Nike Told to Compensate Workers in High-Profile Labour Controversy

A human rights monitor has recommended Nike help compensate workers who were furloughed without pay by a supplier in Thailand early in the pandemic.

Though the companies acted within the bounds of the law, the high-profile dispute was worsened in part because the sportswear giant failed to live up to its own labour standards, an independent investigation commissioned by the Fair Labor Association has found.

Nike and the supplier should devise a plan to pay around $140,000 to compensate affected workers, the investigation concluded.

The FLA is a network of universities, civil society organisations and companies initially set up to monitor working conditions overseas in response to a sweatshop scandal that engulfed Nike in the 1990s. It now accredits the labour protection processes at 30 brands, Nike included. Members are required to engage in remediation once an investigation has exposed problems.

The current controversy concerns claims that workers at the Hong Seng Knitting factory in Bangkok were coerced into accepting unpaid leave in 2020. It has become a flashpoint for criticism of Nike’s approach to human rights in its supply chain, attracting scrutiny from campaign groups and investors.

The FLA commissioned its own independent investigation in March after receiving a complaint from the University of Michigan, an FLA member which has a long-standing athletics partnership with Nike.

The investigation, published last week, concluded there was no evidence of systemic coercion or illegal action on the part of the factory or brand. However, it identified several “significant issues,” including poor communication, Nike’s sudden exit at the pandemic’s onset and a lack of any complaints mechanism — a breach of Nike’s own standards.

“It is clear that both the brand and the factory share responsibility for these issues,” the investigation found. “Focusing only on compliance with local law and disregarding the actual losses suffered by workers due to the actions (or inactions) of both the brand and the factory would be unfair.”

Some campaign organisations were critical of the findings. Labour advocacy group Clean Clothes Campaign said the investigation justified “blatant worker rights violations.” The FLA has long faced criticism because its funding relies in part on the brands it monitors and accredits — Nike included.

“The report is based on extensive research and access to information,” said Sif Thorgeirsson, the FLA’s senior vice president for investigations and engagement, adding that the investigator spoke to 100 workers and surveyed more than 500 others. “The original reports were done in the midst of the pandemic with access to limited information and I think the numbers and the conclusions that those reports draw are based on the information available to them at the time,” she said.

Investors said the report reflected concerns they have tried to raise with the company for several years with little success. Shareholders first sought to engage with Nike on the matter in 2023, when a coalition of 70 investors with $4.4 trillion in assets under management wrote a letter asking the company to help settle two separate claims of alleged wage theft, one of which was the Hong Seng case.

“The shocking thing for investors was that Nike essentially ghosted us,” said Kees Gootjes, who helped lead the letter writing effort while working at ABN AMRO bank. He is now executive director at Dutch association of faith-based investors De Nieuwe Beurskoers.

“What’s interesting about this report is the lack of transparency and communication [it highlights]. These are the exact same issues that come up at a Nike investor relations level,” said Gootjes. “The pattern seems to be a lack of transparency and communication and therefore a lack of accountability.”

“These are all indications that Nike’s voluntary corporate social responsibility may not be sufficient to safeguard workers from labour rights violations in high-risk countries,” said Sarah Couturier-Tanoh, director of shareholder advocacy at Canada-based proxy voting consultancy the Shareholder Association for Research and Education. “We hope that these findings will prompt Nike to review its due diligence approach.”

Nike no longer sources from Hong Seng, though it does have an ongoing relationship with a joint venture spun out of the business.

The company said it would collaborate with the parties involved to bring a final resolution to the case in line with the FLA’s conclusions and recommendations, even though they go beyond what is legally required.

The FLA said the company is expected to provide an implementation in the coming weeks.