Key Violations at Foxconn's Apple Plants

The Fair Labor Association has published the results of its inquiry into working conditions at Foxconn Electronics Inc. , the Taiwan-based contractor to major electronics companies, including Apple Inc. (Nasdaq: AAPL), which commissioned the investigation.

The inquiry "revealed serious and pressing noncompliances with FLA's Workplace Code of Conduct, as well as Chinese labor law" at some Foxconn facilities, and the contract manufacturer has pledged to address the problems within the next 18 months. It has also announced it would jack up wages at its China plants and bring overtime hours in line with Chinese law and Apple's requirements. Foxconn workers currently work more than 60 hours per week, in violation of Chinese law that caps the work week at 49 hours, including overtime.

I have excerpted below the violations unearthed by the FLA and its proposals for resolving these problems. Each alleged violation is followed by the FLA's "remedial action." The full report is available online: Independent Investigation of Apple Supplier, Foxconn.

1. Working hours: During peak production, the average number of hours worked per week at Foxconn factories exceeded both the FLA Code standard and Chinese legal limits. Further, there were periods during which some employees worked more than seven days in a row without the required minimum 24-hour break.

   Proposed remedy: Foxconn has agreed to achieve full legal compliance regarding work hours by July 1, 2013, while protecting workers' pay. In the next year, tens of thousands of extra workers will need to be recruited, trained and accommodated at the same time as hours worked are progressively reduced per worker.

2. Health and safety: Our assessors identified numerous issues related to inconsistent policies, procedures and practices. The investigation revealed that a considerable number of workers felt generally insecure regarding their health and safety.

   Proposed remedy: Foxconn has agreed to change the system by which accidents are recorded. In the past, only those accidents that caused work stoppage were recorded as accidents. Moving forward, all accidents that result in an injury will be recorded and addressed.

3. Industrial relations and worker integration: Investigators found that workers were largely alienated, in fact or in perception, from factories’ safety and health committees and had little confidence in the management of health and safety issues.

   Proposed remedy: Foxconn has agreed to ensure elections of worker representatives without management interference. All workers will receive a copy of the Collective Bargaining Agreement and new employees will receive information about union activities during their orientation process.

4. Compensation and social security insurance: The assessors discovered that unscheduled overtime was only paid in 30-minute increments. 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. Across China, all workers must have health, accident, social security, unemployment, and maternity coverage, but the system is set up on a provincial and city basis. This means that workers who migrate from other cities or provinces can’t collect their insurance when they return home. Workers are further unmotivated to enroll because of a required co-pay into insurance programs from which they do not benefit.

   Proposed remedy: Foxconn has agreed that the policy and practice relating to such situations warrants improvement; workers will be paid fairly for all overtime and work-related meetings that occur outside regular working hours. After extensive discussions, Foxconn will offer a two-track remedial strategy: to investigate alternative private options to provide unemployment insurance to migrant workers, and work with government agencies to expedite the transportability of benefits. FLA 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.