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

Documents also reportedly show Wal-Mart paying $4 for blazer, retails for $21.

January 23, 2014, 9:23 AM
PHOTO: Alianza worker Magdalena, seen here with the younger of her two daughters.
Alianza worker Magdalena, seen here with the younger of her two daughters.
Institute for Global Labour and Human Rights

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.

Authors of the report dispute that, saying documents they collected show that in 2011, the biggest proportion of Alianza's production was for JCPenney, ordered through a middle-man supplier.

Wal-Mart also said its business with Alianza was conducted through a middle-man supplier.

"Our relationships are with suppliers, and we paid them in full for all merchandise produced in that factory when it was in operation," said Wal-Mart spokesman Kevin Gardner. " As the world's largest retailer, we strive to positively influence global supply chain practices by raising our own standards and improving working conditions in the countries from which we source, and we expect our suppliers to adhere to our standards for suppliers and local wage laws. If we learn of a violation, we take appropriate action."

A spokesperson for Macy's said that a "relatively small amount of private good brands were manufactured for Macy's" at the factory "earlier this decade." Macy's became concerned about previous allegations against the company made by the Institute for Global Labour and Human Rights in 2010, but said the allegations were not confirmed at the time. The company said its supplier has not used to Alianza factory for production since October 2012.

Attempts to reach the owner of the now-shuttered Alianza factory were unsuccessful.

Guatemalan investigator Gabriel Zelada told ABC News that factory workers want to recover payment for their past work, and they want factory owners to pay into the social security system and pensions.

Labor rights groups attempted to share their findings with a number of major retail brands whose clothes were made in the factory. PVH, the clothing company that produces garments with the Tommy Hilfiger and Calvin Klein label, was one of only a handful that responded to them – donating $100,000 to the workers who lost their jobs when the factory closed. Those workers were each paid $125 from the fund this month, according to the report.

"The 59 other labels should follow the lead of PVH. Each should contribute $100,000 so that the Alianza workers can be paid at least the back wages and benefits they are owed and desperately need," the report says.

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