Four Firms Settle in Saipan 'Sweatshop' Case

Terms Will Include Independent Monitoring of Garment Facilities

As part of a settlement in a federal class-action lawsuit, Cutter & Buck Inc., Gymboree Corp., J. Crew Group Inc. and Nordstrom Inc. agreed to independent monitoring of their Saipan contractors in an effort to prevent worker abuse and comply with U.S. labor laws and international human rights standards. The measures will be financed by the companies through a $1.25-million fund, which also will be used to compensate workers, develop a worker education campaign and pay legal fees.

The lawsuit, filed on behalf of more than 50,000 past and current garment workers in Saipan, is one of three lawsuits filed in January 1999 that charges upstream retailers and apparel firms with sweatshop abuses, including indentured servitude and human rights violations. (See "Will Saipan Legal Battle Stretch the Limits of Liability?" Bobbin, May 1999.) It is the first legal attempt to hold U.S. retailers and apparel companies responsible for mistreatment of workers under the Racketeer Influenced and Corrupt Organizations Act (RICO) and Alien Tort Claims Act, also known as the Law of Nations.

The terms of the agreement also have been extended to cover charges for the four companies in one of the other two lawsuits, which was filed in state court in San Francisco, CA. It alleges that the companies engaged in unfair business practices and asserts that they were trafficking "hot goods" by falsely advertising their clothing as "Made in U.S.A." Additional settlements also are expected in the case, including an "agreement in principal" worked out during pre-litigation with Chadwick's of Boston Ltd., Donna Karan International Inc., Phillips-Van Heusen Corp. and Polo Ralph Lauren -- all of which were to be named defendants. However, several top companies including The Gap, Wal-Mart, Tommy Hilfiger USA Inc, among others, continue to defend allegations of wrongdoing.

In a phone conference following the settlement, Al Meyerhoff, Milberg Weiss Bershad Hynes & Lerach LLP, the lead attorney for the plaintiffs, stated: "This is the first domino. There is no legitimate reason why the other defendants in this case, such as Wal-Mart, JCPenney and Sears, could not agree to these same terms today. [The remaining defendants] now face a difficult choice ... whether they want to resolve the problems in Saipan or whether they want to spend millions of dollars in litigation."

Medea Benjamin, director of the corporate accountability campaign at the San Francisco-based human rights organization Global Exchange, one of the plaintiffs in the lawsuits, told Bobbin: "The reason we took the retailers and contractors to court is that [we feel] they are responsible for [the employment] conditions of the workers who make their products. And the four companies that have settled are basically saying that they agree. They've taken responsibility and stepped up. [The settlement] sets a precedent of responsibility. Companies that haven't settled ... look morally bankrupt."

The companies stepping up to the plate, however, claim the avoidance of excessive litigation as one of the main reasons for coming to terms with the plaintiffs. As Erik Nordstrom, co-president of Nordstrom, pointed out in a press statement: "A long, drawn-out legal battle didn't make good sense to us even though we remain confident about our ability to successfully defend ourselves in these lawsuits. We feel these resources are better spent elsewhere and could be used toward making a good faith effort to furthering our commitment to using vendors who comply with the law."

Spokespersons at Cutter & Buck, J. Crew and Gymboree issued similar statements, emphasizing that while the settlement reaffirms their commitment to the cause, they still stand behind the vendor compliance and monitoring standards they had in place before the lawsuits. Gymboree, for example, said that it settled all claims made against the company in the two lawsuits, but denied having liability, while a representative at Cutter & Buck called the settlement a "business decision" in an Associated Press report.

"We have checked and double-checked our own monitoring of vendors to assure ourselves that our manufacturing partners were treating workers well," said Gymboree vice chair and CEO Gary White in a statement from the company. "While we are comfortable with the processes we had in place, we are pleased to support the greater safeguards embodied in this agreement."

These "safeguards" will include independent monitoring by Amherst, MA-based Verite, a non-profit organization that offers customized research, consulting and education services, compliance audits and inspections of facilities with regard to global sourcing issues. The organization has performed hundreds of inspections in more than 32 countries and has worked with a number of U.S. companies, including Patagonia Inc. and The Timberland Co.

In regard to Cutter & Buck, Gymboree, J. Crew and Nordstrom, the monitoring agreement reached with this settlement gives Verite plenary power in the Commonwealth of Northern Mariana lslands (C.N.M.I.) to order contractors to comply with various standards. Verite can require contractors to eliminate recruitment fees, in addition to assuring they pay for overtime work and that their facilities are in compliance with basic human and civil rights, including adequate living conditions and safe food and water. If of contractors are found in violation of these standards and fail to correct problems, they risk losing their contracts with the U.S. companies.

In the monitoring process, the organization will conduct announced and unannounced visits to facilities and investigate worker complains. In addition, any violations will be made available to the public.

"'Independent monitoring' is a buzzword that gets thrown around a lot. But in this case, it's different. This is the first time to my knowledge that a judicially enforceable, truly independent monitoring party has been agreed upon," said the plaintiffs' lead attorney Meyerhoff.

In an interview with Bobbin, Mil Niepold, account director at Verite, explained that educational programs and open communication with workers, such as entrance and exit interviews, also will be key ingredients of the monitoring program. "Lack of information has allowed this culture to flourish," she explained. "We will create specific mechanisms to ensure that in the future workers are aware of their rights and that abuses do not continue."

While the settlement has no legal impact outside of Saipan, it certainly adds some additional pressure for companies remaining in the lawsuits, and its effect could reverberate throughout the global sourcing community.

"This has particular significance for companies sourcing in countries with a 'guest-worker' culture. It puts companies on notice that there are inherent abuses in such places and lets them know that they can be held accountable for them," concluded Global Exchange's Benjamin.

At press time, the settlements still required the approval of U.S. District federal judge Christina Snyder, and with a barrage of motions -- ranging from moving the case to Saipan to dropping the case entirely -- being filed almost daily by an army of lawyers, all parties involved agree this issue is far from being resolved.

COPYRIGHT 1999 Miller Freeman, Inc.
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