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Mass Dismissal of Workers Following Strike at the factory PT Panarub Dwikarya Benoa in Indonesia

August 14, 2012

Herzogenaurach, 14 August 2012 – On Thursday July 12, 2012 around 1,600 workers from PT Panarub Dwikarya Benoa (PDB), a subcontractor of one of the adidas Group’s footwear suppliers went on strike. The strike was led by SBTGS, one of the two unions in this factory. Among the SBTGS’s demands was a call for back payment of wages owed to workers following sectoral wage increases which were enacted earlier in the year. The strike took place without prior notice or negotiation with the factory. The strike ran for more than a week, but no resolution could be reached between the union and the factory management. The factory offered to negotiate with the union, if the workers returned to work. The union declined this offer and the strike continued. As the strike proceeded the union barred entry to the factory, locking the factory gate, thereby preventing non-striking workers from entering the premises and for those inside to leave the factory grounds.

In seeking to bring attention to the deadlock and the failure of the management to meet their demands, the union held a peaceful demonstration in front of the adidas offices in downtown Jakarta on July 19, 2012. The adidas Group’s social compliance staff met with union officials and encouraged both the union and the factory management to re-engage and to settle their dispute amicably, or seek formal mediation to achieve this. At the time the union confirmed that they were willing to return to the negotiating table with the factory and that workers would be willing to return to work the following day. Regrettably, neither of these stated actions materialised.

Under Indonesian law1, workers who remain absent from their employment for more than 7 days without proper cause can be considered to have voluntarily resigned. On July 23, 2012, 8 working days after joining the strike, the striking workers returned to work, only to be immediately placed on suspension. They were informed that as the strike had been illegal and given the length of time that they had been absent, many had lost their entitlement to employment at the factory. They were advised that each individual case would be reviewed by the factory’s Human Resources department and that they should remain at home pending an outcome. The adidas Group reached out to PDB’s management, calling on them to reconsider their position and re-open discussions with the union, putting aside any alleged legal breaches. This they have refused to do and the management have proceeded with their plans to dismiss the workers. We believe up to 900 workers are affected.

Based on the government waiver the subcontracting factory has no obligation to meet the demands of the workers, but in terms of fulfilment of the adidas Group’s Workplace Standards and supporting policies, PDB is obliged to pay from the date at which the new minimum wages first came into force, which was January 2012. With respect to workers being dismissed on the grounds of illegal strike action, it is the adidas Group’s view that such a determination can only be made by a properly constituted court. In the case of Indonesia, this would be the Industrial Court which hears labour disputes. It is not a matter which the factory itself can determine.

We have raised this case with Indonesia’s Ministry of Manpower and have asked that they take steps to safeguard the rights of the workers. We have also instructed a local labour lawyer to independently review the case and provide us with their legal opinion. Added to which, we have notified the International Labour Organization Jakarta Office of our concerns.

Currently, the adidas Group has no orders with this subcontractor, which acts as an overflow factory for our business partner, PT Panarub. We have therefore reached out to Mizuno, PDB’s main international buyer to secure their support and involvement. At our insistence, the factory has paid out the workers’ wage arrears and holiday (Idul Fitri) bonuses.

We understand that the Ministry of Manpower has called for mediation between the parties, which we believe is a positive step. Both the factory and the union have declared that they are interested in pursuing mediation, although SBTGS has expressed a preference for such mediation to be provided by an independent third party, not by a government agency. We are waiting to hear the outcome of the mediation talks and will continue to closely monitor this case and provide updates going forward.

Until such time as we see a resolution to the issues surrounding the strike we will not permit any of our orders to be place with this subcontractor.

1 Ministerial Decree KEP. 232/MEN/2003 concerning the legal consequences of illegal strikes