- Factories in California owe $1.6 million in back wages and liquidated damages to nearly 1,400 garment industry employees due to violations of the Fair Labor Standards Act (FLSA), according to a press release from the U.S. Department of Labor (DOL).
- DOL investigations found many employees earned well below the federal minimum wage of $7.25 per hour. Some workers earned as little as $4.27 hourly.
- Some employers failed to pay their workers appropriate overtime rates, while falsifying records to cover up the violations.
With a supply chain philosophy of "low cost at all costs," companies often turn a blind eye to what drives down costs. With euphemisms like "low-cost country sourcing" (LCCS), we acknowledge, yet seemingly ignore, that the reason costs are so low is that the cost of labor is low. While that number on a spreadsheet may be enticing, one needs to look into the eyes of those providing the low cost labor to see the real impact.
But as the DOL investigations indicate, one doesn't have to travel to Asia or Africa to see the pressure to keep labor costs down. While these investigations focus on criminal activities associated with money laundering and other criminal action, the cases of wage theft, violations of labor laws, safety violations and poor employee treatment are just too common.
A look into an employee’s eyes on the shop floor told me a lot about the supplier.
Supply Chain Dive
I have made hundreds of visits to suppliers and my focus has always included how employees are treated. When working on cost analysis, I found that companies that shared their employee turnover ratios and labor costs most likely treated employees well. Those with a more adversarial approach to employees often kept these numbers private and responded to requests with disdain.
But to me, a look into an employee’s eyes on the shop floor told me a lot about the supplier. Those that were engaging and willing to share their work were happy employees — most likely paid well and treated fairly. I’d always introduce myself and ask how long the employee worked at the company. Several years on the job, a safe and reasonable workspace and a smile gave me positive insight into a decent organization.
I visited one potential supplier where I got the opposite impression. My first experience was being invited into the president’s office where I was forced to witness him screaming at his senior managers. Next, on a tour of the production area, he made fun of his employees who were sitting in a very cramped and dark workspace.
But what really got me going was a sign on the bathroom door, which was nothing more than a toilet and sink in a small closet that was supposed to serve about 40 people. The sign said, “If occupied immediately return to work and wait.” My last memory was of the president screaming at me when I said they did not meet my company’s positive workplace criteria.
Sadly, treatment of employees may get worse. Historically low unemployment, pressure on wages, decreasing regulation, reduced union advocacy and anxieties in the immigrant community may give cover to those who choose to take advantage of employees. As supply chain professionals, we can advocate for decent treatment of labor by working with suppliers who maintain, at minimum, acceptable standards of labor.