Please click Here for the PDF version of the report.

Please click Here for the PDF version of the press release.

Please click Here for the PDF version of adidas' comments

--------Press Release------

 

Contact: Li Qiang, Executive Director, (212) 247-2212, qiang@chinalaborwatch.org

cc.: david@chinalaborwatch.org , clw@chinalaborwatch.org

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August 18 th , 2008. In China, there are more than two hundred factories employing over 250,000 workers that produce goods for Adidas. Among these factories, many are similar to the three documented in CLW's recent report, Chengda, Supercap ad Chang Ye Long , in treating their workers poorly. Though only three factories have been investigated from June to August, they suggest a broader pandemic of Adidas' poor practices in China.

The majority of Adidas workers are female approximately twenty years of age. They part with their families in rural villages travel hundreds of miles just to work for factories like Chengda, Supercap and Chang Ye Long.

These workers work an average of six days a week, ten to twelve hours a day. Ten workers are housed in one tiny dorm room and share one restroom. Many of them do not have pensions or unemployment insurance. Workers at Chang Ye Long do not dare be late, because being five minutes late results in a loss of two hours' wages. As adidas outfits 16 Olympic teams, technical officers, and volunteers, workers at Chengda could only enjoy the luxury of face masks and gloves when audits are taking place. Moreover, workers at Chengda don't even have a choice in dining, because the factory automatically charges a dinning fee without their consent.

Many sources have suggested that since China opened its doors to foreign investment in the late 70s, China has enjoyed great economic development at a rapid speed due to foreign companies' businesses, which has, in turn, advanced Chinese' standard of living. However, those who truly profit from China's economic growth is neither China nor its people. Instead, it is companies like Adidas which drive down the cost of labor in order to maximize profit.

According to Adidas' report, from 2004 to 2007, its gross profit has increased from €2,813 millions to €4,882 millions. Asia is its second largest market and has helped Adidas to reach €959 millions worth of sales in just the first half of 2008. The increase in sales was particularly attributed to the Chinese market. The workers at Supercap on the other hand, as a production machine of adidas, are rewarded for the increase in sales by 65 cents an hour. While Adidas enjoys the maximization of profits and allocates much of it in sponsoring the Olympics as another strategy for advertisement, workers at Supercap argue with their supervisors that they produced more than 36 hats per package and thus are entitled to a matching wage.

Although some of Adidas' suppliers such as Chenda claim that overtime is voluntary, because of the extremely low wages, workers have no choice but to work overtime in order to try to survive and support their families back at home. Most cannot not even imagine owning a pair of Adidas shoes or other Adidas products they manufacture; even such imagination is out of their reach. With the low wages, excessive fines and long work hours offered by these Adidas suppliers, workers can only hope that they are paid on time and correctly.

In order t o sponsor the Olympic this year, Adidas has paid about US$70 million. Looking at the low wages workers are earning, it is not difficult to imagine where t he millions of dollars Adidas contributed to the Olympic come from—a contribution from 250,000 Chinese workers ' long work hours and low wages . . While Adidas gains all the fame and fortune from the Olympics, its workers still work day in and day out in front of production lines, hoping to earn that extra dime , literally .

“Who benefits the most from the Olympics? Companies like Adidas are the ones who profit from the event that was originally dedicated to serve as a symbol of hope and peace. It is very difficult to relate such a message to those workers working at Adidas supplier factories.” Says Li Qiang, Executive Director of China Labor Watch.

“While the slogan “Impossible is nothing” is ubiquitous, from CLW's investigative reports on Chengda, Supercap, and Chang Ye Long , there seems to be one thing that remains impossible for Adidas: ensuring suppliers are providing ethical work conditions for workers.” Li added.

Nevertheless, CLW acknowledges that efforts made by adidas in the past few years in advancing workers' conditions are recognizable. However, with adidas' capacity and resources as shown by its Olympic sponsorship, and as one of the important representation for its industry to the international community, we believe that there is much more that can be done by the company.

 

Dongguan Chengda Shoe Co. Ltd.

 

Factory Name Chinese : ?????????? English: (Chengda)   Address Chinese: ?????????????? English: Xiexi Management Zone, Xiexi Village, Shatian Town, Dongguan City.   Contact Number 0769——88806888   Number of Workers About 3,000 workers   Area About 100,000 square meters   Products Sports shoes, leisure shoes and etc.   Certification ISO 9001   Client adidas

Chengda is a Taiwanese Chengda corporation invested factory established in 2004. Besides shoes, the corporation also invests in real estates and etc.

Chengda has three branch factories; Chengda #1, #2 and #3.

Below are few points that needed to be brought to attention

 

1. It is very difficult for workers to quit during probationary period. Most of them have no choice but to leave without permission and forfeit their wages.
2. Workers work about 10 to 12 hours daily; there are day shift and night shift. In addition workers are paid inadequately for the overtimes they worked.
3. Some workers are paid by the hour or by the month while majority of workers are paid from 1,100 to 1,300 RMB per month.
4. Factory deducts 160 RMB from all workers' wage s whether they dine at factory canteen or not.
5. No safety -related training; factory does not have a clear regulation or an explanation towards workers' safety equipments or supplies.

Contract and Hire

Chengda signs contract with workers and gives them a copy to preserve . The contract duration is set at three years including a one month probationary period and c ontract details such as contract duration, probationary period, work details, work hours, pay and etc. are filled out in advance by Chengda . W orkers are simply asked to fill out their personal information on the contract and sign.

During training, a Chengda trainer have said, “You work eight regular hours a day in addition to two to three hours of overtime and you won't be paid for these overtime hours .”

Towards the medical, work injury insurances and pension , many interviewed workers are not certain whether they are insured or not. Such situation may be contributed by lack of management-workers communication. It is very difficult for workers to quit during probationary period and t he only way is to leave voluntarily and forfeit a great proportion of their wage. Chengda has clear ly regulat ed that workers who leave without permission will never be hired by Chengda again.

For workers who wish to quit after the end of probationary period and before the contract terminates, they will be required to fill out a resignation application at the Human Resource office and wait for it to be processed and approved by the Human Resource Director and Business department's assistant manager.

Moreover, Chengda requires that all resigned workers to transfer all related work to the appointed substitute and return all factory propert ies. A ny violation will result in wage arrear or even a lawsuit.

Work Hours

Chengda #1, #2 and #3 has different work schedule according to different production needs.

Chengda #1 first floor's work schedule:

Morning meeting 6:55AM ~ 7:20AM

Morning 7:20AM ~ 11:20AM

Afternoon 12:45PM ~ 4:45PM

Overtime 5:30PM ~ 9:00PM

At Chengda, workers work six days a week. When the factory is busy, workers then w ill be asked to work on Sunday and rearrange d for another day to rest in replacement for the 200 percent overtime wage.

Workers are required to clock in and out 15 minutes before work begins or within 15 minutes after work ends. Overtime is voluntary at Chengda, workers who request to work overtime need to fill out an overtime application form.

Workers are able to use the restroom or drink water freely at work as Chengda does not have regulation on this matter.

There is a daily quota set for each production line, and the amount of current production is shown on the monitor in front of each production line so that workers can see their progress and accommodate their work paste with the current amount of production.

Wage and Remuneration

New workers do not need to pay a deposit or for the uniform they are required to wear at work. Majority of workers' wages are calculated under the piece-rate system. Under such system, workers need to track down the amount they have produced by the end of the day while not knowing the rate per piece. None of the workers interviewed knew the amount they earned for each item. As mentioned above, a Chengda trainer ha d mentioned that there is no overtime premium. In other words, workers are still paid by the regular piece-rate when working overtime.

Chengda generally distributes wages from the 28 th to the end of each month and though there is a pay stub attached with the payment, workers are still unfamiliar with the wage calculation details . According to interviewed workers, a regular worker's average monthly wage ranges from 1,100 to 1,300 RMB. There have been some workers from Chengda #3 paid 1,700 RMB a month for their advance work paste.

Workers at Chengda are able to enjoy paid maternity period (90days) , marriage leave, and mourning leave. Chengda pays by the base wage for types of the leave s described above.

Canteen and Dormitory Conditions

Chengda provides dormitory to workers and deducts 40 RMB from each worker's monthly wage. In addition to the monthly dormitory fee, workers are financially responsible for the ir utility bill. For those who choose not to live in the dormitory do not need to pay the fee. New workers who choose to live in the dormitory need to submit an application, show factory ID and personal luggage to the dormitory supervisor after 5PM.

There are rooms housing six persons and rooms housing eight persons. Workers are assigned to the rooms according to the area they work. For example, workers at Chengda #1 and #3 are assigned to the six - person s room and workers at Chengda #2 are assigned to the eight - person s room Male and female workers are separated by each floor. Inside each room are bunk beds, two storages for each person, an air conditioner, a TV stand, AC outlets, an independent shower room and restroom, and a balcony with two faucets for washing and drying clothes. Workers often complain about lack of sunlight in the rooms. Workers have to take turns on a weekly basis to clean the room. Before entering the room, workers would generally take off their shoes and enter the room with sandals.

There are drinking water distributors installed in the hallways. The dormitory has a curfew; workers who do not return to the dormitory by 11PM will be written down by the securities.

There is a workers canteen onsite; Chengda deducts a 160 RMB monthly meal fee from all workers disregard whether or not they choose to dine in the workers canteen . Below is the canteen schedule:

Canteen Schedule

Breakfast	6:30AM ~ 7:40AM	Fried noodles and etc. (Free rice and soup)
Lunch	10:20AM ~ 11:30AM	Two vegetable entrees and one meat entrée (Free rice and soup)
Dinner	3:40PM ~ 5:30PM	Two vegetable entrees and one meat entrée (Free rice and soup)

Alt hough rice is free, Chengda gives a minor warning to those who did not finish their rice. A minor warning leads to a 10 RMB bonus deduction.

Work Conditions

There are about more than ten production lines at Chengda #1's textile workshop on the first floor and each production line hasabout 20 workers . There are no air conditioners installed at the workshop, only fans are available to workers. Chengda does not provide safety training to workers, instead, workers c ould only depend on the ir own experience in figuring out the safest way to work.

Moreover, many workers engage in manual labor do not have any safety equipments and have to apply glue by hands on a daily basis . According to workers, only when audits are taking place would Chengda begin to distribute face masks and gloves. Supervisors often emphasize the importance of quality control. Since workers are paid by the piece-rate, they are more concerned about their production speed.

There is only one drinking water distributor in the entire workshop and it's shared by both the workers and office employees. Since one distributor is not enough for everyone, some supervisors would ask workers to put in some money to buy water.

Bonuses and Penalties Chengda has a list of bonuses and penalties (See below). When a penalty occurs, Chengda will deduct a certain amount from the worker's bonus depending on the types of penalty. Bonuses and penalties are awarded and deducted on a monthly basis.

Types of bonuses :

Small Award: 10 RMB B onus es

Small Accomplishment: 30 RMB B onus es

Major Accomplishment: 90 RMB B onus es

Types of Penalties :

Warning: 10 RMB B onus D eduction s

Small Penalty: 30 RMB B onus D eduction s

- Mistake that leads to a company loss ranging from 100 to 500 RMB; leave early or late for work for more than three times within one month timeframe ; intentionally fail to clock in or out.

Major Penalty: 90 RMB B onus D eduction s

- Fail to shut down machinerie s or workshop's power after work; asks others to clock in or out; clock in or out for others . Clock in for others as well as for themselves is considering a violation.

Contract Termination:

-Absence to work for more than three consecutive days, absence to work for seven days within one month timeframe , or 15 days within one year timeframe ; impose physical violence or public insults against co - workers, superiors or family members.

Other Conditions

• Workers can file complaints and have possible solutions through workers representatives, complaint boxes, meetings and etc.

• Workers need to swipe in and out before entering or exiting the factory site. S ecurities w ill also search their belongings, if any.

• If there is a conflict between a worker and a security, and if the situation is serious, the worker would be fired. There was a case of a worker got into an argument with the canteen securities and was beaten up and fired .

• In order to work for Chengda , workers would need to open a bank account at the local agricultural bank, pass a health examination and acquire a temporary housing ID. The bank account fee is 15 RMB, the health examination fee is 30 RMB, and the housing ID is 35 RMB.

 

Zhongshan Weili Textile Co. Ltd

Factory Name English (Supercap) Chinese: ???????????   Address English: Sanxian Town , 2 nd industrial Zone, Zhongshan City Chinese: ????????????????? 1 ? 528463   Number of Workers About 3,500 workers   Products Sports hats, sweaters, sweat pants, gloves, scarfs, knee guards, elbow guards, and leg guards.   Primary Clients Adidas, REEBOK, and etc.   Certification ISO 9001, ISO 14001, OHSAS 18001

Supercap is a Taiwanese Weizhong Corporation invested factory. According to an article from the BUSINESS WEEKLY, Issue 971, “one out of every ten hats in the United States is manufactured by Supercap”.

The factory currently acquires over ten production districts onsite; ten hat production districts, a female hat production district, embroiders district, development district, weaving production district, Processing District, Cutting District.

Contract & Hire

Prior to entering the factory, workers are requested a health examination from a Supercap appointed hospital, Baoyuan Hospital . The fee for such health examination is 36 RMB. Trainings are only provided to workers who entered the factory during slow season, during the peak season, workers would be asked to begin working without any training. Trainings lasts from 15 days to one month, during this period, Supercap covers food and housing though no payment will be made to workers. New workers are given a workers handbook. Upon resignation, workers would be asked to return the handbook and if the handbook is lost, a fee will be charged.

Supercap signs contract with workers, though workers are unable to preserve a copy. On the contract, Supercap agrees to pay workers by the local minimum wage of 770 RMB/Month. New workers are required to pass a one month probationary period.

The factory calculates wages by hourly and piece-rate combined.

Workers who wish to resign before the contract terminates need to submit a request form a month in advance to the management. According interviewed workers, if they are able to find a substitute to replace them, it would be much easier to quit.

Work Hours

Hat Production District Schedule (Each district has different work hours)

	Mondays ~ Saturdays
Morning	8:00AM ~ 12:00PM
Lunch	12:00PM ~ 1:30PM
Afternoon	1:30PM ~ 5:30PM
Dinner	5:30PM ~ 6:30PM
Overtime	6:30PM ~ 9:30PM

At Supercap, the factory's peak season is from September to January and slow season is from February to August. On average, workers work about 11 hours a day, six days a week. Overtime is compulsory; workers from hat production district said that they would work until 11PM or 12AM about two three times a month.

Wednesday, and Friday to have overtime. On the other hand, Adidas regulates that overtimes cannot be scheduled on Wednesdays, Saturdays and Sundays.

Wages and Benefits

Supercap encourages workers to introduce new workers to work in the factory. If the referrer is a senior worker, he/she would be paid 60RMB for each worker introduced. If the referrer is a new worker, he/she would be paid 30RMB per worker.

Not all workers have uniforms; workers in hat production district do not have uniforms to wear.

Workers are paid by either hourly or piece-rate; hourly workers are paid 4.43 RMB per hour for each regular hour worked. In regards of the piece-rate wage, it is calculated based on a “production card”. The production card is attached to each package and the workers then fill out the information on the card themselves. Each package typically contains 36 hats. Although there are some packages that contain 38 or more hats, supervisors still calculate workers' wages by 36 hats rather than the actual number. According to a supervisor, he's forced to always calculate the wages by 36 hats because of the computer system and that there is nothing he could do.

On pay day, workers are able to obtain a pay stub with detailed information.

Each month workers are able to earn the average between 1,100 RMB to 1,200 RMB and sometimes even 1,900 RMB. Some workers would receive bonus ranging from 100 to 200 RMB.

Living and Food Conditions

Supercap provides dormitory at cost to workers who wish to house onsite. Each month the factory deducts 45 RMB from each piece-rate worker's wage and 50 RMB from each hourly worker's wage. The factory does not charge workers who live offsite.

There are six dormitory buildings; five are female dormitories and one is male dormitory. Each room has two ceiling fans and an air conditioner housing about ten workers. The air conditioner only operates three hours a day. In the hallway on each floor there is a shower room and restroom. The shower room has about ten compartments and the restroom has about 20 compartments shared by couple hundred workers on each floor. Drinking water distributor is only available on the first floor of each dormitory. Since there are no A/C outlets in the dorm rooms, workers who wish to charge their phone would need to head to the reading room. The reading room has security on 24 hour shift.

There are six canteens at Supercap; five are workers' canteens and the other is office employees' canteen. The canteen food is categorized into a standard meal plan and a high-class meal plan. Standard meal plan costs 165 RMB per month and high-class meal plan costs 249 RMB per month. If a worker chooses the standard meal plan, he or she is responsible to bring a personal food container. Even if one asks for a sick leave and does not dine in the canteen, he would still be asked to pay for the meal fee for the day.

Workers are not allowed to switch meal plan until the end of the month. If one is caught eating a high-class meal when he has standard meal plan, he would be fined 6 points/100 RMB penalty. Workers can cancel the meal plan upon submitting a request to manager and financial office. If a worker is caught dining in the factory canteen without a meal plan, he will be fined 165 RMB, equivalent to the cost of a one month standard meal.

Canteen Schedule and Meals

Morning	7:30AM ~ 8:00AM	Buns, fried donuts, congee, soy milk
Noon	12:00PM ~ 1:00PM	Three entrees and one soup
Night	5:30PM ~ 6:00PM	Three entrees and one soup
Midnight Snack	Varies

 

When asked about the food conditions, workers have said that they can rarely find any meat in a meat dish and that the food quality five years ago was much better than what they have now.

There is also a mini-mart in business at Supercap though workers complain about the high prices. For example, the mini-mart charges 2.5 to 2.6 RMB for a bottle of milk that costs about 1.8 to 1.9 RMB outside the factory.

Work Conditions

A workshop on the Hat production District has about 700 workers and seven production lines, about one hundred workers per production line. Among all the positions, some workers are required to stand at work and some are able to sit while working. For example, workers who iron hats are required to work while standing. Due to the high density of workers with no air conditioners, workers have to learn to accommodate with the five ceiling fans in the workshop.

Each workshop has a first aid box, and inside the first aid box are, the mercurochrome, the ethyl alcohol, and band aid. Workers who iron hats would sometimes injury their hands because of the steam. Although the factory provides gloves to workers, they often choose to not wear the gloves as they believe gloves cripple their work paste.

Workers at cementing positions do not have face masks or aprons. There are chemicals such as glue, “cleaning water”, and gun oil that appear to be hazardous to people if exposed directly. Direct exposure to these chemicals result in skin peeling and etc.

According to interviewed workers, work injuries occur frequently at Supercap; injuries range from minor finger injury to crushed hand. In terms of Supercap's responsiveness towards work injuries, according to workers, the factory often refuse to provide any medical compensation. For example, according to workers, there has been at least one work injury case a month for five consecutive months and four of these injured workers are financially responsible for injury caused at work while only one worker received 4,000 RMB as compensation. Furthermore, workers said if an injured worker requests for compensation directly to the high management, after a complex procedure and upon the approval of the factory manager and assistant managers, he is able to receive a portion of the requested compensation.

There was a worker who was referred by an assistant supervisor had a stroke and fainted one day at work. After medical treatment, the worker was fortunately saved though he lost the ability to speak, had defective limbs and could not recognize people. Some have said what have essentially caused this tragedy are high work pressure at Supercap as well as the worker's conservative living style.

Penalties and Bonuses

Penalty

Each point deducted is equivalent to 15 RMB

 

Late for work (First time)	N/A
Late for work (Second time)	15 RMB
Late for work (Third time)	30 RMB
Late for work (Over three times)	Penalty Unknown
Fighting	135 RMB

Bonuses are calculated according to factory's production's efficiency, peak season and slow season and in addition to worker's individual performance. Bonus can range from 100 to 200 RMB. During holidays, workers are able to enjoy an additional meal at no cost.

Other Conditions

• A union is established at Supercap. Each district has a representative. The union would randomly organize a meeting with all representatives to discuss and reflect workers' issues both at work and in private and develop a solution for each problem raised.
• Each year there would be a major activity onsite; basketball tournament, ping pong tournament, tugs of war and etc.
• There is an internet café onsite. The café has about 35 computers, charging 3.5 or 4 RMB per hour.
• Payphone onsite is more expensive than the ones outside, charging 0.2 RMB per minute.
• In the entertainment district, there are ping pong tables, a basketball court, volleyball court, ice-skating ring, and a reading room. The reading room has different types of chess, books, newspaper and novels. Workers are also able to go to the canteens to watch TV.
• There is a gate between the production districts and dormitory district with securities. Workers would need to swipe card and be searched by securities before entering or exiting.
• There are cameras installed by the exits on each product storage site.

 

Chang Ye Long

Factory Name English: Chang Ye Long (Chang) Chinese: ???????????   Address English: Chang Ye Long Industrial City , Suken Management Zone, Changping Town , Dongguan City , Guangdong Province Chinese: ????????????????????   Contact Number (0769 ) 83333308-142/140   Number of Workers About 3,000   Product Soccer, volleyball, football, baseball, knee guard, baseball gloves and etc. Client Adidas

The factory has three major departments: Yuan Dong (Baseball), Chang Ye Long (Soccer), and Long Yang Chang (Gloves)

Contracts and Hiring

Workers receive a contract after working for more than one month. The contract duration is two years, including a two-month probationary period. Though there are two copies of each contract, the factory takes both of them away immediately after a worker signs them.

Work Hours

There are three shifts among the three departments. The departments switch shifts every three months

Schedule

The peak season at Chang is from October to February. During this period, workers often do not even have one off day a month. Overtime is compulsory and workers are notified about overtime on the day that they are expected to work overtime.

	1 st shift	2 nd shift	3 rd shift
Morning	7:20AM	7:50AM	8:20AM
Lunch	One and half hour	One and half hour	One and half hour
Afternoon	N/A	N/A	N/A
Dinner	N/A	N/A	N/A
Overtime	N/A	N/A	N/A

 

If workers want to use the restroom, they have to sign up with their supervisor and report the time of departure . Though the factory promises workers that they will “make more, earn more,” a worker who made over 3,000 soccer balls earlier this May was paid 400 RMB less than what he was entitled by law. Similar cases occur frequently at Chang. Workers receive nothing even after they file complaints with the human resources office. According to an interviewed worker, “The HR office only knows how to waste time and ignore problems! ”

Wages and Remuneration

Upon joining the workforce, the factory charges workers a 30 RMB fee for the factory ID process and promises that the fee will be reimbursed upon retirement. Workers say, “There is no way we are going to get that money back”.

Some workers have said that uniforms are free, while some have suggested that although Chang promises free uniform, the factory actually deducts the cost of uniforms from workers' first monthly wages. According to one worker, “A winter uniform costs 20 RMB per set and a summer uniform costs 15 RMB per set; one set is new and the other is used. If you don't want to wear a used uniform, then you would have to pay for a new one.”

Upon recruitment, workers are assigned to a training lasting four to five days. The pay during the training is calculated by the hour, and the preset daily wage is 35 RMB. Workers said that though Chang states that the monthly base wage is 770 RMB, in addition to 4 RMB per overtime hour and 6 RMB per weekend overtime hour, in reality, workers' wages are calculated according to the amount of products they make. It is a piece rate system in practice.

The rate per piece depends on the difficulty of the production process. For example, in the textile department, workers are paid at least 0.05 RMB per sewed ball or at most 0.17 RMB per sewed ball. Each worker can generally produce about 4,500 balls a month, earning about 700 RMB. There have been a few highly skilled workers who have earned over 2,000 RMB a month. At Chang, besides the packaging workshop, which pays by the hour, all the other workshops are effectively paid by piece-rate.

Workers often complain about wage arrears at Chang. Not only does the factory withhold a month's worth of wages in order to prevent employees from leaving, but workers can rarely expect to be paid on time. Chang pays in the form of cash, without an explanation of pay details.

Chang only purchases insurance for workers upon their request. Each month insurances cost 79 RMB.

Workers reported that there are no paid vacations, subsidies, or bonuses, etc. at Chang. Regarding holiday overtime pay, some workers said that the factory pays at the rate of 300 percent of 35 RMB (Based on 770 RMB base wage/21.75 work days). Some workers have also suggested that the holiday overtime wage is paid at the rate of 300 percent of the wage of the current day.

Canteen and Dormitory Conditions

Chang provides dormitories and food. Workers who live in the dormitory have to pay 15 RMB a month. At the factory's canteen on the new site, each meal costs 2.5 or 4 RMB, and at the old site, each meal costs 2.5, 4.5 or 6 RMB. An IC card system is adopted by both canteens; workers need to swipe their IC card to buy food. Next to the IC card readers there is a menu of the day. While most of workers are satisfied with the food, they suggest the canteen sanitation needs to be improved. Chang often dumps the leftovers in the sewers by the canteens and workers passing these sewers often complain about the foul smell.

There are six dormitory buildings onsite; buildings A, B, C and D are located on the old site and building E and F are located on the new site. Generally, each dormitory room houses six workers with ten bed spaces, a separate restroom and hot water are available.

Work Conditions   

In most cases, workers are given gloves only when clients are visiting the factory. When there is no clients' presence, workers' requests for gloves are ignored.

There are no air conditioners installed in workshops, so workers can only rely on windows for cooler temperature and air. Moreover, there are no special technicians maintaining production equipments.

Some posts require direct contact with hazardous chemicals such as oil, ink, ethylene and glycol monobutyl ether. Since Chang only distributes gloves when clients are auditing, many workers' hands are peeling and even cracked during the wintertime. Many workers complain about the unimaginable pain they experience when their cracked hands are exposed to chemicals.

In the summer of 2006, a packaging worker's thumb was crushed by a machine. The damange to the machine and the worker was so severe that the machine had to be taken apart. The worker was given a one month paid work-injury leave. However, since the worker did not have insurance, the factory refused to pay for the medical treatment required and merely recommended that the worker to purchase insurance in the near future.

Awards and Penalties

Note: one point = 10 RMB

Infraction	Fine
Late to work or leaving early (5 minutes)	First Time: Warning Second Time: 1 point
Late to work or leaving early (15 minutes)	First Time: 1 point Second Time: 2 points
Late to work or leaving early (16 to 30 minutes)	First Time: 2 points Second Time: 3 points
Absence from work	Two days worth of wage for each day absent
Retiring with less than one year of work	20 points

 

• No union exists at Chang.

• There are worker's handbooks, one handbook for each workshop. Workers said the information in the handbook is not relevant at all to their work and that it is only a tool to deceive clients.

• Although the factory promises a 100 RMB monthly subsidy for food, none of the workers have received the subsidy.

• The factory trains workers to deceive clients. Prior to a client audit, the factory will test workers on their ability to provide “proper answers.”

Questions and Answers That Workers Are Made

To Practice Before Client Audits

Q: Did you pay to receive a factory ID?

A: No, I didn't. The factory pays for it.

Reality: Workers have to pay 30 RMB for the ID. In early 2007, workers had to pay 60 RMB.

Q: How much do you pay for each meal?

A: The meal is free.

Reality: Workers have to pay 60 RMB a month for meal,s whether they dine at factory canteen or not.

Q: How much do you pay for dormitory?

A: The dormitory is free.

Reality: There is a 15 RMB / month dormitory fee.

Q: Is there a minimum wage?

A: For new workers, their first month is 690 RMB/Month and after that we are paid 770 RMB/ Month. We are paid by the hour.

Reality: The factory gives workers a fake pay stub in case a client wants to look at it. The amount of wages on the fake pay stub is generally 500 to 600 RMB more than the wages actually given to workers.

A worker shared his thoughts on the fake pay stub: “If it was the real wage, then I don't think any of us would think about leaving”

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adidas' comments regarding the three factories

Chengda Corporation	General Remarks: Chengda has 3 branch factories: Chengda #1, #2 and #3. The adidas Group has production only in the Chengda #2 plant which produces for Rockport, Reebok and Timberland. adidas Group orders represent no more than 10% of the total orders of Chengda Corp. Chengda has been previously independently audited by the FLA and is the subject of regular monitoring by the adidas Group Social and Environmental Affairs team.
Issues Raised in CLW Report	Comment	Follow-up Action
Workers worked about 10 to 12 hours daily;	Based on our audit records of the Chengda #2 plant we can confirm that workers typically work 11 hours, excluding lunch break of 1.5 hours and dinner break of 1 hour.	No specific follow up action required.
many interviewed workers are not certain whether they are insured or not;	At the Chengda #2 plant workers have 100% coverage for work-injury insurance, which is fully paid for by the factory. The factory also has put in place Commercial Group Medical Insurance for all employees which is fully paid for by the factory.	In terms of government's social insurance schemes, the factory has still to achieve 100% coverage for pension, medical and unemployment insurances. A plan has been developed for progressive expansion of the insurance coverage with pension and unemployment insurance reaching 50% coverage by July 2009. State Medical insurance, will reach 100% coverage by October 2008.
It's very difficult for workers to quit during probationary period and the only way is to leave voluntarily while forfeiting a great proportion of their wage. any violation (against resignation process requirement) will result in wage arrear or a lawsuit.	We have not received worker complaints or feedback from worker interviews that would indicate that workers are having a difficulty with terminating their contracts during the probation period. During probationary period, workers are only required to give 3 days advance notice if he/she intends to quit. Workers can indicate how their last payment should be made in the Resignation Sheet: either by bank transfer or cash payment. Payment by bank transfer will be transacted in the coming salary payment date, whereas cash settlements are completed within 3 days after resignation.	No further action until clarification is given by CLW as to which factory they are referring to.
They (the workers) would be asked to work on Sunday and rearrange for another day off instead of paying 200 percent of overtime wage….a Chengda trainer has said that there is no overtime premium. In other words, workers are still paid by the regular piece-rate when working overtime.	Based on our regular auditing of the Chengda #2 plant we have not found evidence of the practice outlined. There may be different policies in different factories. At the Chengda #2 any Sunday work must be compensated by 200% multiplier in accordance with the law. The factory must also provide an addition day's compensation, in accordance with the adidas Group's working hours policy.	No further action until clarification is given by CLW as to which factory they are referring to.
Chengda generally distributes wages from the 28th to the end of each month,workers are still unfamiliar with the wage calculation details.	Yes, at Chengda #2, the current pay day is the end of each month. The pay slip which is given to workers details the monthly base, which includes normal working hours, overtime hours and compensation, paid leave, living allowance, performance points and performance bonus and deductions. We can confirm that as part of new employee orientation workers are shown how to calculate their wages and read the pay slip. Information is also provided in the worker handbook.	Although not mandated under the Chinese Labour Law, the adidas Group's compliance policies require prompt payment of wages for all work completed. Effective from the end of 2008 the factory has agreed to pay wages on the 15th day of each month.
workers who do not return to the dormitory by 11 pm will be written down by the security.	Workers are entitled and are given the free choice to live either in the dormitory or secure accommodation outside the factory grounds. When they choose to live in the dormitory they are required to abide by the regulations which have been put in place for the security of those workers using the dormitory. The dormitory regulation states that a workers' name will be recorded and they will receive a verbal warning if they return after 24:00.	No specific follow up action required.
Chengda deducts 160 RMB monthly meal fee from all workers disregard whether or not they choose to dine in the workers canteen.	Yes, currently Chengda deduct a standard monthly fee of 160 RMB for meals, irrespective of whether always eat in the canteen. This is an issue that has already been raised with the factory by the compliance team in 2007. The factory ran a trial last year but this proved a failure. Effective from September 2008 the workers will be able to choose to dine in the factory, or not, on a monthly basis and will only be charged if they eat meals in the factory canteen.	Update CLW when the scheme takes effect and ask for feedback on worker concerns.
there was a case that a worker ran into an argument with the canteen securities and was beaten up and fired.	We have not heard of this case, and have received no complaint or feedback during our worker interviews.	CLW to confirm whether this incident involved a worker from the Chengda #2 plant. CLW to provide more detailed information to enable adidas Group to further investigate.
No pre-employment safety training; Chengda does not provide safety training to workers, instead, workers can only depend on themselves in figuring out the safest way to work.	Based on our direct observations of the operations at the Chengda #2 plant we can confirm that new employees participate in a "3-Layers of Safety" training, which includes chemical usage. The first layer of safety training is conducted prior to the workers being sent to shop floor and includes general safety training, fire safety and general machine safety.	No further action until clarification is given by CLW as to which factory they are referring to . CLW to provide more detailed information to enable adidas Group to further investigate.
do not have any safety equipments…only when audits are taking place would Chengda begin to distribute face masks.	The adidas Group monitoring team undertakes both announced and unannounced audits. Based on our direct observations and monitoring of the operations at the Chengda #2 plant we can confirm that the factory has job hazard analysis in place, according to which PPE is provided to those who need it. Free rubber gloves and masks are provided to workers of chemical operations. The replacement frequency is set according to the hazard risk.	No specific follow up action required.
Since the water is not enough for everyone, some supervisors would ask workers to put in some money to buy water.	Again, based on our monitoring visits to Chengda #2 we can confirm that the plant has its own purifying water system and that free purified water is provided to all employees without any quota.	No further action until clarification is given by CLW as to which factory they are referring to.
Warning by bonus deduction	All workers are paid an hourly-rate salary. Production workers receive performance bonuses based on individual performance and productivity. Those bonuses must be above the total wages that would otherwise be received, based on standard and overtime hour worked. The factors that determine the percentage of the bonus include: monthly output, quality and individual performance.   Reduced bonuses can be paid when targets or full attendance are not met, but such systems must be transparent and easily understood by the workers.	The adidas Group Workplace Standards do not permit factories to levy fines or make deduction from basic wages of workers. We will verify through worker interviews and a review of the payroll records to see if a penalty or warning system is being used in breach of our Standards.
bank account for 15 rmb, health examination fee is 30 rmb, the factory housing ID is 35 rmb.	In the past, the factory paid the bank account opening fee of rmb 5, which was subsequently charged back to workers. The current practice is that all workers are required to open their own bank accounts before taking up employment in the factory. A Resident ID (which CLW has termed a “housing” ID) costs rmb35 and is paid by the worker to the local government, not the factory. It is a commonly held practice in China that newly hired employees bear the cost of their pre-employment Health Certificates. We do encourage suppliers, as a matter of best practice, to pay these costs directly, but this is not mandated by government regulations.	No specific follow up action required.

 

Supercap	General Remarks: This factory producing caps for a range of adidas group brands, which together account for less than 10% of Supercap's total output. Overall Supercap produces for over 40 international brands. The factory was audited in 2006, 2007 and twice in 2008 by the adidas Group social compliance team. Supercap was also independently audited by the FLA in 2007.
Issues Raised in CLW Report	Comment	Follow-up Action
Contract & Hire
Trainings are only provided to workers who entered the factory during slow season, during the peak season, workers would be asked to begin working without any training. Trainings lasts from 15 days to one month, during this period, Supercap covers food and housing though no payment will be made to workers. (p.1)	Orientation training is provided to each new employee when hired, regardless it's peak or low season and relevant records are maintained. We have found no evidence nor have we received complaints from workers that workers are failing to be paid during their probation or training period.	CLW to provide more detailed information to enable adidas Group to further investigate.
Supercap signs contract with workers, though workers are unable to preserve a copy.	We have not received worker complaints or feedback from worker interviews that would indicate that workers are having a difficulty with their contracts. Worker sign contract in duplicate and are provided a copy. This is confirmed in a separate “Contracts receipt form” which they sign to show that they have received a copy of their contract.	No specific follow up action required.
At Supercap, the factory's peak season is from September to January and slow season is from February to August. On average, workers work about 11 hours a day, six days a week. Overtime is compulsory; workers from hat production district said that they would work until 11PM or 12AM about two three times a month	We fully accept that excessive working hours remains a challenge in China , especially in factories such as Supercap where there are multiple buyers and seasonal peaks in orders. Currently the weekly working hour of Supercap workers is no more than 60 hours which is a significant improvement over past years.   In accordance with our Standards any overtime worked must be voluntary.	Overtime must be a voluntary process and the factory will have to demonstrate to us that they have proper systems in place for workers to voluntary sign on for overtime when it is being offered. We will verify this through an interview with workers and the factory management.
Work Hours
Wednesday, and Friday to have overtime. On the other hand, Adidas regulates that overtimes cannot be scheduled on Wednesdays, Saturdays and Sundays. (p.2)	adidas Group has no such requirement for overtime arrangements. We operate a working hours policy where factories have to seek specific approval if they wish to swap regular workdays for Sundays or Public Holidays	No specific follow up action required.
Wage and Benefits
Each package typically contains 36 hats. Although there are some packages that contain 38 or more hats, supervisors still calculate workers' wages by 36 hats rather than the actual number. (p.3)	Supercap operates three “packages” of work for which there are piece rates. These packages comprise 24, 36 or 72 caps. It is the workers themselves who fill out their information on the total pieces they have made. Supervisors should only cross-check.	We will review the pay calculation based on recorded pieces to ensure that workers are being paid in accordance with the work completed.
Supercap provides dormitory at cost to workers who wish to house onsite. Each month the factory deducts 45 RMB from each piece-rate worker's wage and 50 RMB from each hourly worker's wage. The factory does not charge workers who live offsite.	It is common practice in China for factories to charge a basic fee for dormitory accommodation. These charges are normally significantly lower than the cost of offsite accommodation. Based on the information we hold, the monthly dormitory charge is RMB 30 for each employee. There is no any difference between the piece-rate or hourly-rate worker.	No specific follow up action required.
Even if one asks for a sick leave and does not dine in the canteen, he would still be asked to pay for the meal fee for the day.	Workers are able to be credited for any meal deduction, if they report their leave request to the HR department.	We will cross-check to ensure that workers who are granted sick leave and therefore are unable to use the canteen are deducted fees for meals.
Living Conditions and Food
If one is caught eating a high-class meal when he has standard meal plan, he would be fined 6 points/100 RMB penalty. Workers can cancel the meal plan upon submitting a request to manager and financial office. If a worker is caught dining in the factory canteen without a meal plan, he will be fined 165 RMB, equivalent to the cost of a one month standard meal. (p.4)	We have enquired with Supercap's HR staff. They state that the factory has no such regulation or practice in place.	adidas Group does not permit the use of fines or penalties as a disciplinary measure.   CLW to provide more detailed information to enable adidas Group to further investigate.
When asked about the food conditions, workers have said that they can rarely find any meat in a meat dish and that the food quality five years ago was much better than what they have now.   There is also a mini-mart in business at Supercap though workers complain about the high prices.	The quality and quantity of food is a common concern for workers and topic that they are often very forthright in their comments. During our monitoring visits we inspect the kitchens, as well as the food which is being served in the canteens.   Where food outlets and markets are run on a commercial basis within the grounds of a factory, then the outlet should be setting prices according to the general market conditions in the area. If the mini-mart is overcharging for goods then the factory management must review the terms of the contract for the service provider.   We actively encourage suppliers to create discount stores within the workforce, so that workers benefit from the wholesale prices. We also encourage the establishment of worker cooperative run food stores and have issued guidance on this to our factories in China .	adidas Group will interview the management and worker to determine whether their has been a deterioration in the standard of the food provided by the factory in its canteens. We will also review the pricing of goods sold at the mini-mart.

Health & safety
Workers at cementing positions do not have face masks or aprons. There are chemicals such as glue, “cleaning water”, and gun oil that appear to be hazardous to people if exposed directly. Direct exposure to these chemicals result in skin peeling and etc	Domestic washing powder is mixed with water for cleaning purposes and this does not pose a hazard to the workers. Machine oil is used on equipment, as part of general maintenance. Glues are applied to the brims of the caps. The chemical content of the glue has been checked for their hazardous content and have met our Standards. Based on our own on-site observations PPE (face masks and gloves) are provided and are being worn by worker's gluing the caps.	No specific follow up action required.
Schedule and Medical
...the factory often refuses to provide any medical compensation. For example, according to workers, there has been at least one work injury case a month for five consecutive months and four of these injured workers are financially responsible for injury caused at work while only one worker received 4,000 RMB as compensation. Furthermore, workers said if an injured worker requests for compensation directly to the high management, after a complex procedure and upon the approval of the factory manager and assistant managers, he is able to receive a portion of the requested compensation (p.4)	With respect to work-injury and medical insurance we have verified that Supercap has 100% coverage in place for the workforce. The insurance covers all medical expenses for work-related injury and there should be no charges, or direct costs, borne by workers. The factory also has formal obligation to assist workers with their claim for accident compensation from local government.	CLW to provide more detailed information to enable adidas Group to further investigate.
Penalties and Bonuses
Each point deducted is equivalent to 15 RMB (p.5)	There is clear policy in the workers hand book that no deductions are permitted against wages. Workers with good performance can obtain a bonus. We understand for each point accrued workers area able to secure RMB 15.	No specific follow up action required.
Other Conditions
Workers would need to swipe card and be searched by securities before entering or exiting. (p.5)	No body searches are permitted of workers, but they must abide by the security process that is in place as they enter and leave the factory.	No specific follow up action required.

 

Chang Ye Long Group			General Remarks: The Group has 3 branch factories - Yuan Dong (for Baseball), Chang Ye Long (for Soccer) and Long Yang Chang (for Gloves), adidas product is in this factory). The adidas Group has production in only one of these factories: Yang Chang. Our order volume represents no more than 5% of the total volume of the factory. We can therefore only comment on the plant where we have production. Please note that other major sports goods brands are also sourcing from the Chang Ye Long Group.
Issues Raised in CLW Report			Comment	Follow-up action
Contract and Hire
…Contract duration is two years including a two months probationary period. Though there are two copies of contract, after worker signs it, the factory takes both of them away immediately. (page 1)			The majority of the workers at Chang Ye Long hold two year contract terms, with less than two months probation. A smaller number have three year contract terms, with two months probation. All workers are required to have a copy of the signed contract registered with the local authority. At times workers may have to wait for a copy of the contract to be returned after processing (registration) by government.	If workers are being denied a copy of their employment contracts this would be a breach of the adidas Group Workplace Standards. The factory will have to demonstrate that all workers hold a copy of their contract. We will verify this through an interview with workers and the factory management.
Work Hours
…workers often do not even have one off day a month. Overtime is compulsory… (page 2)			Our own monitoring has indicated a problem over working hours during the peak season and we have required the Chang Ye Long to make improvements in the production area of the Long Yang Chang factory. We can not comment on the conditions and hours at the two other factories.	Overtime must be a voluntary process and the factory will have to demonstrate to us that they have proper systems in place for workers to voluntary sign on for overtime when it is being offered. We will verify this through an interview with workers and the factory management.
…workers would have to sign up with the supervisor and report the time for leave… …workers receive nothing even after they file complaint to the Human Resource office. (page 2)			We have found no evidence of this in our monitoring of the Long Yang Chang plant? Where the workers interviewed from one of the other factories within the group? We can confirm that the Long Yang Chang plant has a grievance system in place for resolving workplace disputes or complaints. Based on our audit records the factory has received and resolved 8 complaints this year. Please also note that Chang Ye Long is currently enrolled in a FLA Worker Grievance Program to improve the function and effectiveness of their grievance system.	No further action until clarification is given by CLW as to which factory they are referring to.
Wages and Remuneration
Upon recruitment, factory charges a 30 RMB fee for factory ID process and promises that the fee will be reimbursed before retirement… (page 2)			Based on our audit records we believe Long Yang Chang is charging RMB10 (not RMB30 as stated) for their ID cards. We have already communicated to the factory that this practice must stop.	Verify that the factory has ceased charging for factory ID cards during next audit visit
Some workers have said that uniform is free, while some suggested that although Chang promises the free uniform, the factory would deduct its cost from workers' first month wage… (page 2)			We can confirm that Long Yang Chang provides two sets of uniforms to workers free. Any replacement will be charged, a practice that we do not accept.	Pay records to be checked to determine whether deductions are being made for uniforms. If they are we will require the factory to immediately stop this practice.
Workers often complain about the situation of wage arrears at Chang…. Chang pays in the form of cash without any explanation of pay details. (page 3)			The pay day Long Yang Chang which produces for adidas is on 7-8th day of every month. Perhaps CLW are referring to the ball production areas. The workers receive a pay slip when they are paid in cash. The pay slip includes Gross income, OT hours, OT premiums, Net income, and the deductions (insurance, food & dormitory, income tax, etc).	No further action until clarification is given by CLW as to which factory they are referring to.
Chang only purchases insurances for workers upon their request. Each month insurances cost 79 RMB. (page 3)			Currently, all workers are covered for work-injury insurance and Commercial Medical Insurance, a 100% of which should be at the factory's expense. Only 30% workers are currently entitled to pension and other insurances, which should reach 50% by October 2008.	As part of our existing monitoring programme we have been working with Long Yang Chang on a progressive plan to improve insurance cover. We will cross-check the charges stated for insurance.
Workers reported that there are no paid vacations, subsi dy, bonuses and etc. at Chang… (page 4)