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Response to the NLC report about working conditions at the Chi Fung factory in El Salvador

May 18, 2010

Herzogenaurach, 18 May 2010 – The adidas Group learned of the allegations at Chi Fung in late January 2010 and commissioned a respected local member of civil society to conduct an investigation. This team composed of experts in law, business management and health and safety started their work on February 23, 2010. They reviewed payroll documents back to 2006, interviewed dozens of workers on and off site, evaluated factory management systems and processes, as well as a thorough inspection of the production floor’s mechanical infrastructure. The preliminary findings were given to the adidas Group on March 15, 2010. Some of the NLC (National Labor Committee) allegations proved to be true. In all cases of non-compliant activities, corrective action is in process or being implemented.
During the course of the investigation, adidas Group representatives met multiple times with local stakeholders including Chi Fung workers, Chi Fung management, the Salvadoran Minister of Labor, an NLC representative, and other members of civil society. All of these stakeholders contributed to the development of corrective actions, and will be instrumental in verifying remedial progress. Several of the corrective actions were developed with innovative and sustainable mechanisms including a confidential hotline for workers to communicate grievances, an engagement with the El Salvadoran government to review and rule on unregistered compensation programmes, and industrial relations training for supervisors.
Allegations of breaches in employment rights have been addressed. All overtime is being paid correctly and is strictly voluntary. All compensation will be registered with the government, including the incentive programme. Communication channels, one internal and one external, have been implemented to receive employee grievances including complaints of harassment by supervisors. In the instance of health and safety allegations, there are corrective actions in place for bathroom hygiene, the availability of personal protective equipment, electrical wiring infrastructure, and ambient ventilation. Improvements have been made in preventative maintenance procedures, and additional staff assigned to repairs. A surveillance camera which had been installed near the production floor bathrooms and used as part of the factory’s US CTPAT certification has been moved to another location.
The allegation of ineffective auditing is more complex. Previous audits by the adidas Group’s Social and Environmental Affairs staff have identified and remediated non-compliant issues at Chi Fung since 2003. One long time roadblock has been inconsistencies between the findings and enforcement actions from Chi Fung’s buyers and the Ministry of Labor Inspectorate. The adidas Group will continue to engage the El Salvador government in efforts that promote the efficacy of national regulatory agencies and the enforcement of employment, health and safety laws.
While some adidas branded production has been placed in Chi Fung since January 2009, Reebok NFL jerseys have not been made in Chi Fung since September 2008. Current adidas production will be completed and shipped by June 2010. No other adidas Group production has been in the factory since Q3 2008. While preliminary indications from workers and the NLC have noted positive changes during the last 2 months, the adidas Group Social and Environmental Affairs staff will continue to work with the factory management and local civil society to ensure the sustainability of the corrective actions.