due them. While $10.44 might not seem like too big a deal, for the workers, this is the equivalent of being cheated of 14 ½ hours’ wages each week!

Supervisors try to make it seem that working unpaid overtime is actually to the workers’ advantage. “Working on Saturday [without pay] benefits you,” supervisors explain, “because you can advance your work for the next week and therefore earn more money.”

The base wage in El Salvador’s garment factories is 72 cents an hour and overtime is supposed to be paid as double time, or $1.44. In El Salvador, as in much of Latin America, workers can receive a “7th Day” attendance bonus. If they do not miss a day and are not late, the workers will be paid the minimum wage for eight hours a day, seven days a week.

Garment Workers’ Wages in El Salvador

(Including 7th Day Attendance Bonus)

72 cents an hour (base wage) / 92 cents an hour with Attendance Bonus $5.76 a day (8 hours) $40.48 a week (44 hours) $173.70 a month $2,084.40 a year

With the attendance bonus, workers can earn 92 cents an hour. The workers also receive annual vacation pay of $26.05 and (for workers with one to three years employment) a Christmas bonus of $57.76.

For the average 57 ½ hour workweek, including 13 ½ hours of mandatory overtime, the NFL workers should have been paid $59.76, not the $49.32 they received. They are being shortchanged of 18 percent of the wages legally due them.

“We always knew they were cheating us,” one woman said, “We knew they weren’t paying overtime. But we don’t have any other choice. At least we are sure of earning the minimum wage, while we were hearing that a lot of maquila factories were closing. So where could we go? Many got desperate and quit—that’s true—but many of us were trapped without any alternatives.”

Sometimes supervisors told the workers that they could not pay overtime because the factory did not have enough work orders and were short on money.

For four years, from 2006 until September, 2009, in broad daylight, the Chi Fung factory cheated the NFL workers of their legal overtime wages.

It is even worse than it seems. The legal minimum wage in El Salvador’s garment factories does not even come close to meeting basic subsistence-level needs. The highly respected independent Salvadoran non-governmental organization, Center for Consumers Defense (CDC), has found that garment workers wages meet just 23 percent of the basic subsistence needs for food, housing, health care and clothing for an average sized family (3.94 people).

International Labor Organization (ILO) data also show that real wages in the export garment sector in El Salvador have actually fallen by eight percent since 2000. The workers are actually going backward.

The major quarter-billion dollar NFL/Reebok deal has done nothing to help its workers around the developing world to climb out of poverty.

Surely the NFL and Reebok could do better than paying the workers in El Salvador just 10 cents for each $80 jersey they sew. Even if they doubled the wages, the direct labor cost to sew the NFL jerseys would still be just 20 1/2 cents, or less than 3/10ths of one percent of the jersey’s $80 retail price.

Constant Harassment

Supervisors constantly shout at the workers: “You’re falling behind your target. Do you want me to call the boss?” …”You’re not here to warm your seat.” “You had better stay home if you don’t like the work here –the gates are always open to you if you don’t like it here.” It is not uncommon for women workers in the production lines to cry because of the constant pressure and abuse.

Cameras are used to Spy on the Workers

Cameras have been placed throughout the production area and at the entrance to the bathrooms. Management uses the cameras to intimidate the workers and to spy on them so they feel under constant pressure. The owner, Mr. Wen Ling Tsao—who is called “Don Antonio,” uses a loud speaker so that everyone can hear him chastising a worker. Watching the camera screen, if he sees a worker is taking too long to use the bathroom, he’ll shout: “Hurry up! Sit down fast. Don’t take so much time. You’re hurting production!” For the workers, it is humiliating to be embarrassed and harassed in front of the other workers.

Dirty Bathrooms and Water

The bathrooms only receive a good cleaning and some maintenance repair before the corporate auditors schedule their visit to inspect the factory. Otherwise, the bathrooms smell bad. Some toilets are out of order and many of the stall doors are broken. With several toilets out of order, there are longer delays for the workers, who are then yelled at for taking too much time. There is no soap or towels in the bathrooms, but at the beginning of the week each worker is provided with a small roll of toilet paper, which must last the full six days.

Codes of Conduct and Corporate Audits continue to Fail

Codes of conduct—for Reebok, Adidas and Soffee—adorn the factory walls, but they are meaningless. Management has never discussed the Codes with the workers and at any rate, they have never been implemented or enforced.

Auditors from Reebok, Adidas and Soffee regularly visit the factory. According to the workers, audits take place every six months or so. The auditors spend more time and attention on the quality of the garments than on factory conditions. During the audits, production goals are drastically cut back, the pace of production slows down and there is no forced overtime. But the short reprieve is a mixed blessing since when the auditors depart, the supervisors start yelling and urge the workers to “work faster..to replace the time lost because of the auditors visit.”

Before the auditors arrive, the workers are routinely threatened by managers and supervisors: “Look. If you speak badly about Chi Fung, the labels will pull their work and the factory will close. Don’t forget. Chi Fung is the one who feeds you!” Some of the threats are more direct: “You should think hard about what you are going to tell the auditors. If you speak against the factory, you are going to be fired. You will never work with us again.”

Needless to say, given their experience, the workers put no faith or reliance in the corporate codes of conduct. They are alone.

Nor do unions exist in El Salvador’s garment factories. Organizing is not allowed. There is not a single garment factory in El Salvador where the workers have a union with a collective contract. Yet, despite the routine gross violation of Salvadoran labor law and the core International Labor Organization’s worker rights standards, the NFL and other garments continue to enter the U.S. duty-free under the U.S.-Cafta Free Trade Agreement. The worker rights provisions in CAFTA are not being respected.

The NFL/Reebok jerseys were sewn for at least four years—from 2006 to 2009. It was only in September of 2009 that the NFL production stopped.

* Reebok: Reebok garments are still being sewn at Chi Fung, only they are not NFL. Reebok is currently producing cotton sweatpants and sweatshirts in grey, blue and green. The sweatshirts have pockets and a zipper. (Two production lines.) * Adidas: Adidas is producing athletic shorts in blue, black, green and white. (Production on three lines.) * Soffee: Soffee is producing waterproof men’s shorts with pockets in blue and white. Soffee is also producing lingerie for women. (Soffee production on four lines.) * Fruit of the Loom: Fruit of the Loom is producing children’s t-shirts. (Production on one line). * Elderwear: Elderwear began production at Chi Fung in November 2009 and 100 new workers were hired to sew their garments.

A Strange Thing Happened

When the NFL/Reebok production stopped (after four years) at the Chi Fung factory, in September 2009, Chi Fung began paying its workers the correct overtime premium. All overtime is still forced, but the workers are now being paid double time ($1.44) for each hour of overtime they work. Again, supervisors explain to the workers that “overtime is required because you have needs and I know the money is not enough for you.”

The workers were not able to explain exactly why all of a sudden the factory had started paying overtime correctly. Perhaps one of the companies finally put pressure on Chi Fung management. Or it could be that so many of the best and fastest workers were quitting Chi Fung because they were being cheated on their overtime pay that the turnover, with new workers continually coming in, was hurting the production and the quality of Chi Fung’s work. New workers have to be trained and it takes time to bring them up to speed.

At the same time that Chi Fung finally started paying the correct overtime premium, they increased factory production goals, forcing the workers to produce more in less time.

What Must Be Done

An Appeal to the NFL and Reebok

The National Labor Committee is anxious to work together with Reebok and the National Football League to improve conditions at the Chi Fung factory in El Salvador. With such well known and powerful labels sewn at Chi Fung –NFL/Reebok, Adidas, Soffee, Elderwear, Fruit of the Loom—it should be possible to combine our efforts to bring their contractor, Chi Fung, into complete compliance with El Salvador’s laws and commitments under the U.S.-Central America Free Trade Agreement. With the right intentions and efforts, Chi Fung could be transformed from a sweatshop into a much better than average or even model plant.

The worst thing Reebok, the NFL and the other labels could do would be to pull their work from the Chi Fung factory.

NFL/Reebok production has been at the Chi Fung factory for years. Cutting and running would only further punish the workers, who have already suffered enough. Reebok, the NFL, Adidas and the others should keep their production in Chi Fung and use their considerable power and influence to improve factory conditions. There is not a consumer in the United States who does not believe that if the NFL and Reebok really wanted to clean up the factory, it would be done quickly and correctly.

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