"Failure to Pay Terminal Benefits at Violet Apparel (Cambodia) Co., Ltd", 14 June 2023

This report details the findings and recommendations for corrective action of the Worker Rights Consortium (“WRC”) concerning the failure of Ramatex Group to pay terminal benefits to workers at its factory, Violet Apparel (Cambodia) Co., Ltd. (“Violet Apparel”), thereby violating Cambodia labor law...

...Violet Apparel manufactured Nike-branded clothing until 2020. This work was subcontracted from the factory’s sister facility, Olive Apparel. From 2017 to the present, Nike has publicly listed Olive Apparel on its corporate website as a Nike supplier...

The WRC’s investigation found that, in June 2020, Ramatex dismissed all of the factory’s 1,284 workers with less than one week’s notice, without paying compensation in lieu of such prior notice, as the law and both Nike’s and Matalan’s stated policies require. The WRC determined that Ramatex also violated Cambodian law and its supplier codes by failing to pay workers full terminal benefits...Full terminal benefits, including damages, is legally mandatory in all cases, unless the employer can demonstrate that workers were terminated for a legally valid cause, which the WRC has determined Ramatex did not have.

...11 the country’s labor dispute mediation and adjudication bodies failed to hold Ramatex accountable for its lawbreaking and repeatedly denied workers a fair hearing and meaningful redress. First, the Cambodian government’s Ministry of Labor and Vocational Training (“MLVT” or “labor ministry”) issued an illegal proclamation stripping garment workers of a substantial portion of their notice pay. The proclamation...allowed Ramatex to claim it had a legitimate basis for refusing to compensate workers. The MLVT then tried, unsuccessfully, to intimidate the factory’s workers into acceding to Ramatex’s theft of their terminal compensation. After this, the MLVT violated its mandate under the law to promptly refer unresolved labor disputes to Cambodia’s Arbitration Council (“AC”), delaying referral for two months.

After the case was finally heard, the AC refused to make a ruling on notice pay and, on severance, issued a ruling favorable to Ramatex that had no credible basis in the facts of the case....

With respect to the issue of Ramatex’s failure to provide workers with compensation in lieu of prior notice of termination, the AC’s refusal to act broke with almost two decades of its own jurisprudence. Worse, in explaining its refusal, the Council cited the same unlawful labor ministry proclamation that Ramatex has used to defend its actions.

On the question of the factory’s failure to pay workers damages for dismissal, thereby reducing workers’ terminal compensation by nearly half, the AC accepted, without scrutiny, Ramatex’s contention that it needed to fire them, due to a decline in orders from European buyers. Cambodian law places a high burden on a company that seeks to avoid paying full terminal benefits when a worker is dismissed through no fault of their own...To refuse full terminal benefits, including damages, to fired workers, an employer must prove that it had a valid reason to dismiss them. Ramatex provided no evidence to support its claim that it had a valid reason to terminate the Violet Apparel workers; the AC accepted this claim anyway...

This is why, in a recently published report on Cambodia’s deteriorating human and labor rights environment, Human Rights Watch decried the outcome of the Violet Apparel case as the product of a “politically compromised Arbitration Council” that can no longer be relied upon to render independent and impartial decisions in labor disputes.

...Ramatex, with the connivance of the Cambodian labor authorities, and the acquiescence of its buyer brands, has denied its workers their legal right to an estimated US$1.4 million in terminal compensation—for nearly three years. The WRC recommends that Nike, and other current business partners of Ramatex, take immediate action to ensure that the Violet Apparel workers finally receive the full terminal compensation legally due to them.

Unfortunately, Nike, the only one of Ramatex’s current major buyers whose goods were produced at Violet Apparel, has responded by denying that it sourced from the factory, despite conclusive evidence that its goods were indeed produced there...

Nike’s other response has been to cite the AC decision…to defend Ramatex’s actions...Well before the Violet Apparel case, Nike itself joined other leading apparel brands in publicly engaging with the Cambodian labor minister to raise concerns about the reduced independence of the AC. Despite this, Nike continues to cite a decision of that same compromised AC to justify its refusal to use its considerable leverage with Ramatex to secure remediation for the Violet Apparel workers.