Factory for Wal-Mart, JCPenney Goods Shortchanged Guatemalan Workers, Report Says

Jan. 23, 2014 — -- Guatemalan factory workers making blazers and suits for dozens of well-known American retailers, including Wal-Mart, JCPenney, and Kohl's, were allegedly deprived of more than $6 million in wages and benefits when their employer abruptly shut down the business last year, according to a report published today.

"These workers got robbed, completely," said Charles Kernaghan, director of the Institute for Global Labour and Human Rights, which produced the 50-page report on the Alianza factory. "Violations take place in other factories – but in this case the workers were able to document what they were legally owed. That's unprecedented."

Investigators with a Guatemalan workers' rights organization obtained a trove of rarely-seen internal factory records, including paystubs, rate sheets, and design specifications from a range of well-known American clothing brands. Twelve years of records for nearly 1,500 employees were used to document what Kernaghan says was an attempt to prevent workers from collecting overtime pay, health care benefits and pensions.

While more than 1,200 workers sewed garments in the factory in a typical year, the company only submitted applications for 65 workers per year to receive benefits, the report said. The 548 workers who were employed when Alianza closed last year had already worked an average of 4.5 years without benefits, and were owed an average of $2,069, investigators found.

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The report said workers were also deprived of extra pay they were entitled to receive for work during Christmas and summer holidays, that can typically amount to two months-worth of paychecks.

The report says records were also used to document the presence of clothing being manufactured for dozens of American companies doing business with the Alianza Fashion factory in Chimaltenango, Guatemala – either directly or through middle men. Records indicated, for instance, that Wal-Mart paid $4.25 for the production of a women's blazer that retailed for $21.88. Workers who sewed the blazer were paid a base wage of $1.05-per-hour, the report says.

ABC News contacted officials with Wal-Mart, JCPenney, Kohl's and Macy's, all of which appear in records to have sold clothing produced at Alianza.

JCPenney said it has not sourced clothes to Alianza in more than six years, and officials there thought the payroll problems there had been resolved in 2011.