Liz Claiborne, Inc. - Labor Compliance Program in Year Two1Overview of the Program
Program Features
- Compliance Systems Developed in Year Two
- Improvements in Implementing the FLA Requirements
Overview of the Program
LCI's Standards of Engagement are based on the FLA's Workplace Code of Conduct. In Year Two, LCI increased the size of its Compliance Department, which, as of December 2003, consisted of 4 full-time and 17 part-time staff worldwide. The Vice President of Human Rights Compliance is based in New York and oversees compliance activities in coordination with compliance team members -- some of whom are LCI agents -- located in 9 different countries in East Asia, South Asia, and the Americas. The VP of Human Rights Compliance reports to the Senior Vice President of Corporate Affairs/General Counsel, who in turn reports to LCI's Chairman of the Board and CEO.
In countries where LCI did not possess adequate staff resources, LCI contracted with Global Social Compliance (GSC) to conduct internal monitoring visits and follow-up. In sum, GSC monitored 34 factories on LCI's behalf. In Thailand, Kenan Institute Asia was contracted to conduct 2 compliance visits.
With a view to supplementing LCI Compliance Department activities, LCI quality staff and country managers were instructed to report all noncompliance issues to the Compliance Staff. Such reporting increased in Year Two, particular in the Americas, where in several cases, quality staff actively participated in remediation (e.g., a quality technician with an engineering background has made various health and safety changes in factories). At the executive level, the VP of Human Rights participated in quarterly meetings of the LCI Allocation Committee (which makes decisions about factory allocations for future seasons), as well as monthly executive collaboration meetings and other high-level meetings, where manufacturing, sourcing and compliance issues are discussed.
Features of Liz Claiborne, Inc.'s Labor Compliance Program in Year Two1
A. Compliance Systems Developed in Year Two
LCI reported that it focused considerable attention on Hours of Work and Overtime Wages in Year Two, since these were two of the most common and challenging noncompliance issues encountered by the company. LCI staff reported having used alternative methods to determine working hours in many cases, e.g., reviewing shipping information or broken needle records, and night surveillance of the factory. These findings were also instrumental in measuring whether workers received adequate overtime pay.
LCI focused on this issue in China where monitors had found especially high rates of noncompliance with these standards there, citing issues of double books and workers' understanding of overtime policies. Therefore, the compliance team worked to develop relationships with management that would lead to transparent payroll record-keeping. The company also worked with suppliers to develop overtime policies, requiring that they post them where they were visible for workers to review. LCI also made several follow-up visits and phone calls to key facilities in order to chart their progress in ensuring "reasonable" work hours and fair wage payments.
LCI hosted five vendor workshops in China during the reporting period, which included sessions that focused on payroll records and working hours, and the need for transparency and compliance with regard to these standards. In addition, the VP of Human Rights and LCI's Lead Monitor in Asia held approximately 30 individual meetings with high level representatives of main suppliers during the year to highlight the importance of improvement in this area.
The FLA conducted five (5) independent monitoring visits to LCI applicable facilities in China in Year Two. Of these factories, FLA monitors reported noncompliance with at least one of the three FLA Hours and Wages standards in four facilities. Through correspondence and return visits, LCI staff required various corrective actions, ranging from the purchase of new timekeeping software, to the payment of overtime wages that were not paid to workers who worked Sundays, to policy postings and trainings for workers and supervisors for improved understanding of the pay system. Please see LCI tracking charts to review these reports in detail.
While the company reported that some factories had made improvements (an estimated 20%) as a result of various efforts, the continued high rate of noncompliance with hours of work and overtime standards had led the compliance staff to consider taking more drastic measures -- including ultimately dropping noncompliant facilities from factory lists. The company also reported that it looked forward to actively participating in the FLA's Hours of Work in China project as an alternative means by which to bring about compliance.
Click here to see the Year One report on LCI.
B. Improvements in Implementing the FLA Requirements
- This year, LCI increased internal monitoring from 28% of all active applicable facilities to over 50%, surpassing the company's goal for internal monitoring for the period. Monitoring was targeted at facilities where there was a higher risk of noncompliance, as well as those not monitored in Year One.
- Of the 199 factories that LCI internally monitored in Year Two, almost half received follow-up visits. LCI's Compliance Department conducted 95 follow-up visits in all during the reporting period.
- LCI standardized worker interview questions and procedures for improved factory monitoring. The policy instructs monitors to conduct at least 10 interviews or 5% of the workforce, whichever is greater, in locations that provide worker confidentiality, such as cafeterias or dormitories, or offsite locations.
- In Year Two, all new factories were audited before being approved for sourcing. At least six factories were declined for sourcing because of noncompliance issues, in particular falsified payroll and time records. In at least one case, factory remediation of key issues resulted in LCI's eventually sourcing there.
Click here to see the Year One report on LCI.
1 Please note that this section in no way seeks to capture all of the compliance activities reported to the FLA by companies. Instead, the FLA considers it an overview of company activities that will provide the reader with a better understanding of each company's approach and focus in Year Two.
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