labor laws – The OM Blog by Heizer, Render, & Munson

OM in the News: Apple Again Faces Supplier Labor Violations

“Apple has once again been accused of poor and unsafe working conditions at one of its factories in China,” writes The Christian Science Monitor (Sept. 4, 2014). A report compiled by China Labor Watch, which has previously targeted Apple for labor violations, says that a factory in Suqian has violated Chinese laws in addition to violating policies put in place by Apple and its supplier, Catcher Technology. Labor violations at the factory included “excessive overtime work, long work shifts while standing, a lack of occupational safety training and heavy dust in the workplace.” Subsequent investigations, 16 months after the initial investigations, found that working conditions had not improved and, in some cases, had worsened.

The 22 labor violations documented include discriminatory hiring practices, insufficient safety training, and a lack of protective equipment provided to workers handling toxic chemicals. Fire exits were blocked, while flammable alloy dust and shavings filled the air. Working overtime was mandatory for all workers, who were forced to work up to 100 hours of overtime per month, almost 3 times the 36-hour limit prescribed by Chinese law. Apple replies it has sent a team to investigate operations at the factory.

China continues to be Apple’s largest source of suppliers, in addition to being the place where nearly all Apple products are assembled. But factory safety for workers assembling Apple products has come under close scrutiny in recent years. About 150 Chinese workers at Foxconn threatened to commit suicide 2 years ago unless their working conditions were improved. Earlier this year, an Apple audit uncovered human rights violations at different levels of its supply chain, including abuses of migrant laborers and the use of underage workers. In response, Apple has increased supplier audits from 173 in 2012 to 451 last year.

On a separate note, the release of the iPhone 6 this week is expected to add 1% a month to China’s export growth for the rest of 2014.

Classroom discussion questions:

1. Why do these supplier problems persist?

2. What more can Apple do?

OM in the News: Trying to Close French Factories Can Lead to “Boss-napping”

Workers set tires on fire at this French Goodyear plant where 2 execs were held hostage

Negotiations broke down last week at a Goodyear tire factory scheduled for closing in northern France, so employees kidnapped the bosses. Hundreds of employees held two senior executives captive, threatening to detain them until the company agreed to pay out “huge amounts of money” to nearly 1,200 workers about to lose their jobs. The revival of the French unions’ “boss-napping” tactic clearly causes concerns of multinationals about France as a place to locate, reports The New York Times (Jan. 8, 2014). “This happened because workers were desperate,” said a French prof. “But it is still an act that will underline the perception that it’s difficult to do business in France.”

Tension at the Goodyear plant flared last year after Maurice Taylor, CEO of an American tire company, Titan International, rejected a government appeal to step in and buy the plant. Taylor described French workers as loafers of minimal productivity. “In the U.S., we call this kidnapping,” he stated. “These people would be arrested and prosecuted. But in France, your government does nothing — it’s crazy.”

France’s rigid labor market and the influence of labor unions has long been a source of aggravation to employers. The country’s 3,200-page labor code embodied what the government acknowledged was a “cult of regulation” that choked business. Procedures for shedding workers when economic conditions deteriorate are lengthy and expensive, and businesses pay high taxes to help fund France’s social welfare system. For an employee earning 1,200 euros a month, employers pay an additional €1,000 in tax and pension costs. Unions at the Goodyear plant had been demanding severance packages of €80,000 ($110,000) plus €2,500 for each year worked.

In recent years, French employees took executives of Caterpillar hostage when talks over revamping the company’s operation broke down, trapped the CEO of the group that owns Gucci, while bosses at 3M and Sony were held in an attempt to get bigger severance packages.

Classroom discussion questions:

1. How else can companies in France deal with overcapacity?

2. Why does the French government seem to favor unions?

OM in the News: They Call it “The Chasing-Out Room” in Japan

Unwanted employees are made to feel forgotten

Shusaku Tani is employed at the Sony electronics plant in Tagajo, Japan, reports The New York Times (Aug. 17, 2013) front page story, but he doesn’t really work. For more than 2 years, he has come to a small room, taken a seat and then passed the time reading. Sony consigned him to this room because it can’t get rid of him. His position at the Technology Center was eliminated, but Tani, 51, refused to take an early retirement offer in 2010 — his prerogative under Japanese labor law. So there he sits in what is called the “chasing-out room.” “I won’t leave. Companies aren’t supposed to act this way. It’s inhumane,” he states.

The standoff between Sony workers and management underscores an intensifying battle over hiring and firing practices in Japan, where lifetime employment has long been the norm and where large-scale layoffs remain a social taboo. Economists say bringing flexibility to the labor market in Japan would help struggling companies streamline bloated work forces to better compete in the global economy. Fewer restrictions on layoffs could make it easier for Sony to leave loss-ridden traditional businesses and concentrate resources on more innovative, promising ones.

Sony offered workers early retirement packages that are generous by US standards–severance payments equivalent to as much as 54 months of pay. But the real point of the rooms is to make employees feel so bored and shamed that they just quit. Labor practices in Japan contrast sharply with those in the US, where companies are quick to lay off workers when demand slows or a product becomes obsolete. It may be cruel to the worker, but it usually gives the overall economy agility.

Discussion questions:

1. Have the “chasing out rooms” been successful?

2. Why did Detroit automakers eliminate their version of the rooms (called “rubber rooms”)?

OM in the News: Why Indian Firms Outsource Even More Than American Ones

The front page headline in the New York Times (Dec.2,2011) reads “Outsourcing Giant Finds It Must Be Client, Too”, describing how most employers in India rely on contract hiring agencies to avoid India’s restrictive labor laws. India, of course, is known the world over as a prime innovator of outsourcing for foreign firms which take advantage of its cheap, English-speaking labor force. Less well-known is the extent to which Indian companies outsource their own jobs within their own country.

To skirt laws that prevent companies from laying off workers, Indian firms hesitate to hire permanent employees, instead turning to firms like TeamLease to field “temporary employees”. Factories employing more than 100 workers, for example, are not allowed to lay off employees without government approval. Economists assert that firms will continue the outsourcing trend, although they are reluctant to admit to it because of political and societal pressures. Already, 1/4 of India’s industrial laborers and perhaps 1/2 of service sector workers are on outsource contracts.

Walk into any of India’s shiny new shopping malls and many of the store clerks, janitors, and security guards will be on the payroll of outsourcing companies. Firms like TeamLease supply workers who are paid half of what a “permanent employee” can earn, with few benefits to boot. Today, one of TeamLease’s biggest clients in India is Whirlpool. It has hired 1,850 salesmen for the American giant and sent them to stores to sell appliances. This avoids the myriad of employment laws and taxes that differ by region and simplifies Whirlpool’s entry into a new market.

Discussion questions:

1. How does outsourcing impact Indian companies and employees?

2. What are the disadvantages of outsourcing in general?