Students & Scholars Against Corporate Misbehaviour

Telephone: (852) 2392 5464 Fax: (852) 2392 5463 Email: sacom@sacom.hk Website: www.sacom.hk Mailing Address: P.O.Box No. 79583, Mongkok Post Office, HONG KONG

LOCOG's Empty Promise to Respect Labour Rights: Olympic mascots made in sweatshops
23 January 2012

Introduction
The London Organising Committee of the Olympic and Paralympic Games (LOCOG) expects to generate at least GBP 86 million from sales of London 2012 merchandise. Among the merchandise, the majority of products feature the official mascots, Wenlock and Mandeville, and the Team GB mascot, Pride-the-Lion. In 2008, LOCOG issued sustainable and ethical sourcing codes with the aim of ensuring that all products associated with LOCOG are produced under internationally acceptable social standards. In terms of labour practices, the codes refer to the provisions of the Ethical Trading Initiative (ETI) Base Code which spells out that workers should receive at least the minimum wage as specified in their national legal standards and have a contract defining their terms of employment and payment. The ETI Code also states that punitive fines are prohibited and that working hours should not be excessive. Regrettably, LOCOG has not issued any lists detailing the firms that supply goods to the licensees. Moreover, there have been no reports on the levels of compliance with the code by these suppliers. Consumers are kept in the dark about the conditions in which the goods are produced. In summer and autumn 2011, Students & Scholars Against Corporate Misbehaviour (SACOM) investigated the Yancheng Rainbow Arts and Crafts Company, a manufacturer of Wenlock,

Mandeville and Pride-the-Lion goods in Dafeng City, China. The factory is also a supplier to Disney. This investigation revealed numerous violations of workers' rights violations in the Rainbow Factory, which puts it far outside the promises of the code. The following are the major labour rights violations found in the factory: - Workers are told to tell lies to the auditors during factory inspections. - No labour contract is given to workers. - The factory does not pay a basic salary to workers. - Workers do not know about the piece rate before production. - Overtime premium is not paid in accordance with legal standards. - Sewing workers have muscle fatigue, due to the repetitive work, and cloth-cutting workers have to stand during the whole day. - No paid maternity leave for workers. The quality control of Olympic products is demanding. It is very difficult to produce the mascots. There cannot be any flaws. Although they are Olympic products, the unit price is lower than for other products. I am not proud of making the mascots at all, explained one sewing worker. According to the workers, the Olympic products were to be sent to the British companies, Golden Bear and John Lewis. It is disappointing that the client puts so much effort into quality control of the products but turns a blind eye to the labour rights violations. The Rainbow Factory is a primary labour rights violator and Golden Bear and John Lewis failed to examine the working conditions at their supplier. Nevertheless, LOCOG cannot evade its responsibility for enforcing its own sustainable and ethical sourcing codes.

Wenlocks and Mandevilles.

SACOMs Demands to LOCOG and IOC

The rampant labour rights violations in the Rainbow Factory demonstrate that, at present, the sustainable and ethical sourcing codes are nothing more than pieces of paper. In line with its proclaimed goal of respecting labour rights, LOCOG should:
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- publish the full list of suppliers to its license holders; - conduct selective investigations at the licensees' suppliers to examine the level of compliance and publicise the reports; and - work with the licensees to launch remedial actions in any factory where rights violations are found. The International Olympic Committee (IOC) should establish a policy to prevent violation of labour rights at the suppliers of Olympic products. On top of the demands for disclosure of supplier lists and selective audits at the licensee suppliers, SACOM further demands that the IOC should: - adopt a code of conduct for the suppliers which should include terms like living wages, freedom of association and the right to remedy; and - require the licensees to ensure that every worker, at every supplier, receives a copy of this code.

Contact Persons
CHAN Sze Wan, Debby Project Officer Email: debby@sacom.hk Tel: +852 2392 5464 or +852 6756 8964 CHENG Yi Yi Project Officer Email: yycheng@sacom.hk Tel: +852 2392 5464 or +852 6012 0312

Yancheng Rainbow Arts and Crafts Company

Exterior of Yancheng Rainbow Arts & Crafts Co. Ltd.

Factory Profile
Yancheng Rainbow Arts and Crafts Company is situated in Dafeng City, Jiangsu Province, China. The factory was founded in 1997. The workforce in summer was 100. In November 2011, there were about 60 workers. There are at least 5 production departments in the factory, namely sampling, cloth-cutting, sewing, cotton-stuffing and packing departments. Unlike the toy factories in the coastal area, most of workers are middle-aged citizens from the communities in the vicinity. About 90% of the workers are female. Last summer, the factory's main production goods were Pride-the-Lion and Disney soft toys and Christmas hats.
Address: Telephone no.: Fax no.: Estimated workforce: Clients: No. 8 Xikang Road, Dafeng City, Jiangsu Province, China 86 515 398 3809 86 515 381 4109 60 (low season); 100 (peak season) LOCOG and Disney

Research Methodology
Golden Bear, the licensee of the Olympic mascots, has not revealed its supplier list for public scrutiny. From its research, SACOM found a factory, Rainbow Factory, which claimed that it produced the London Olympic mascots. In summer 2011, a SACOM researcher applied for a job in the factory as an undercover worker to collect first hand information on the working conditions. In the autumn, another SACOM volunteer worked in the factory to establish whether any improvements had taken place. In order to protect the identities of workers, some of the personal information about the interviewees has been changed.

Findings
Labour rights violations in Rainbow Factory are systematic, including a denial of contract, no minimum wage and excessive overtime. The following is a summary of the working conditions in the factory observed by SACOM researchers. Cheating on auditing According to workers, the client of Olympic mascots came to inspect the Rainbow Factory in summer 2011. The shop floor was tidied up before the audits took place. Workers were told to give prepared answers to the auditors. For example, workers had to say that they worked only until 17:30 and did not work any overtime. Furthermore, they had to lie that they were paid on an hourly rate whereas, actually, they work on piece rate. A few interviewees also confided in the researcher that the factory submitted counterfeit time sheets to the auditors. The workers knew nothing about the code of conduct of the brands. It is evident that factory inspection does not help to ensure that working conditions at Olympic merchandise manufacturers meet the labour standards of the codes. Contract A labour contract states the rights and obligations of the employer and employee. Such a contract is a fundamental evidence to prove an employment relationship if there is a labour dispute. Article 16 of the Labour Contract Law stipulates that every worker should have a copy of their contract. However, the Rainbow Factory does not sign any contract with its workers. This constitutes a fundamental violation of the Labour Contract Law. It is also a breach of the ETI code, which provides that workers should have the right to receive information, in written form, about the employment conditions in respect to wages before they enter employment. Wages Most of the workers in Rainbow Factory can earn CNY 1600-1700 per month. For some workers, who are less productive, their monthly salary is as low as CNY 900. Only a few workers who are highly efficient can earn up to CNY 3000 a month. Workers are paid by piece rate. The rate is arbitrary and workers do not receive a pay slip. No basic salary for workers The monthly minimum wage in Dafeng City, Jiangsu Province, was CNY 930 at the time of the investigation. Workers in the Rainbow factory are paid at piece rate and they do not receive a basic salary at all. The composition of the wages of the regular workers is as follow: Unit price x quantity + unit price x quantity x 6% (food allowance) + attendance bonus - social allowance - dormitory fee - fines

Christmas hats for Disney.

Pride-the-Lions.

In other words, if a worker does not work fast enough, they may be paid less than the minimum wage of the city. This is a serious violation of Article 48 of the Labour Law which stipulates that the employer cannot pay a basic salary lower than the minimum wage. Even worse, the piece rate for the product is not transparent. The factory managers decide the piece rate after the workers have completed the order! This means that the firm can manipulate the rate and pay less money to the workers. No overtime premium Article 21 of the Regulation of Jiangsu Province on the Payment of Wages requires employers to pay an overtime premium to piece rate workers if they have finished the production quota within the regular shift. The amount should not be less than 150%, 200% and 300% of the regular piece rate for overtime work on weekdays, weekends and statutory holidays, respectively. Rainbow Factory only pays CNY 1 per hour to the workers for overtime work, which is a breach of the labour law. No pay slip Employers are obliged to issue a pay slip to each worker in line with article 18 of the Regulation of Jiangsu Province on the Payment of Wages. Nevertheless, in this factory, workers can only check their salary on the factory spreadsheet. No pay slip is given to them. Delayed payment The Labour Law states that wages should be paid on a monthly basis and cannot be delayed without reason (article 50). Workers in Rainbow Factory only receive their wages at the end of the following month. Ma Ping, a pseudonym, who works in the sewing department complained, The experienced worker can estimate the piece rate, but it is unfair that we do not know about the money that we can get before we start producing the soft toys. Chen Hui, a pseudonym, is in her late 30s. She has a daughter who is studying in secondary school. She has worked in the factory for one year as a sewing worker. The selling price of the Olympic products must be expensive but we have no chance to share the benefits, Chen said. The client and the factory only care about their profit. They show no interest in the plight of workers, she added. Working hours The seasonality in the factory is obvious. In the low season, usually the first half of the year, workers will have a few days off in a month. In the peak season, there are no days off in the month. Overtime work in the factory is between 90-110 hours per month. The Labour Law limits monthly overtime to 36 hours. That means that overtime in the Rainbow Factory is 2-3 times the legal limit.
Work shift in autumn: 7:30 Work shift begins 11:30 Lunch break 13:30 Work shift resumes 17:30 Dinner break 19:00 Overtime shift begins 21:00 Shift ends

Because of the low piece rate, many workers have to work the overtime shift in order to earn a living. Occupational health and safety In the cloth-cutting department, the work is done by laser fabriccutting machines and manual workers. On the first floor, the ventilation of the cloth-cutting department is poor. When the machines cut the clothes, there is an irritating smell of burning. The supervisor claims there is no harm to workers at all, but the workers are worried that the fumes are toxic. The smell is strong even several metres away from the department. One worker who passed by the department reported that, The smell was harmful to lungs and it makes me retch. Workers, who have to put the clothes in different shapes and send them to the sewing workers, have to stand throughout the day which makes them tiring. The sewing department is the biggest department in the factory. There are about 60 sewing machines. The lighting is sufficient. However, the noise level is high. I cannot hear the music when I listen to songs on Above: Sewing department of the factory. my cell phone, a female worker Below: Cloth-cutting department (manual section). said. Workers have to sit all the time and bend their heads during work. I feel extremely tired as I have to concentrate very closely on the work. I suffer from muscular aches in my waist, back and neck. Even my eyes are very tired, a sewing worker grumbled. Another new worker complained her waist tingled badly after working for a day in the factory. There have also been examples of workers suffering industrial injury when their fingers were punched by the needles of the sewing machines. Chemicals are sometimes used on the shop floor. If the soft toys get stained, workers have to use a cleaning solvent to clean them. Workers do not know the name of the solvent or its chemical composition. The cloth-cutting workers are not issued with face-masks. Likewise, no earplugs are given to the sewing workers.

Zhang Qing, a pseudonym, is in her early forties. She has worked in the factory for over 2 years. It is extremely exhausting to do the sewing work. As a middle-aged worker, I dont have many options, Zhang explained. Li Quan, a pseudonym, told a researcher, Sewing the mascots is complicated. We have to sew about 30 times to make a Wenlock. For a Mandeville, we have to sew at least 54 times. Even skilful workers can only produce 5 dozen Wenlocks in 2 days. We may need one more day to make 5 dozen Mandevilles. Of course, it is tiring because I have to bend my back and neck during work. However, I have to live with the pain. Punitive fines Even though the EIT code states that, deductions from wages as a disciplinary measure shall not be permitted, workers were fined as much as CNY 20-50 for not putting the tools in the right positions or places. A worker was fined CNY 10 because her table was considered untidy. Social insurance Since 2008, the regular workers can benefit from a social insurance scheme. Although social insurance benefits are supposed to be mandatory, by law, this right is not recognised for temporary workers at the Rainbow Factory. Maternity leave Pregnant workers can take leave but without payment. After giving birth to the child, the female worker can continue working in the factory. Food and accommodation Workers have to pay CNY 1.8 per meal. The portions of rice and vegetables are sufficient. Workers grumbled, however, that the taste is not good and there is no meat in the dishes. The dormitory is free but workers have to pay for water and electricity. About 4 persons share a room. The hygiene of the toilets is poor and the corridor is flooded with water sometimes. Workers have to pay CNY 120 if they want a single room in the dorm. There are no facilities for entertainment in the factory.

Exterior of the dormitory.

Toilet of the dormitory.

Conclusion
Most of the interviewees said that the quality requirement for the Olympic products is very demanding. While the licensee has put lots of effort into quality control of the products, they do not care about the violation of labour rights in the factory. Clearly, the code of conduct of LOCOG cannot guarantee decent working conditions for the production workers. Workers sell their labour to the factory to earn a living for their families, but they do not even receive the basic salary and overtime premiums required by law. It is clearly unjust that managers do not disclose the piece rate that workers can earn before production starts and this enables them to depress wages. In order to survive, workers have no choice but extend their working hours. In its public statement, LOCOG says it is determined to ensure that merchandise is not produced in sweatshops. It is disappointing that there are no enforcement measures to ensure that the standards set by LOCOG are actually met. LOCOG should not only look into the problems in the Rainbow Factory and provide remedies to the workers. More importantly, it should develop a policy to prevent further rights violations by publishing the list of suppliers for public scrutiny and select some factories in which to examine the enforcement of the codes.

Appendix: An appeal letter from a Rainbow Factory worker

A young worker who sought a summer job in Yancheng Rainbow Arts & Crafts Factory called on the London Organising Committee of the Olympic and Paralympic Games to respect labour rights. The letter was written in July 2011 and is originally in Chinese.
Dear London Organising Committee of the Olympic and Paralympic Games, My name is Xiao Ming, a year 1 high school student of Dafeng City. I have to earn money to supplement my tuition fee. In the summer vacation, I found a job in Yancheng Rainbow Arts & Crafts Factory. The factory pays us by piece rate. The higher quantity we make, the higher the salary will be. The factory does not tell me how much I can earn. However, I am sure the wage will be satisfactory if I am diligent. After I had started working in the factory, I discovered it was making Olympic products. I worked 8 hours and I could only get CNY 20-30 per day. Sometimes, even less. The piece rate was too low. (In fact, I dont know the piece rate. [I work in the packing department.] Each pack of products has 12-18 pieces, and I can get 20 cents from a pack of products. And I can pack 100-200 bags of products.) I believe it is unfair. LOCOG placed the order at the Rainbow Factory, it should pay a fair wage and monitor the factory to provide decent working conditions, including wage and social insurance. Rainbow Factory does not comply with the minimum wage of Yancheng. (The minimum wage is CNY 930 per month.) I hope that LOCOG will defend its good reputation, comply with the Chinese labour laws and monitor the suppliers of Olympic products to ensure they respect labour rights. Thank you! Yours faithfully, A summer job worker