by James C. Hyatt

The Fair Labor Association reported the results of “the equivalent of a full-body scan” of working conditions at three Chinese factories operated by Apple Inc.’s major supplier Foxconn, and said both companies have pledged to bring their practices up to compliance with Fair Labor code standards.

Apple FactoryThe FLA said its nearly month-long investigation “revealed serious and pressing noncompliances with FLA’s Workplace Code of Conduct, as well as Chinese labor law.” The findings called for a detailed set of remedial measures to protect employee health and safety, reduce worker hours to legal limits while protecting worker pay, and establish “genuine avenues” for workers to provide input on company decisions.

Apple joined the FLA earlier this year following intense public attention over allegations of widespread problems at Foxconn, China’s largest private employer.

The FLA said both Apple and Foxconn “have agreed to ongoing assessments by FLA in order to ensure that labor practices meet FLA standards and remain in compliance for the long term.”

The FLA monitors factories in the supply chains of affiliated companies to assess compliance with FLA standards and requirements; most of its more than 30 participating companies are clothing and footwear makers.  (At the time Apple joined the FLA, there was considerable comment that the FLA inspections weren’t as rigorous as critics might like.)

Compensation Not Meeting “Basic Needs”

In its report, released March 29, the FLA said its staff had put in 3,000 hours investigating three Foxconn factories and surveying more than 35,000 workers.

The probe found that within the last 12 months, all three factories exceeded the FLA standard of 60 hour work weeks (including overtime) and the Chinese legal limits of 40 hours a week and a maximum of 36 hours maximum overtime per month.

According to FLA’s worker survey, 64 percent of employees said that “compensation does not meet their basic needs.”  FLA said it will conduct a cost of living study in Shenzhen and Chengdu to assist Foxconn in determining whether worker salaries meet FLA requirements for basic needs, as well as discretionary income.

“The assessment found that unscheduled overtime was only paid in 30-minute increments,” FLA reported.  “This means, for example, that 29 minutes of overtime work results in no pay and 58 minutes results in only one unit of overtime pay.”

FLA said it had also observed serious issues in areas such as health and safety, worker integration and communication, treatment of interns, and enrollment in China’s social security system.

The FLA report said Foxconn had agreed to revised its compensation packages to make up for the lost overtime, and would hire thousands of additional workers.

Broad Implications

The agreement likely will ripple through the Chinese electronics assembly sector, Reuters reported.

“Apple and Foxconn are obviously the two biggest players in this sector and since they’re teaming up to drive this change, I really do think they set the bar for the rest of the sector,” FLA President Auret van Heerden told Reuters in an interview. The Apple-Foxconn agreement may also raise costs for other manufacturers who contract with the Taiwanese company, including Dell Inc, Hewlett-Packard, Amazon.com Inc, Motorola Mobility Holdings, Nokia Oyj and Sony Corp.

Apple has confronted pressure on labor issues for a number of years, including from socially responsible investment firms.  Adam Kanzer, Managing Director and General Counsel of Domini Investments, said: “I think this is a very good day for the FLA, and for Apple as well. Together, they have demonstrated the power of transparency. The problems at Foxconn that were uncovered by the FLA are endemic in factories around the world — this is not solely an Apple problem, but Apple is the only company in its industry that has committed to this level of transparency.”

“It is too early to tell whether conditions will actually change at Foxconn, but I believe this public investigation has moved the needle,” Mr. Kanzer added. “The FLA audit appears to have been rigorous and credible, and I expect to see more companies following Apple’s lead. Millions of workers stand to benefit.”

Some critics were skeptical about the promised improvements for workers.  ““In theory it’s an improvement, but it actually has to happen. Without an effective oversight mechanism there is no accountability,” said Justin Feldman, health and safety advocate for Public Citizen, an advocacy group.  Mr. Feldman added, ““We just can’t trust the FLA. The FLA has a history of close alignment with corporations. Its board has had corporate representatives on it in the past.”

Meg Roggensack, a senior advisor on business and human rights for Human Rights First, said, “The key to the report’s success…will be implementation of this agreement. Talk is cheap. The steps needed to protect workers in Apple’s supply chain may not be.”

Reuters said the agreement could result in higher prices for consumers, though the impact will be limited because labor costs are only a small fraction of the total cost for most high-tech devices.

Ironically, one of the catalysts for the Apple/Foxconn inspections was a widely broadcast radio episode on This American Life repeating  the assertions of monologist Mike Daisey that his research had turned up examples of worker exploitation at Foxconn.  This American Life later discovered that parts of his material couldn’t be confirmed, and broadcast a lengthy apology.

And Mr. Daisey subsequently has apologized as well, declaring on his blog: “In my drive to tell this story and have it be heard, I lost my grounding. Things came out of my mouth that just weren’t true, and over time, I couldn’t even hear the difference myself.”