|Apple Probe May Lead to Price Hikes|
|By JOANNA STERN (@joannastern)||Mar 29, 2012, 5:13 PM|
The Fair Labor Association (FLA) has released the results of its independent investigation of Apple's Foxconn supplier based in China, and has found "serious and pressing noncompliances" with its Workplace Code of Conduct and Chinese labor law, with forced overtime as the top concern.
As a result, Foxconn has promised to lower overtime hours without lowering pay, a move that could raise the cost not just of Apple products but all electronics.
"Social responsibility has a cost. We are asking factories to make significant investment. We all have to be willing to share that cost," Auret van Heerden, the President and CEO of the Fair Labor Association, told ABC News "Nightline's" Bill Weir in an interview.
After a month-long investigation, which included interviews with 35,000 randomly selected Foxconn workers and in-depth surveys of all of Apple's production lines, the FLA has concluded that there are excessive overtime and overtime compensation issues and health and safety risks within the Chinese factories that make popular Apple products, including iPhones, iPads, and MacBook laptops.
"We found over 50 findings. Findings are either a violation of the law or the code, or just a gap in the management system, which represents a risk, which could lead to a non-compliance in future," van Heerden said.
Overtime Issues and Remedies
The report focuses on four main violations: workers' health and safety, worker integration, wages, and working hours.
Workers' hours and overtime payment issues are the main focus of the 13-page report. Within the last 12 months, at all three of Apple's Foxconn factories -- in Guanian, Longhua, and Chengdu -- the average employee worked over 60 hours per week, the FLA found. The legal limit is 49 hours per week, including overtime.
"There were periods during which some employees worked more than seven days in a row without the required minimum 24 hours break," the report says.
It was also discovered that 14 percent of workers did not receive compensation to which they were entitled for overtime. Unscheduled overtime is only paid in 30-minute increments, meaning that if someone works 29 minutes they will not be paid.
Along with the findings are remedies. Foxconn has vowed to comply with the Chinese legal limits and the FLA standards; by July 1, 2013, the factory has promised to reduce worker hours and stabilize pay.
But to do that, the report said, it will need to increase the number of workers to maintain the same level of production output. While employees will be working less, Foxconn promised it will ensure that workers do not lose income due to the reduced overtime.
Foxconn recently raised the wages of workers by 25 percent, but workers told the FLA survey that the wages still don't meet their basic needs. A cost of living audit in the locations of the factories will be conducted.
Additionally, Apple and Foxconn have agreed to pay any worker retroactively who hasn't received the correct overtime wages. Another audit is being conducted now to determine that amount.
"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," the report says.
Van Heerden implied this could affect either the number of products Apple can ship or the price. "We have to be ready to put our money where our mouths are," he added.
Apple recently recorded record sales of its new iPad; three million were sold in their first weekend on the market. Apple would not comment on the impact this might have on product supply and prices.
Health and Safety Concerns
This audit was partly prompted by two explosions at two factories in Chengdu last year, in which 77 workers were injured and four were killed. Workers reported that they are worried about their safety and health, especially after the explosions.
With over 43 percent of workers reporting that they have experienced or seen an accident, Foxconn said it is now committed to more closely monitoring health and safety issues. A number of health and safety violations, including blocked exits and protective equipment have already been remedied.
Foxconn said it is also taking steps to bring workers into the conversation. It has agreed to "enhance workers' participation in committees and other union structures," says the report.
In line with what ABC News Nightline exclusively reported in February, the FLA report says that no issues of child labor, forced labor or payment of the legal minimum wage were discovered at the factories. The FLA said it had "unfettered access" within the factories.
Apple and Next Steps
Apple's promises are not detailed directly in the report, but in a statement the company said it will comply with the FLA's recommendations.
"Our team has been working for years to educate workers, improve conditions and make Apple's supply chain a model for the industry, which is why we asked the FLA to conduct these audits," Apple told ABC News. "We share the FLA's goal of improving lives and raising the bar for manufacturing companies everywhere."
However, Taren Stinebrickner-Kauffman, the Founder and President of SumOfUs, an actvist group based in Washington, DC, says Apple's made these promises before. "The promises are empty until we see actual improvement in workers lives."
Stinebrickner-Kauffman also called attention to the July 2013 date. "Foxconn will be breaking the law for the next 15 months. If Foxconn can't hire workers quick enough, Apple would just have to reduce demand. We shouldn't be buying things that are produced illegally."
Apple CEO Tim Cook has been in China all week, meeting with local business as well as visiting Foxconn. Former Apple CEO Steve Jobs never visited China or Foxconn when he was CEO of the company.
Still, Van Heerden said he is confident that Foxconn will make the changes recommended in the report. "I know they will do this because we will monitor it. And they have made this commitment publicly now. It is such a high profile and major commitment, there is no way they wouldn't do it."
Full Disclosure: Apple and the Walt Disney Company, the parent company of ABC News, have strong ties. Disney CEO Bob Iger serves on the Apple Board of Directors.