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					FLA Audit Profile
Country                                                     El Salvador
Name of Factory                                             530022699F
Independent External Monitoring Organization                Grupo de Monitoreo Independiente de El Salvador (GMIES)
Date(s) in Facility                                         October 29-31 and November 1, 2007
FLA Affiliated Compan(ies)                                  adidas-Group AG
Number of Workers                                           672
Product(s)                                                  Blouses and children's shirts
Production Processes                                        Cutting, piece production, whole packaging

FLA Code/Benchmark                                          Compliance Status Describe noncompliance, risk of             List sources/documentation used          Cite and describe local and/or   Describe notable features implemented
                                                                              noncompliance or uncorroborated evidence of for reference and corroborating          country laws used for additional by factory management or Company
                                                                              noncompliance                               evidence (e.g. worker interviews,        reference
                                                                                                                          factory walkthrough, records
                                                                                                                          review, etc.)
1. Code Awareness
GEN 1: Establish and articulate clear, written workplace      Uncorroborated   There was an adidas labor standards posted,
standards. Formally convey those standards to Company noncompliance            but it is important to mention that since March
factories as well as to licensees, contractors and suppliers.                  2007, factory does not produce for adidas any
                                                                               more; therefore, it was not possible for
                                                                               monitors to know whether the company
                                                                               formally conveyed these standards to
                                                                               licensees, suppliers and subcontractors.
GEN 2: Ensure that all Company factories as well as        Noncompliance       The factory has posted information related to
contractors and suppliers inform their employees about the                     labor standards and once a year workers are
workplace standards orally and through the posting of                          orally informed about these standards. Also
standards in a prominent place (in the local languages                         there is information posted about adidas labor
spoken by employees and managers) and undertake other                          standards. However, most of workers claimed
efforts to educate employees about the standards on a                          they do not know the factories policies and
regular basis.                                                                 procedures meaning it is necessary to
                                                                               develop more effective mechanisms to
                                                                               communicate policies and procedures to
                                                                               workers and to educate them about the
                                                                               standards.
GEN 3: Develop a secure communications channel, in a          Noncompliance    The Company established a communication           Observation tour and interviews
manner appropriate to the culture and situation, to enable                     channel: a telephone number, which workers        with management and workers.
Company employees and employees of contractors and                             could use to report any noncompliance.
suppliers to report to the Company on noncompliance with                       However, this mechanism is limited, because
the workplace standards, with security that they shall not be                  such telephone number was posted in the
punished or prejudiced for doing so.                                           management office which workers rarely
                                                                               pass. Consequently, the possibilities that
                                                                               workers use this communication channel are
                                                                               restricted.
2. Forced Labor
There will not be any use of forced labor, whether in the
form of prison labor, indentured labor, bonded labor or
otherwise.
F.10 Freedom of Movement                                    Risk of            There are no terms which expressly confine       Observation tour and interviews
                                                            noncompliance      workers but at lunch time they are not quite     with workers and management.
                                                                               free to leave the facilities. If they want to go
                                                                               out for lunch (or do anything else) they have
                                                                               to follow a procedure to ask for authorization:
                                                                               first of all, they must talk with the production
                                                                               manager and secondly with the human
                                                                               resources manager. When both have signed
                                                                               the authorization the worker can go out of the
                                                                               facilities, but he/she must justify the leave.
F.14 Forced Overtime                                        Noncompliance      8 workers said they feel pressured to work  Worker interviews                       Overtime can only be agreed
                                                                               overtime. Supervisors or Production Manager                                         upon on an occasional basis,
                                                                               always insist on doing overtime even when                                           when unforeseen, special, or
                                                                               they have said "no" at first.                                                       necessary circumstances so
                                                                                                                                                                   require (Article 170 of the Labor
                                                                                                                                                                   Code)
                                                                                                                                                                                                                                1
FLA Code/Benchmark                                         Compliance Status Describe noncompliance, risk of             List sources/documentation used         Cite and describe local and/or   Describe notable features implemented
                                                                             noncompliance or uncorroborated evidence of for reference and corroborating         country laws used for additional by factory management or Company
                                                                             noncompliance                               evidence (e.g. worker interviews,       reference
                                                                                                                         factory walkthrough, records
                                                                                                                         review, etc.)
3. Child Labor
No person will be employed at an age younger than 15 (or
14 where the law of the country of manufacture allows) or
younger than the age for completing compulsory education
in the country of manufacture where such age is higher
than 15.
CL.11 Child Care Facilities                               Noncompliance       There are no childcare facilities. The lack of   Observation tour and interviews   The Constitution requires
                                                                              worksite children centers is a generalized       with workers and management.      worksite childcare centers for
                                                                              noncompliance in the garment industry in El                                        employees' children (Article 42).
                                                                              Salvador.                                                                          Secondary laws do not contain
                                                                                                                                                                 rules related to this obligation.

4. Harassment or Abuse
Every employee will be treated with respect and dignity. No
employee will be subject to any physical, sexual,
psychological or verbal harassment of abuse.
H&A.1 General Compliance Harassment and Abuse               Risk of           No evidence of systematic abuses, but there Worker interviews and records          Verbal abuse of workers is
                                                            noncompliance     was a case of verbal confrontation between a review.                               included among the prohibitions
                                                                              worker and a supervisor. At first, the worker                                      to employers detailed in Article
                                                                              received a written warning but then she                                            29 of the Labor Code (Grounds
                                                                              appealed and the disciplinary measure was                                          5).
                                                                              revoked by the Human Resources Manager
                                                                              because the worker proved, by means of a
                                                                              witness, that the supervisor spoke to her in an
                                                                              inappropriate way. However, the supervisor
                                                                              then gave her a 2-day suspension. According
                                                                              to the disciplinary policy, disciplinary
                                                                              measures will be adopted by a supervisor in
                                                                              coordination with the Human Resources
                                                                              Manager. The worker decided not to report
                                                                              this act to the Hurman Resources
                                                                              Management in order to avoid "more
                                                                              problems." Auditors reviewed her time card
                                                                              records and, in fact, she did miss 2 working
                                                                              days. She asked us not to comment on this
                                                                              situation with management. Also, 4 workers
                                                                              told auditors that some supervisors display
                                                                              behavior that constitutes verbal abuse. For
                                                                              instance, they use rude words such as "they
                                                                              are good for nothing", or "work, lazy people."
H&A.3 Discipline/Review of Disciplinary Action             Risk of            Written disciplinary policy does not specify     Records review
                                                           noncompliance      what person is responsible to receive an
                                                                              appeal.
H&A.4 Discipline/Fair and Non-discriminatory Application   Noncompliance      Noncomplinace due to the unfair disciplinary     Worker interviews and records
                                                                              rule application by the supervisor against a     review.
                                                                              worker (situation explained in H&A.1).
H&A.5 Discipline/Written Disciplinary System               Risk of            The factory has a system of written          Worker interviews
                                                           noncompliance      disciplinary rules and procedures.
                                                                              Management informs employees twice a year
                                                                              but these rules are not clearly communicated
                                                                              to workers because most of those interviewed
                                                                              did not know the disciplinary procedure and
                                                                              few of them had just a little idea of the
                                                                              disciplinary procedure. No workers knew the
                                                                              procedure completely.



                                                                                                                                                                                                                              2
FLA Code/Benchmark                                                 Compliance Status Describe noncompliance, risk of                 List sources/documentation used         Cite and describe local and/or   Describe notable features implemented
                                                                                     noncompliance or uncorroborated evidence of for reference and corroborating             country laws used for additional by factory management or Company
                                                                                     noncompliance                                   evidence (e.g. worker interviews,       reference
                                                                                                                                     factory walkthrough, records
                                                                                                                                     review, etc.)
H&A.11 Discipline/Verbal Abuse                                     Noncompliance     Noncompliance due to supervisor's attitude,     Workers interviewed and records
                                                                                     supervisor screaming at a worker and then       review.
                                                                                     imposing a disciplinary measure. Human
                                                                                     Resources Manager did not have knowledge
                                                                                     of this situation since the worker decided not
                                                                                     to report it, so management did not have the
                                                                                     opportunity to correct this irregularity.
                                                                                     However, management must take all
                                                                                     measures to make sure workers are not
                                                                                     victims of abuse. Also, 4 workers told auditors
                                                                                     that some supervisors display behavior that
                                                                                     constitutes verbal abuse. For instance, they
                                                                                     use rude words such as "they are good for
                                                                                     nothing", or "work, lazy people."
H&A.15 Security Practices/Body Searches                            Noncompliance       10 workers complained about the way that the      Worker interviews and observation
                                                                                       female security guard conducts the body           tour.
                                                                                       search procedure. Workers also said that the
                                                                                       female security guard is rude. It was
                                                                                       corroborated through the observation tour that
                                                                                       she conducts body searches in such a way as
                                                                                       to make workers feel unconfortable - she
                                                                                       touches female and male workers in an
                                                                                       unnecessary and excessive manner. 1 female
                                                                                       worker said that this security guard had put
                                                                                       her hand under her brassiere.
H&A.16 Punishment of Abusive                                       Noncompliance       There was a case of verbal confrontation          Interviews with supervisors and     Verbal abuse of workers is
Workers/Supervisors/Managers                                                           between a worker and a supervisor in which        workers and records review.         included among the prohibitions
                                                                                       just the worker received a written warning.                                           to employers detailed in Article
                                                                                       The worker appealed and the disciplinary                                              29 of the Labor Code (Grounds
                                                                                       measure was revoked by the Human                                                      5).
                                                                                       Resources Manager because the worker
                                                                                       proved, by means of a witness, that the
                                                                                       supervisor spoke to her in an inappropriate
                                                                                       way. However, the supervisor gave the
                                                                                       worker a 2-day suspension. According to the
                                                                                       disciplinary policy, disciplinary measures will
                                                                                       be adopted by the supervisor in coordination
                                                                                       with the Human Resources Manager. The
                                                                                       worker decided not to report this act to the
                                                                                       Human Resources Management in order to
                                                                                       avoid "more problems." Auditors reviewed her
                                                                                       time card records and, in fact, the worker had
                                                                                       missed 2 working days. The worker asked us
                                                                                       not to comment on this situation with the
                                                                                       management.
5. Non-Discrimination
No person will be subject to any discrimination in
employment, including hiring, salary, benefits,
advancement, discipline, termination or retirement, on the
basis of gender, race, religion, age, disability, sexual
orientation, nationality, political opinion, or social or ethnic
origin.




                                                                                                                                                                                                                                          3
FLA Code/Benchmark                                          Compliance Status Describe noncompliance, risk of                 List sources/documentation used     Cite and describe local and/or   Describe notable features implemented
                                                                              noncompliance or uncorroborated evidence of for reference and corroborating         country laws used for additional by factory management or Company
                                                                              noncompliance                                   evidence (e.g. worker interviews,   reference
                                                                                                                              factory walkthrough, records
                                                                                                                              review, etc.)
D.1 General Compliance Non-Discrimination                   Noncompliance     There is discrimination in gender-based         Observation tour and interviews     According to Article 3 of the
                                                                              assignment of tasks as confirmed in cutting     with management and workers.        Constitution, all people are
                                                                              and ironing positions. There is a lack of                                           equal under the law, and
                                                                              measures to promote the participation of male                                       hereditary employment or
                                                                              or female employees in non-traditional roles or                                     privileges are not recognized.
                                                                              occupations (as is the case of no women in                                          Likewise, Article 30, subsection
                                                                              the cutting and ironing sections). A worker                                         12 of the Labor Code prohibits
                                                                              with a physical disability (deaf-mute) said he                                      employers from establishing any
                                                                              feels that his co-workers make jokes around                                         type of distinction, exclusion, or
                                                                              him. Management has not taken the                                                   preference based on race, color,
                                                                              neccesary measures to avoid this situation.                                         sex, religion, political opinion,
                                                                                                                                                                  nationality, or social
                                                                                                                                                                  background, unless there are
                                                                                                                                                                  exceptional provisions in the law
                                                                                                                                                                  designed to protect the worker.

D.3 Recruitment and Employment Practices (Job               Risk of             This risk was identified at the begining of the Employment application            Article 2 of the 1958 ILO
Advertisements, Job Descriptions and Evaluation Policies)   noncompliance       hiring process. Requesting date of birth in the                                   Convention No. 111 regarding
                                                                                employment application could lead to age-                                         Employment and Occupational
                                                                                based discriminatory distinctions.                                                Discrimination (in which El
                                                                                                                                                                  Salvador is a Participating State)
                                                                                                                                                                  establishes the obligation of
                                                                                                                                                                  Participating States to create
                                                                                                                                                                  and implement a national policy
                                                                                                                                                                  which promotes equal
                                                                                                                                                                  employment and occupational
                                                                                                                                                                  opportunities and treatment.
                                                                                                                                                                  Within the terms of employment
                                                                                                                                                                  and occupation is included
                                                                                                                                                                  acceptance for employment and
                                                                                                                                                                  distinct occupations (Article 1.3
                                                                                                                                                                  of the Convention).

D.5 Marital Discrimination                                  Risk of             Job applications request information          Employment application
                                                            noncompliance       concerning marital status, which is not
                                                                                relevant to job requirements.
D.7 Possible Marriage or Pregnancy                          Risk of             A woman who had just returned from            Records review
                                                            noncompliance       maternity leave could not be interviewed
                                                                                because she had been fired at the moment
                                                                                the audit took place. Management was asked
                                                                                about this situation and they said that their
                                                                                policy is to keep the workers after they have
                                                                                given birth and have been through their
                                                                                maternity leave.
D.9 Protection and Accommodation of Pregnant Workers        Noncompliance       The right of working mothers to 1 paid hour    Interview with management,         The Labor Code stipulates that if
and New Mothers                                                                 daily to nurse her baby is not respected. Also supervisors, and workers.          an employee is nursing her
                                                                                1 pregnant woman said she did not feel                                            child, she has the right to up to 1
                                                                                comfortable with the position in which she                                        paid hour of work interruption
                                                                                performed her work while pregnant. Although                                       per day to do so. By her
                                                                                she has not asked her supervisor for a                                            request, this daily hour can be
                                                                                change of position, the factory does not have                                     divided into two 30-minute
                                                                                a clear policy about the change of positions                                      breaks (Article 312, paragraph
                                                                                for pregnant workers.                                                             2).




                                                                                                                                                                                                                               4
FLA Code/Benchmark                                                Compliance Status Describe noncompliance, risk of                List sources/documentation used     Cite and describe local and/or   Describe notable features implemented
                                                                                    noncompliance or uncorroborated evidence of for reference and corroborating        country laws used for additional by factory management or Company
                                                                                    noncompliance                                  evidence (e.g. worker interviews,   reference
                                                                                                                                   factory walkthrough, records
                                                                                                                                   review, etc.)
D.14 Discriminatory Violence/Harassment/Abuse                     Noncompliance     Also, 4 workers told auditors that some        Interviews with workers.            Verbal abuse is prohibited
                                                                                    supervisors display behavior that constitutes                                      (Article 29, Grounds 5, Labor
                                                                                    verbal abuse. For instance, they use rude                                          Code).
                                                                                    words such as "they are good for nothing", or
                                                                                    "work, lazy people." There is also the case of
                                                                                    the supervisor who screamed at a worker and
                                                                                    then unfairly imposed a disciplinary measure.

6. Health and Safety
Employers will provide a safe and healthy working
environment to prevent accidents and injury to health
arising out of, linked with, or occurring in the course of work
or as a result of the operation of employer facilities.
H&S.1 General Compliance Health and Safety                        Risk of             Visible and accessible information for workers Inspection walkthrough.           The Constitution requires that
                                                                  noncompliance       regarding safety regulations is lacking. In the                                  laws regulate the conditions of
                                                                                      heat transfer area, due to the techniques used                                   workshops, factories, and
                                                                                      to print on fabric, the lighting tends not to be                                 worksites. Furthermore, it
                                                                                      enough (78 lux) and this could affect the sight                                  stipulates that the State shall
                                                                                      of workers.                                                                      provide technical inspection in
                                                                                                                                                                       order to assure faithful
                                                                                                                                                                       compliance with labor,
                                                                                                                                                                       assistance and social security
                                                                                                                                                                       and pension laws (Article 44).
                                                                                                                                                                       Likewise, the Labor Code
                                                                                                                                                                       requires that all employers adopt
                                                                                                                                                                       and implement adequate safety
                                                                                                                                                                       and hygiene measures in the
                                                                                                                                                                       workplace to protect the life,
                                                                                                                                                                       health, and physical well-being
                                                                                                                                                                       of their workers (Article 314).

H&S.4 Worker Consultation                                         Noncompliance       16 workers said that they do not know how the Worker and management
                                                                                      safety policy is developed and implemented. interviews.
                                                                                      Management admitted that they do not consult
                                                                                      workers to develop the health and safety
                                                                                      policy.
H&S.6 Communication to Workers                                    Risk of             Workers know some health and safety            Workers interviews.
                                                                  noncompliance       regulations but the safety policy and
                                                                                      procedures must be communicated in a more
                                                                                      effective way. Despite the annual lecture that
                                                                                      Human Resources Management provides, 16
                                                                                      workers did not know the procedures factory
                                                                                      applies to implement health and safety
                                                                                      regulations and 12 workers did not even know
                                                                                      the health and safety policy.


H&S.9 Evacuation Requirements and Procedure                       Noncompliance       In the aisles the demarcation lines are faded    Observation tour                According to Articles 47 and 59
                                                                                      and need painting.                                                               of the General Safety
                                                                                                                                                                       Regulation, floors and aisles
                                                                                                                                                                       should be clear to avoid
                                                                                                                                                                       accidents from falls or blows,
                                                                                                                                                                       and all work facilities should be
                                                                                                                                                                       equipped to handle a fire.
H&S.10 Safety Equipment and First Aid Training                    Noncompliance       Even though factory has provided a first aid     Observation tour.
                                                                                      kit, there is lack of silverdiazine (cream for
                                                                                      burns), which is necessary for workers in the
                                                                                      ironing section.
                                                                                                                                                                                                                                    5
FLA Code/Benchmark                                               Compliance Status Describe noncompliance, risk of                  List sources/documentation used     Cite and describe local and/or   Describe notable features implemented
                                                                                   noncompliance or uncorroborated evidence of for reference and corroborating          country laws used for additional by factory management or Company
                                                                                   noncompliance                                    evidence (e.g. worker interviews,   reference
                                                                                                                                    factory walkthrough, records
                                                                                                                                    review, etc.)
H&S.17 Ventilation/Electrical/Facility Installation and          Noncompliance     In the heat transfer area, due to the            Inspection walkthrough.             Articles 12, 55 and 60 of the
Maintenance                                                                        techniques used to print on fabric, the lighting                                     General Safety Regulation
                                                                                   tends not be enough (78 lux) and this could                                          stipulate that work facilities be
                                                                                   affect the sight of workers.                                                         artificially lit when natural
                                                                                                                                                                        lighting is insufficient. They
                                                                                                                                                                        should also take necessary
                                                                                                                                                                        measures to avoid accidents
                                                                                                                                                                        caused by contact with electrical
                                                                                                                                                                        conductors, which should be
                                                                                                                                                                        grounded and protected.
                                                                                                                                                                        Finally, visible and easily
                                                                                                                                                                        understandable graphics should
                                                                                                                                                                        be posted in areas were
                                                                                                                                                                        dangerous work is performed, to
                                                                                                                                                                        guarantee safety.
Other                                                            Risk of             Despite the fact that workers do not incur any
                                                                 noncompliance       cost related to personal protective equipment,
                                                                                     the majority of workers in the sewing section
                                                                                     do not use masks when it becomes necessary
                                                                                     to do so in order to prevent respiratory
                                                                                     diseases.
7. Freedom of Association and Collective Bargaining
Employers will recognize and respect the right of
employees to freedom of association and collective
bargaining.
FOA.1 General Compliance Freedom of Association                  Risk of             Management does not have a policy related to Interviews with workers and
                                                                 noncompliance       freedom of association. In the annual lectures supervisors.
                                                                                     that the Human Resources Manager provides,
                                                                                     workers are not informed that they have a
                                                                                     right to constitute workers' associations or
                                                                                     trade unions. In this way, they do not feel free
                                                                                     to exercise freedom of association and
                                                                                     collective bargaining, because they think it
                                                                                     could have negative consequences. 5
                                                                                     workers support that argument.

FOA.2 Right to Freely Associate                                  Uncorroborated      According to 3 workers, around the year 2000 Interviews with workers and
                                                                 noncompliance       a group of workers was fired because of an    supervisors.
                                                                                     attempt to constitute a trade union. Auditors
                                                                                     inquired about this with management but they
                                                                                     said that workers have never tried to
                                                                                     constitute a trade union.
8. Hours of Work
Except in extraordinary business circumstances,
employees will (i) not be required to work more than the
lesser of (a) 48 hours per week and 12 hours overtime or
(b) the limits on regular and overtime hours allowed by the
law of the country of manufacture or, where the laws of
such country will not limit the hours of work, the regular
work week in such country plus 12 hours overtime; and (ii)
be entitled to at least one day off in every seven day period.




                                                                                                                                                                                                                                     6
FLA Code/Benchmark                                Compliance Status Describe noncompliance, risk of                  List sources/documentation used      Cite and describe local and/or   Describe notable features implemented
                                                                    noncompliance or uncorroborated evidence of for reference and corroborating           country laws used for additional by factory management or Company
                                                                    noncompliance                                    evidence (e.g. worker interviews,    reference
                                                                                                                     factory walkthrough, records
                                                                                                                     review, etc.)
HOW.1 General Compliance Hours of Work            Noncompliance     There is a noncompliance in a contract term      Records review and interview with    According to Article 38,
                                                                    which establishes a 44-hour ordinary work        workers and management.              subsection 6 of the Constitution,
                                                                    week when employees really work 47 hours                                              and Articles 161, 163, 166, 168,
                                                                    and 45 minutes per week. That is because                                              and 169 of the Labor Code, the
                                                                    management does not count lunch time as                                               ordinary daytime workday is 8
                                                                    worktime, and consequently does not                                                   hours, and the work week is 44
                                                                    compensate it. Management explained that                                              hours. Likewise, it is stipulated
                                                                    the work day is divided; it considers the                                             that overtime and night work
                                                                    workday to be interrupted by lunch time, which                                        shall be paid with an additional
                                                                    total 1 hour. The 1-hour lunch is not                                                 charge. Day overtime hours
                                                                    considered worktime and therefore not                                                 should be paid twice the wage
                                                                    compensated as part ot the ordinary work day.                                         for ordinary hours, and night
                                                                    This situation is a generalized practice in the                                       overtime should be paid twice
                                                                    garment industy. Article 166 of the Labor                                             plus 25% of ordinary wages
                                                                    Code, related to Article 163 of the same Code,                                        (Articles 142, 169 and 168 of the
                                                                    stipulates that recesses and lunch breaks                                             Labor Code).
                                                                    (which should be no less than 30 minutes
                                                                    each) are indeed considered worktime, and
                                                                    the workday should therefore be considered
                                                                    complete; especially when at lunch time
                                                                    workers are not free to leave the facilities; if
                                                                    they want to do so they must get 2 signed
                                                                    authorizations from management. For all
                                                                    these reason, management does not pay 3.75
                                                                    hours of work per week.
HOW.3 Meal and Rest Breaks                        Risk of             Workers do have 1 hour for taking their lunch Observation tour and interviews       Effective work time includes
                                                  noncompliance       and there are no terms which expressly           with workers, supervisors and      necessary breaks for rest,
                                                                      confine workers but at lunch time they are not management.                          eating and satisfying other
                                                                      free to leave the facilities. If they want to go                                    physiological needs, within the
                                                                      out for lunch (or do anything else) they have                                       workday (Articles 38, Subsection
                                                                      to follow a procedure to ask for authorization.                                     6 of the Constitution and 163 of
                                                                      First, they must talk with the production                                           the Labor Code).
                                                                      manager and secondly with the human
                                                                      resources manager. When both have signed
                                                                      the authorization, the worker can leave the
                                                                      facilities, but he/she must justify the leave.

HOW.7 Maintenance of Reasonable Levels of Staff   Risk of             Factory has dismissed 223 workers between       Records review and interview with
                                                  noncompliance       January 2007 and October 2007.                  management.
HOW.8 Overtime/Reduced Mandated Overtime          Noncompliance       The factory has a system to document            Interviews with management and
                                                                      voluntary overtime consent; however, 8          workers.
                                                                      workers considered overtime not to be
                                                                      voluntary. They feel pressure to work
                                                                      overtime. Supervisors or production manager
                                                                      always insist on overtime even when they
                                                                      have said "no" at first. Management assures
                                                                      that overtime work is voluntary.
HOW.9 Overtime/Positive Incentives                Risk of             15 workers said that management does not        Interviews with management and
                                                  noncompliance       use positive incentives to induce overtime. 8   workers.
                                                                      of them said that they felt pressure to work
                                                                      overtime.




                                                                                                                                                                                                                       7
FLA Code/Benchmark                                             Compliance Status Describe noncompliance, risk of                 List sources/documentation used     Cite and describe local and/or   Describe notable features implemented
                                                                                 noncompliance or uncorroborated evidence of for reference and corroborating         country laws used for additional by factory management or Company
                                                                                 noncompliance                                   evidence (e.g. worker interviews,   reference
                                                                                                                                 factory walkthrough, records
                                                                                                                                 review, etc.)
HOW.10 Overtime/Calculation over Period Longer than            Noncompliance     Based on the regular work day established in Records review and interview with      The ordinary daytime work day
One Week                                                                         the employment contract, all employees work workers and management.                 shall not exceed 8 hours per day
                                                                                 a 47.75-hour work week, exceeding the                                               and the work week shall not
                                                                                 ordinary 44-hour work week established by                                           exceed 44 hours, according to
                                                                                 national law (Article 38, Subsection 6 of the                                       Articles 38, Subsection 6 of the
                                                                                 Constitution and Article 16, paragraph 3 of the                                     Constitution and 161 of the
                                                                                 Labor Code). This means that workers do not                                         Labor Code. However, if the
                                                                                 receive compensation for 3.75 overtime hours                                        Ministry of Labor so approves,
                                                                                 per week. In the packaging area, there was                                          employees and employers may
                                                                                 an instance in which an employee worked an                                          agree to add one extra hour to
                                                                                 average of 64 hours per week during the                                             the workday day to compensate
                                                                                 second week of July which corresponds to                                            for the 4 work hours of the sixth
                                                                                 excessive overtime of 4 hours per week. In                                          day, in order for workers to
                                                                                 another case, a worker in the ironing section                                       enjoy two consecutive days off
                                                                                 worked 64 hours per week during 2                                                   each week, on Saturday and
                                                                                 consecutive weeks (from July 9-14 and from                                          Sunday. (Article 170, Labor
                                                                                 July 16-21, 2007).                                                                  Code)

HOW.11 Extraordinary Business Circumstance/Forced              Noncompliance       10 workers said that in extraordinary business Interviews with management and     Overtime should only be
Overtime                                                                           circumstance the overtime is not voluntary,    workers and review of files.       performed occasionally, when
                                                                                   although they sign the voluntary overtime                                         unforeseen circumstances or
                                                                                   registry.                                                                         special needs require (Article
                                                                                                                                                                     170 of the Labor Code)
HOW.12 Extraordinary Business Circumstance/Overtime            Noncompliance       6 workers claimed that the factory does not     Interviews with workers and
Explanation                                                                        provide them with explanations about            supervisors.
                                                                                   extraordinary business circumstances; they
                                                                                   are just told to sign the voluntary overtime
                                                                                   registry.
HOW.13 Public Holidays                                         Noncompliance       January 16th is a public holiday since 2007,  Records review and interview with   If workers do not have days off
                                                                                   but the factory operated as a normal day. The management.                         and holidays, this work should
                                                                                   Human Resources Manager explained to                                              be remunerated at 50% and
                                                                                   auditors that management agreed with                                              100% more than the ordinary
                                                                                   employees to work this day and that workers                                       salary, respectively. Overtime
                                                                                   could take 2 consecutive Saturdays off.                                           should be remunerated at a rate
                                                                                   However, it was corroborated in 8 cases that                                      of 100% more and 125% more
                                                                                   not all employees rested the following                                            than an ordinary work hour if it is
                                                                                   Saturdays. Also, there were 3 cases in which                                      performed during the day or
                                                                                   employees worked on January 1st and 1 case                                        night, respectively (Articles 175,
                                                                                   in which an employee worked on May 1st.                                           192, 142, 169 and 168 of the
                                                                                                                                                                     Labor Code).
HOW.17 Leave/Retaliation                                       Uncorroborated      There was a case of a worker who was fired      Worker interviews
                                                               noncompliance       after she had been through 84 days of
                                                                                   postnatal maternity leave established by law.
                                                                                   Management said that they always respect
                                                                                   this right to all women who have given birth.
9. Wages, Benefits and Overtime Compensation
WAGES AND BENEFITS: Employers recognize that
wages are essential to meeting employees’ basic needs.
Employers will pay employees, as a base, at least the
minimum wage required by local law or the prevailing
industry wage, whichever is higher, and will provide legally
mandated benefits.




                                                                                                                                                                                                                                  8
FLA Code/Benchmark                                        Compliance Status Describe noncompliance, risk of             List sources/documentation used          Cite and describe local and/or   Describe notable features implemented
                                                                            noncompliance or uncorroborated evidence of for reference and corroborating          country laws used for additional by factory management or Company
                                                                            noncompliance                               evidence (e.g. worker interviews,        reference
                                                                                                                        factory walkthrough, records
                                                                                                                        review, etc.)
OVERTIME COMPENSATION: In addition to their
compensation for regular hours of work, employees will be
compensated for overtime hours at such premium rate as is
legally required in the country of manufacture or, in those
countries where such laws will not exist, at a rate at least
equal to their regular hourly compensation rate.
WBOT.1 General Compliance Wages, Benefits and                Noncompliance   There are noncompliances with regard to     Payroll records, year-end bonus         Day overtime shall be paid at
Overtime Compensation                                                        overtime payment and other legal benefits   records and interviews with             double the rate of ordinary
                                                                             such as year-end bonuses and nursing leave. management, workers and                 wages, and night overtime be
                                                                                                                         supervisors.                            paid at twice plus 25% the rate
                                                                                                                                                                 of ordinary wages. Likewise,
                                                                                                                                                                 overtime in excess of the
                                                                                                                                                                 ordinary work week should also
                                                                                                                                                                 be duly remunerated.
                                                                                                                                                                 (Articles142, 169 and 168 of the
                                                                                                                                                                 Labor Code).
WBOT.5 Holidays, Leave, Legal Benefits and Bonuses        Noncompliance      The 1 paid hour daily benefit for nursing      Payroll review and interviews with   The law requires that if a
                                                                             mothers is not granted, and the year-end       workers and management.              working mother is nursing a
                                                                             bonus did not factory in worker seniority into                                      child, she has the right to do so
                                                                             calculations up to last year. Also, January                                         by interrupting her work for up to
                                                                             16th is a public holiday since 2007, but the                                        one duly paid hour per day.
                                                                             factory operated as a normal day. The Human                                         (Article 312 of the Labor Code).
                                                                             Resources Manager explained to auditors that                                        Likewise, the law stipulates that
                                                                             management agreed with employees to work                                            all employers must provide
                                                                             this day, and workers could then take 2                                             workers with a year-end bonus,
                                                                             consecutive Saturdays off. However, it was                                          including allowances for each
                                                                             corroborated in 8 cases that not all employees                                      year worked, whose average
                                                                             rested the following Saturdays. There were                                          value will be commensurate with
                                                                             also 3 cases in which employees worked on                                           the worker's longevity (Article
                                                                             January 1st and 1 case in which an employee                                         196 of the Labor Code).
                                                                             worked on May 1st.


WBOT.6 Production and Incentive Schemes                   Noncompliance      Usually, workers do not reach their production Production records review,
                                                                             targets and if they want to earn bonuses they observation tour and worker and
                                                                             have to work overtime because the ordinary     supervisor interviews.
                                                                             working day is not enough. Auditors
                                                                             corroborated this situation through worker
                                                                             interviews and by reviewing payroll. Payroll
                                                                             showed that frequently workers do not reach
                                                                             their production targets.
WBOT.7 Payment for All Hours Worked                       Noncompliance      There is a noncompliance in a contract term   Payroll records, contracts, and       The law considers worked hours
                                                                             which establishes a 44-hour ordinary work     interviews with management,           to be all times in which the
                                                                             week when employees really work 47 hours      supervisors and workers.              employee is available to the
                                                                             and 45 minutes per week. Management does                                            employer, as well as necessary
                                                                             not count this 3.75 hours as time worked, and                                       breaks during the workday taken
                                                                             consequently does not compensate it as part                                         for rest, eating, or physiological
                                                                             of the overtime employees work in a week.                                           needs. (Article 163 of the Labor
                                                                                                                                                                 Code). According to Article 167
                                                                                                                                                                 of the same law, these breaks
                                                                                                                                                                 should be at least one-half hour
                                                                                                                                                                 long.




                                                                                                                                                                                                                              9
FLA Code/Benchmark                                   Compliance Status Describe noncompliance, risk of                     List sources/documentation used Cite and describe local and/or     Describe notable features implemented
                                                                       noncompliance or uncorroborated evidence of for reference and corroborating           country laws used for additional by factory management or Company
                                                                       noncompliance                                       evidence (e.g. worker interviews, reference
                                                                                                                           factory walkthrough, records
                                                                                                                           review, etc.)
WBOT.8 Calculation Basis for Overtime Payments       Noncompliance     Even when workers agree with this situation, Payroll records and interviews with
                                                                       the right to paid overtime is constitutional and management, supervisors and
                                                                       inalienable. In addition, it is factory practice to workers.
                                                                       provide workers compensation for the
                                                                       production targets achieved, so management
                                                                       must pay the corresponding bonuses as an
                                                                       incentive provided voluntary. At the same
                                                                       time, factory must recognize overtime worked
                                                                       by employees.
WBOT.10 Premium/Overtime Compensation                Noncompliance       The factory has not complied with applicable Records review and interview with    If workers do not have days off
                                                                         laws regarding holidays. 8 workers worked on management.                          and holidays, this work should
                                                                         January 16th and they were not compensated.                                       be remunerated at 50% and
                                                                         Another 3 workers worked on January 1st and                                       100% more than ordinary salary,
                                                                         1 worker worked on May 1st.                                                       respectively. Overtime should
                                                                                                                                                           be remunerated at a rate of
                                                                                                                                                           100% more and 125% more
                                                                                                                                                           than an ordinary work hour if it is
                                                                                                                                                           performed during the day or
                                                                                                                                                           night, respectively. (Articles
                                                                                                                                                           175, 192, 142, 169 and 168 of
                                                                                                                                                           the Labor Code)
WBOT.11 Overtime Compensation Awareness              Noncompliance       Workers have not been properly informed of       Interviews with workers.
                                                                         the value of overtime, since it is not paid.
WBOT.12 Overtime Compensation for Piece Rates and    Risk of             Since production targets are too high, workers Records review and interviews
Other Incentive Schemes                              noncompliance       must perfom overtime to achieve them.          with workers and management.

WBOT.16 Employer Provided Services                   Risk of             Workers are not free to go out at lunch time.   Observation tour and interviews
                                                     noncompliance       If they want to go out for lunch, they must ask with workers and management.
                                                                         for 2 signed authorizations.
WBOT.17 Accurate Calculation and Recording of Wage   Noncompliance       For the payment of year-end bonuses, factory Records review and interview with    The law stipulates that all
Compensation                                                             did not consider the seniority in the years      workers and management.          employers must provide workers
                                                                         before the audit period (the audit period is:                                     with a year-end bonus, including
                                                                         October 2006-October 2007). The policy of                                         allowances for each year
                                                                         the factory is to divide payment of the year-                                     worked, whose average value
                                                                         end bonus - one part is paid in December and                                      will be commensurate with the
                                                                         the other one when they complete a work                                           worker's longevity (Article 196 of
                                                                         year. Last year, the factory consider seniority                                   the Labor Code). To accurately
                                                                         but only in the payment made in December.                                         calculate the year-end bonus,
                                                                         This year, management told auditors that they                                     the following should be
                                                                         will probably take account of workers' seniority                                  considered: 1) basic wages at
                                                                         to calculate year-end bonuses. Also, overtime                                     the time when the bonus is to be
                                                                         is not paid due to the factory practice to pay                                    paid; and 2) basic wages
                                                                         bonuses instead of overtime as explained                                          calculated by dividing ordinary
                                                                         above.                                                                            wages earned by the worker
                                                                                                                                                           during the 6 months prior to the
                                                                                                                                                           date of year-end bonus
                                                                                                                                                           payment, by the number of
                                                                                                                                                           worked days in that period.


WBOT.18 Accurate Length of Service Calculation       Noncompliance       During 2006, just the portion of the year-end    Personnel files and year-end     According to Article 196 of the
                                                                         bonuses paid in December was calcuted            bonus records.                   Labor Code, all employers must
                                                                         legally; the other portion was not. This year,                                    provide employees with a year-
                                                                         management assured that they will consider                                        end bonus reflecting allowances
                                                                         seniority if economic conditions allow them.                                      for each year of employment.


                                                                                                                                                                                                                        10
FLA Code/Benchmark              Compliance Status Describe noncompliance, risk of                 List sources/documentation used     Cite and describe local and/or   Describe notable features implemented
                                                  noncompliance or uncorroborated evidence of for reference and corroborating         country laws used for additional by factory management or Company
                                                  noncompliance                                   evidence (e.g. worker interviews,   reference
                                                                                                  factory walkthrough, records
                                                                                                  review, etc.)
WBOT.22 Worker Wage Awareness   Uncorroborated    While workers are unaware of how to             Worker interviews
                                noncompliance     calculate year-end bonuses or the value of
                                                  overtime, it was not possible to confirm
                                                  whether or not management had made
                                                  sufficient efforts to explain this information.
10. Miscellaneous




                                                                                                                                                                                                 11
FLA Audit Profile
Country                              El Salvador
Name of Factory                      530022699F
Independent External Monitoring      Grupo de Monitoreo Independiente de El Salvador (GMIES)
Organization
Date(s) in Facility                  October 29-31 and November 1, 2007
FLA Affiliated Compan(ies)           adidas-Group AG
Number of Workers                    672
Product(s)                           Blouses and children's shirts
Production Processes                 Cutting, piece production, whole packaging

FLA Code/Benchmark                   Compliance Status                                                                          Remediation                                                                                                                     Status
                                                         Description of noncompliance, risk of                 Company          Company Remediation Plan                           Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                         noncompliance or uncorroborated evidence of           Internal Audit                                                      Date              (optional)         (cite date of follow-                   On-going
                                                         noncompliance                                         Findings                                                                                                 up)
                                                                                                               (optional)

GEN 1: Establish and articulate clear, Uncorroborated    There was an adidas labor standards posted,                            1. Factory management must ensure to a)             5/6/2008                                                                    Ongoing
written workplace standards.           noncompliance     but it is important to mention that since March                        Disclose any subcontractors to adidas prior to
Formally convey those standards to                       2007, factory does not produce for adidas any                          sending any adidas-Group product to the
Company factories as well as to                          more; therefore, it was not possible for monitors                      subcontractor; b) Conduct an initial assessment
licensees, contractors and suppliers.                    to know whether the company formally                                   prior to working with the subcontractor to ensure
                                                         conveyed these standards to licensees,                                 that such is in compliance with adidas-Group's
                                                         suppliers and subcontractors.                                          new factory approval requisites; c) Provide verbal
                                                                                                                                training to subcontractors on adidas-Group
                                                                                                                                workplace standards; d) Conduct ongoing
                                                                                                                                monitoring activities to ensure subcontractor is in
                                                                                                                                compliance with local/adidas-Group
                                                                                                                                standards/laws; e) Ensure to maintain
                                                                                                                                documentation of any monitoring/training efforts
                                                                                                                                conducted at any possible subcontractors'
                                                                                                                                facilities.
GEN 2: Ensure that all Company       Noncompliance       The factory has posted information related to                          1. Factory management must draft and adopt a        5/6/2008                                                                    Ongoing
factories as well as contractors and                     labor standards and once a year workers are                            new worker induction program and ongoing
suppliers inform their employees                         orally informed about these standards. Also                            factory training program that provides verbal
about the workplace standards orally                     there is information posted about adidas labor                         training to all managers, supervisors, and workers
and through the posting of standards                     standards. However, most of workers claimed                            on factory policies/procedures, as well as adidas-
in a prominent place (in the local                       they do not know the factories policies and                            Group's workplace standards. Trainings should
languages spoken by employees and                        procedures meaning it is necessary to develop                          be provided to workers during the first month of
managers) a                                              more effective mechanisms to communicate                               employment, as well as on an annual basis after
                                                         policies and procedures to workers and to                              that. 2. Factory management must maintain
                                                         educate them about the standards.                                      documentation of training materials and sign-up
                                                                                                                                sheets. 3. Additionally, factory management must
                                                                                                                                ensure to post all factory policies and procedures
                                                                                                                                in accessible areas to workers.

GEN 3: Develop a secure                Noncompliance     The Company established a communication                                1. Factory management must create an internal      5/6/2008                                                                     Ongoing
communications channel, in a                             channel: a telephone number, which workers                             grievance procedure to allow workers to report
manner appropriate to the culture and                    could use to report any noncompliance.                                 any complaints or suggestions to management.
situation, to enable Company                             However, this mechanism is limited, because                            The grievance system should be confidential, and
employees and employees of                               such telephone number was posted in the                                should include a non-retaliation policy indicating
contractors and suppliers to report to                   management office which workers rarely pass.                           that workers will not receive any retaliation for
the Company on noncompliance with                        Consequently, the possibilities that workers use                       reporting a grievance. 2. Factory management to
the workplace standards, with secur                      this communication channel are restricted.                             communicate grievance procedure to all
                                                                                                                                managers, supervisors, and workers once such is
                                                                                                                                completed. 3. Factory management to assign
                                                                                                                                responsible person to oversee the grievance
                                                                                                                                procedure.
F.10 Freedom of Movement             Risk of             There are no terms which expressly confine                             1. Factory management must discontinue this        5/6/2008                                                                     Ongoing
                                     noncompliance       workers but at lunch time they are not quite free                      practice and allow workers to exit lunch period as
                                                         to leave the facilities. If they want to go out for                    needed without having to ask for permission. 2.
                                                         lunch (or do anything else) they have to follow                        Factory management through guard may control
                                                         a procedure to ask for authorization: first of all,                    who enters and leaves the factory, but it must not
                                                         they must talk with the production manager and                         restrict workers' ability to exit as needed during
                                                         secondly with the human resources manager.                             lunch. 3. HR Department must communicate to all
                                                         When both have signed the authorization the                            managers, supervisors, and workers that from
                                                         worker can go out of the facilities, but he/she                        now on workers may leave factory during lunch if
                                                         must justify the leave.                                                desired.




                                                                                                                                                                                                                                                                      12
FLA Code/Benchmark               Compliance Status                                                                        Remediation                                                                                                                     Status
                                                     Description of noncompliance, risk of               Company          Company Remediation Plan                           Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                     noncompliance or uncorroborated evidence of         Internal Audit                                                      Date              (optional)         (cite date of follow-                   On-going
                                                     noncompliance                                       Findings                                                                                                 up)
                                                                                                         (optional)

F.14 Forced Overtime             Noncompliance       8 workers said they feel pressured to work                           1. Factory management must create and adopt a 3/31/2008                                                                         Ongoing
                                                     overtime. Supervisors or Production Manager                          voluntary OT policy indicating that all OT is strictly
                                                     always insist on doing overtime even when they                       voluntary. 2. Factory management to verbally train
                                                     have said "no" at first.                                             all managers, supervisors, and workers on
                                                                                                                          voluntary OT policy. 3. Management must also
                                                                                                                          ensure to verify reasons that OT is needed in
                                                                                                                          order to ensure that production orders are
                                                                                                                          calculated based on the regular hours of work,
                                                                                                                          and not OT.
CL.11 Child Care Facilities      Noncompliance       There are no childcare facilities. The lack of                       Factory management must provide a Childcare         3/31/2008                                                                   Ongoing
                                                     worksite children centers is a generalized                           Center for the factory's employees. Childcare
                                                     noncompliance in the garment industry in El                          Center must be away from production building
                                                     Salvador.                                                            and follow Salvadorean specifications and
                                                                                                                          requirements for child care centers unless factory
                                                                                                                          is able to receive permit from Ministry of Labor
                                                                                                                          indicating that this requirement is not enforced by
                                                                                                                          the government.
H&A.1 General Compliance         Risk of             No evidence of systematic abuses, but there                          1. Factory management must revise its               3/31/2008                                                                   Ongoing
Harassment and Abuse             noncompliance       was a case of verbal confrontation between a                         disciplinary procedure to ensure that the various
                                                     worker and a supervisor. At first, the worker                        types of possible worker misbehavior/offenses
                                                     received a written warning but then she                              match the level of disciplinary action given by the
                                                     appealed and the disciplinary measure was                            factory. 2. All warnings (regardless of the level
                                                     revoked by the Human Resources Manager                               and severity) must be documented and approved
                                                     because the worker proved, by means of a                             by senior management. 3. All managers,
                                                     witness, that the supervisor spoke to her in an                      supervisors, and workers must be verbally trained
                                                     inappropriate way. However, the supervisor                           on the disciplinary procedures to ensure that they
                                                     then gave her a 2-day suspension. According                          do not skip any steps of the procedure, or apply
                                                     to the disciplinary policy, disciplinary measures                    unfair disciplinary actions.
                                                     will be adopted by a supervisor in coordination
                                                     with the Human Resources Manager. The
                                                     worker decided not to report this act to the
                                                     Hurman Resources Management in order to
                                                     avoid "more problems." Auditors reviewed her
                                                     time card records and, in fact, she did miss 2
                                                     working days. She asked us not to comment on
                                                     this situation with management. Also, 4 workers
                                                     told auditors that some supervisors display
                                                     behavior that constitutes verbal abuse. For
                                                     instance, they use rude words such as "they
                                                     are good for nothing", or "work, lazy people."

H&A.3 Discipline/Review of       Risk of             Written disciplinary policy does not specify                         1. Factory management must include an appeal         3/31/2008                                                                  Ongoing
Disciplinary Action              noncompliance       what person is responsible to receive an                             system for all disciplinary actions given within the
                                                     appeal.                                                              Disciplinary Procedures. Appeal system must
                                                                                                                          include a person responsible for receiving,
                                                                                                                          reviewing, and responding to appeals. 2. Factory
                                                                                                                          management must verbally train all managers,
                                                                                                                          supervisors, and workers on disciplinary
                                                                                                                          procedures and appeal system.
H&A.4 Discipline/Fair and Non-   Noncompliance       Noncomplinace due to the unfair disciplinary                         1. Factory management must revise its               5/6/2008                                                                    Ongoing
discriminatory Application                           rule application by the supervisor against a                         disciplinary procedure to ensure that the various
                                                     worker (situation explained in H&A.1).                               types of possible worker misbehavior/offenses
                                                                                                                          match the level of disciplinary action given by the
                                                                                                                          factory. 2. All warnings (regardless of the level
                                                                                                                          and severity) must be documented and approved
                                                                                                                          by senior management. 3. All managers,
                                                                                                                          supervisors, and workers must be verbally trained
                                                                                                                          on the disciplinary procedures to ensure that they
                                                                                                                          do not skip any steps of the procedure, or apply
                                                                                                                          unfair disciplinary actions.




                                                                                                                                                                                                                                                                13
FLA Code/Benchmark                  Compliance Status                                                                        Remediation                                                                                                                    Status
                                                        Description of noncompliance, risk of               Company          Company Remediation Plan                          Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                        noncompliance or uncorroborated evidence of         Internal Audit                                                     Date              (optional)         (cite date of follow-                   On-going
                                                        noncompliance                                       Findings                                                                                                up)
                                                                                                            (optional)

H&A.5 Discipline/Written Disciplinary Risk of           The factory has a system of written disciplinary
System                                noncompliance     rules and procedures. Management informs
                                                        employees twice a year but these rules are not
                                                        clearly communicated to workers because most
                                                        of those interviewed did not know the
                                                        disciplinary procedure and few of them had just
                                                        a little idea of the disciplinary procedure. No
                                                        workers knew the procedure completely.

H&A.11 Discipline/Verbal Abuse      Noncompliance       Noncompliance due to supervisor's attitude,                          1. Factory management must create a work           3/31/2008                                                                   Ongoing
                                                        supervisor screaming at a worker and then                            manual for all supervisors including their
                                                        imposing a disciplinary measure. Human                               responsibilities and limits. Information should be
                                                        Resources Manager did not have knowledge of                          given on treatment of workers and harassment
                                                        this situation since the worker decided not to                       and abuse in the supervisors' manual. 2. Create a
                                                        report it, so management did not have the                            disciplinary action for supervisors or managers
                                                        opportunity to correct this irregularity.                            who mistreat workers. 3. All disciplinary actions
                                                        However, management must take all measures                           given to workers by a manager or supervisors
                                                        to make sure workers are not victims of abuse.                       should be approved and documented by the
                                                        Also, 4 workers told auditors that some                              Human Resources Manager, especially
                                                        supervisors display behavior that constitutes                        suspensions and terminations.
                                                        verbal abuse. For instance, they use rude
                                                        words such as "they are good for nothing", or
                                                        "work, lazy people."
H&A.15 Security Practices/Body      Noncompliance       10 workers complained about the way that the                         1. Factory management to investigate allegations 5/6/2008                                                                      Ongoing
Searches                                                female security guard conducts the body                              against security guard, to ensure she is following
                                                        search procedure. Workers also said that the                         proper procedures. 2. Factory management to
                                                        female security guard is rude. It was                                create a search procedure indicating what
                                                        corroborated through the observation tour that                       security guard may do and NOT do during
                                                        she conducts body searches in such a way as                          searches. All body searches must be gender
                                                        to make workers feel unconfortable - she                             sensitive and respectful; in other words, gender
                                                        touches female and male workers in an                                searches may only be done by a person of the
                                                        unnecessary and excessive manner. 1 female                           same sex as the worker. 3. Factory management
                                                        worker said that this security guard had put her                     to verbally communicate search procedures to
                                                        hand under her brassiere.                                            security guards.
H&A.16 Punishment of Abusive        Noncompliance       There was a case of verbal confrontation                             1. Factory management must create progressive 5/6/2008                                                                         Ongoing
Workers/Supervisors/Managers                            between a worker and a supervisor in which                           disciplinary procedures that are fair and
                                                        just the worker received a written warning. The                      transparent. Disciplinary procedures should have
                                                        worker appealed and the disciplinary measure                         a direct relationship with the factory rules, a
                                                        was revoked by the Human Resources                                   breach of the rules, and the relative disciplinary
                                                        Manager because the worker proved, by means                          action. 2. Factory must develop factory forms to
                                                        of a witness, that the supervisor spoke to her in                    document all instances of discipline, including
                                                        an inappropriate way. However, the supervisor                        verbal warnings. Ensure that these records are
                                                        gave the worker a 2-day suspension. According                        kept on individual workers' files. 3. Factory
                                                        to the disciplinary policy, disciplinary measures                    management must establish various levels of
                                                        will be adopted by the supervisor in                                 authority within the factory for exercising various
                                                        coordination with the Human Resources                                levels of discipline, e.g., a supervisor may give a
                                                        Manager. The worker decided not to report this                       verbal or written warning, but only a production
                                                        act to the Human Resources Management in                             manager or HR manager may give a suspension.
                                                        order to avoid "more problems." Auditors                             4. Factory management must establish a system
                                                        reviewed her time card records and, in fact, the                     of appeal or grievance for employees. If workers
                                                        worker had missed 2 working days. The worker                         disagree with the decision of their supervisor or
                                                        asked us not to comment on this situation with                       the level of discipline being used, there should be
                                                        the management.                                                      direct access to HR or personnel department to
                                                                                                                             discuss the issue. 5. Factory management must
                                                                                                                             post disciplinary/appeal procedures in areas
                                                                                                                             accessible to workers.
                                                                                                                             Additionally, all workers (including managers,
                                                                                                                             supervisors, and operators) must be verbally
                                                                                                                             trained on procedures during induction and on
                                                                                                                             annual basis.




                                                                                                                                                                                                                                                                  14
FLA Code/Benchmark                   Compliance Status                                                                         Remediation                                                                                                                     Status
                                                         Description of noncompliance, risk of                Company          Company Remediation Plan                           Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                         noncompliance or uncorroborated evidence of          Internal Audit                                                      Date              (optional)         (cite date of follow-                   On-going
                                                         noncompliance                                        Findings                                                                                                 up)
                                                                                                              (optional)

D.1 General Compliance Non-          Noncompliance       There is discrimination in gender-based                               1. Factory management must create a job profile 3/31/2008                                                                       Ongoing
Discrimination                                           assignment of tasks as confirmed in cutting and                       for each position within the factory. All positions
                                                         ironing positions. There is a lack of measures                        should only require characteristics needed to
                                                         to promote the participation of male or female                        perform each job, and not age, sex, etc. 2.
                                                         employees in non-traditional roles or                                 Factory management should also review its hiring
                                                         occupations (as is the case of no women in the                        procedures to ensure that all steps needed to
                                                         cutting and ironing sections). A worker with a                        apply for a job only focus on the applicant's ability
                                                         physical disability (deaf-mute) said he feels that                    to do that job. 3. Communicate hiring procedures
                                                         his co-workers make jokes around him.                                 to all managers and supervisors responsible for
                                                         Management has not taken the neccesary                                making hiring decisions. 4. Factory management
                                                         measures to avoid this situation.                                     should verbally communicate non-discrimination
                                                                                                                               policy and harassment and abuse policy to all
                                                                                                                               employees to ensure that they understand that
                                                                                                                               discriminatory and derogatory treatment to
                                                                                                                               another fellow employee will not be tolerated.


D.3 Recruitment and Employment        Risk of            This risk was identified at the begining of the                       1. Factory management should ensure that job         3/31/2008                                                                  Ongoing
Practices (Job Advertisements, Job    noncompliance      hiring process. Requesting date of birth in the                       application only ask workers if they are the legal
Descriptions and Evaluation Policies)                    employment application could lead to age-                             age to work in order to ensure hiring decisions
                                                         based discriminatory distinctions.                                    are not based on age.
D.5 Marital Discrimination           Risk of             Job applications request information                                  1. Factory management thourgh HR must revise 6/13/2008                                                                          Ongoing
                                     noncompliance       concerning marital status, which is not relevant                      job application, and remove any questions that
                                                         to job requirements.                                                  are not related to the ability of the applicant's to
                                                                                                                               do the job he/she is applying to. 2. Factory
                                                                                                                               management must also review its hiring
                                                                                                                               procedures to ensure that other portions of the
                                                                                                                               application process (interviews, tests) are not
                                                                                                                               based on subjective factors, but only on the ability
                                                                                                                               of the individual.
D.7 Possible Marriage or Pregnancy   Risk of             A woman who had just returned from maternity                          1. Factory management must create a termination 5/6/2008                                                                        Ongoing
                                     noncompliance       leave could not be interviewed because she                            procedure that describes the steps needed to
                                                         had been fired at the moment the audit took                           terminate a worker, including how/when worker
                                                         place. Management was asked about this                                will receive communication of termination,
                                                         situation and they said that their policy is to                       calculation of legal payments/severance, and exit
                                                         keep the workers after they have given birth                          interview procedures. 2. Should factory
                                                         and have been through their maternity leave.                          management decide to terminate a worker,
                                                                                                                               management must document all supporting
                                                                                                                               documentation explaining reasons for workers
                                                                                                                               termination, and maintain such documents in
                                                                                                                               worker's files. Reasons for termination should be
                                                                                                                               in strict compliance with legal/adidas-Group
                                                                                                                               standards. Please note that workers may NOT be
                                                                                                                               terminated for going on maternity leave.

D.9 Protection and Accommodation     Noncompliance       The right of working mothers to 1 paid hour                           1. Factory management must create a policy for      5/6/2008                                                                    Ongoing
of Pregnant Workers and New                              daily to nurse her baby is not respected. Also 1                      pregnant workers to ensure that their work will not
Mothers                                                  pregnant woman said she did not feel                                  put their/baby's health in danger during the
                                                         comfortable with the position in which she                            course of the pregnancy. Policy should identify
                                                         performed her work while pregnant. Although                           positions in which pregnant workers should not
                                                         she has not asked her supervisor for a change                         work (with chemicals, standing, etc.), in addition
                                                         of position, the factory does not have a clear                        to limiting their OT hours. 2. Factory management
                                                         policy about the change of positions for                              must provide workers with 1 hour daily nurse time,
                                                         pregnant workers.                                                     and communicate to all pregnant/nursing workers
                                                                                                                               of this right.
D.14 Discriminatory                  Noncompliance       Also, 4 workers told auditors that some                               1. Factory management must implement a policy 5/6/2008                                                                          Ongoing
Violence/Harassment/Abuse                                supervisors display behavior that constitutes                         banning all forms of harassment and abuse of
                                                         verbal abuse. For instance, they use rude                             employees by other employees, supervisors or
                                                         words such as "they are good for nothing", or                         managers. 2. Non-harassment/abuse policy
                                                         "work, lazy people." There is also the case of                        should be verbally communicated to all managers,
                                                         the supervisor who screamed at a worker and                           supervisors, and workers during induction
                                                         then unfairly imposed a disciplinary measure.                         training, as well as during annual policy training.
                                                                                                                               3. Must provide supervisors with written
                                                                                                                               guidelines regarding proper forms of discipline,
                                                                                                                               and provide special and periodic (quarterly)
                                                                                                                               training to supervisors on the progressive
                                                                                                                               disciplinary system. 4. Also, must create a
                                                                                                                               special disciplinary procedure for
                                                                                                                               managers/supervisors who go beyond their limits
                                                                                                                               by yelling, threatening workers.
                                                                                                                                                                                                                                                                     15
FLA Code/Benchmark                  Compliance Status                                                                        Remediation                                                                                                                       Status
                                                        Description of noncompliance, risk of               Company          Company Remediation Plan                             Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                        noncompliance or uncorroborated evidence of         Internal Audit                                                        Date              (optional)         (cite date of follow-                   On-going
                                                        noncompliance                                       Findings                                                                                                   up)
                                                                                                            (optional)

H&S.1 General Compliance Health     Risk of             Visible and accessible information for workers                       1. Factory management must create and adopt a 5/6/2008                                                                            Ongoing
and Safety                          noncompliance       regarding safety regulations is lacking. In the                      health safety policy that describes factory's
                                                        heat transfer area, due to the techniques used                       procedures regarding fire safety (fire safety
                                                        to print on fabric, the lighting tends not to be                     equipment maintenance, fire drills, fire
                                                        enough (78 lux) and this could affect the sight                      extinguisher training), chemical management
                                                        of workers.                                                          (chemical use, storage, PPE requirements,
                                                                                                                             emergency procedures) , machine safety
                                                                                                                             (machine maintenance, use, safety equipment
                                                                                                                             requirements), PPE (PPE use for chemicals,
                                                                                                                             machines, etc), etc. 2. HSE policy should be
                                                                                                                             verbally communicated to all workers during
                                                                                                                             induction training, as well as during annual factory
                                                                                                                             policy training. 3. Factory management to
                                                                                                                             designate responsible person to manage factory's
                                                                                                                             HSE program including training to workers on
                                                                                                                             such, and implementation. 4. Factory
                                                                                                                             management must verify current lighting in heat
                                                                                                                             transfer area to ensure that they are in
                                                                                                                             compliance with local standards. Please provide
                                                                                                                             copy of results and remediation plan if necessary.

H&S.4 Worker Consultation           Noncompliance       16 workers said that they do not know how the                        1. Factory management must provide HSE policy 5/6/2008                                                                            Ongoing
                                                        safety policy is developed and implemented.                          training to all workers during induction training
                                                        Management admitted that they do not consult                         and ongoing annual policy training. 2. Factory
                                                        workers to develop the health and safety policy.                     management must create an HSE committee
                                                                                                                             composed of workers
                                                                                                                             representatives/management representatives.
                                                                                                                             Workers representatives should be elected by
                                                                                                                             workers. 3. HSE Committee must conduct monthly
                                                                                                                             meetings to a) monitor current HSE issues within
                                                                                                                             the factory such as fire safety equipment,
                                                                                                                             electrical connections, proper
                                                                                                                             aisle/workstation/em. exit maintenance, PPE use,
                                                                                                                             etc. Based on results of joint audits management
                                                                                                                             and workers' representatives should create
                                                                                                                             remediation plan to address findings. 4. Workers
                                                                                                                             should be trained to communicate any HSE
                                                                                                                             concerns/suggestion to elected representatives in
                                                                                                                             order to be brought to management's attention. 5.
                                                                                                                             Factory management must document HSE
                                                                                                                             committee meeting minutes.

H&S.6 Communication to Workers      Risk of             Workers know some health and safety                                  1. Factory management must provide verbal         5/6/2008                                                                        Ongoing
                                    noncompliance       regulations but the safety policy and                                communication of HSE policies to all workers,
                                                        procedures must be communicated in a more                            managers, and supervisors during induction
                                                        effective way. Despite the annual lecture that                       training. 2. Copy of policies should be posted
                                                        Human Resources Management provides, 16                              throughout the factory, in areas that are
                                                        workers did not know the procedures factory                          accessible to workers. 3. Factory management
                                                        applies to implement health and safety                               must provide verbal training to all during annual
                                                        regulations and 12 workers did not even know                         factory policy training. 4. Once HSE committee is
                                                        the health and safety policy.                                        established, factory management should post
                                                                                                                             minutes of HSE committee meetings, as we all as
                                                                                                                             joint monitoring results conducted by HSE
                                                                                                                             committee and remediation.
H&S.9 Evacuation Requirements and Noncompliance         In the aisles the demarcation lines are faded                        1. Factory management must paint all aisles with 5/6/2008                                                                         Ongoing
Procedure                                               and need painting.                                                   demarcation lines. 2. Factory must assign a
                                                                                                                             responsible person to ensure fire safety
                                                                                                                             equipment/signs are properly maintained.
                                                                                                                             Monitoring of fire safety signs/equipment should
                                                                                                                             be conducted on a monthly basis.
H&S.10 Safety Equipment and First   Noncompliance       Even though factory has provided a first aid kit,                    1. Factory management must draft and post a list     5/6/2008                                                                     Ongoing
Aid Training                                            there is lack of silverdiazine (cream for burns),                    of first aid supplies for each first aid kit. List
                                                        which is necessary for workers in the ironing                        should include supplies required by local/adidas-
                                                        section.                                                             group standards. 2. Factory management must
                                                                                                                             assign a responsible person to check all first aid
                                                                                                                             kits on a weekly basis, and ensure that they are
                                                                                                                             properly stocked with required first aid
                                                                                                                             medicines/equipment.


                                                                                                                                                                                                                                                                     16
FLA Code/Benchmark                   Compliance Status                                                                         Remediation                                                                                                                       Status
                                                         Description of noncompliance, risk of                Company          Company Remediation Plan                             Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                         noncompliance or uncorroborated evidence of          Internal Audit                                                        Date              (optional)         (cite date of follow-                   On-going
                                                         noncompliance                                        Findings                                                                                                   up)
                                                                                                              (optional)

H&S.17 Ventilation/Electrical/Facility Noncompliance     In the heat transfer area, due to the techniques                      1. Factory management must verify current            5/6/2008                                                                     Ongoing
Installation and Maintenance                             used to print on fabric, the lighting tends not be                    lighting in heat transfer area to ensure that they
                                                         enough (78 lux) and this could affect the sight                       are in compliance with local standards. Please
                                                         of workers.                                                           provide copy of results and remediation plan if
                                                                                                                               necessary.
Other                                Risk of             Despite the fact that workers do not incur any                        1. Factory management must conduct an air            6/13/2008                                                                    Ongoing
                                     noncompliance       cost related to personal protective equipment,                        quality test to ensure that air quality meets
                                                         the majority of workers in the sewing section do                      local/adidas' standards. 2. Based on results,
                                                         not use masks when it becomes necessary to                            factory must determine whether workers need to
                                                         do so in order to prevent respiratory diseases.                       use dust masks. 3. Should dust masks be
                                                                                                                               required, factory management must provide
                                                                                                                               workers with dust masks, and enforce the use of
                                                                                                                               such by providing training on reasons for the use
                                                                                                                               of PPE. 4. Supervisors should also be asked to
                                                                                                                               verify that workers in their area are using the
                                                                                                                               correct PPE.
FOA.1 General Compliance Freedom Risk of                 Management does not have a policy related to                          1. Factory management must draft and adopt a         5/6/2008                                                                     Ongoing
of Association                   noncompliance           freedom of association. In the annual lectures                        freedom of association policy clearly indicating
                                                         that the Human Resources Manager provides,                            that workers are free to form or join an association
                                                         workers are not informed that they have a right                       of their choice. 2. Policy should clearly state that
                                                         to constitute workers' associations or trade                          workers will not receive any repercussions for
                                                         unions. In this way, they do not feel free to                         attempting to unionize or join any other type of
                                                         exercise freedom of association and collective                        association, nor will factory management
                                                         bargaining, because they think it could have                          discriminate against workers who have been part
                                                         negative consequences. 5 workers support that                         of any type of association. 3. Factory
                                                         argument.                                                             management must verbally communicate policy to
                                                                                                                               all workers, managers, and supervisors during
                                                                                                                               induction training, as well as during ongoing
                                                                                                                               annual policy training. 4. Copy of policy should be
                                                                                                                               posted in areas accessible to workers.

FOA.2 Right to Freely Associate      Uncorroborated      According to 3 workers, around the year 2000 a                        1. Factory management must draft and adopt a         5/6/2008                                                                     Ongoing
                                     noncompliance       group of workers was fired because of an                              freedom of association policy clearly indicating
                                                         attempt to constitute a trade union. Auditors                         that workers are free to form or join an association
                                                         inquired about this with management but they                          of their choice. 2. Policy should clearly state that
                                                         said that workers have never tried to constitute                      workers will not receive any repercussions for
                                                         a trade union.                                                        attempting to unionize or join any other type of
                                                                                                                               association, nor will factory management
                                                                                                                               discriminate against workers who have been part
                                                                                                                               of any type of association. 3. Factory
                                                                                                                               management must verbally communicate policy to
                                                                                                                               all workers, managers, and supervisors during
                                                                                                                               induction training, as well as during ongoing
                                                                                                                               annual policy training. 4. Copy of policy should be
                                                                                                                               posted in areas accessible to workers.




                                                                                                                                                                                                                                                                       17
FLA Code/Benchmark                Compliance Status                                                                         Remediation                                                                                                                       Status
                                                      Description of noncompliance, risk of                Company          Company Remediation Plan                             Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                      noncompliance or uncorroborated evidence of          Internal Audit                                                        Date              (optional)         (cite date of follow-                   On-going
                                                      noncompliance                                        Findings                                                                                                   up)
                                                                                                           (optional)

HOW.1 General Compliance Hours    Noncompliance       There is a noncompliance in a contract term                           1. It is factory practice to allow its workers to take 5/6/2008                                                                   Ongoing
of Work                                               which establishes a 44-hour ordinary work                             their meals in a divided work schedule and not a
                                                      week when employees really work 47 hours                              continuous one. Management must seek MOL
                                                      and 45 minutes per week. That is because                              written approval of the divided work schedule in
                                                      management does not count lunch time as                               order to do so. 2. Factory management must also
                                                      worktime, and consequently does not                                   allow workers to exit factory during lunch period,
                                                      compensate it. Management explained that the                          as prohibition of such is a violation to the workers
                                                      work day is divided; it considers the workday to                      freedom of movement. Factory must draft, adopt,
                                                      be interrupted by lunch time, which total 1 hour.                     and communicate to all workers that they are
                                                      The 1-hour lunch is not considered worktime                           allowed to exit factory should they choose to
                                                      and therefore not compensated as part ot the                          during their lunch period, without having to seek
                                                      ordinary work day. This situation is a                                permission of their supervisor.
                                                      generalized practice in the garment industy.
                                                      Article 166 of the Labor Code, related to Article
                                                      163 of the same Code, stipulates that recesses
                                                      and lunch breaks (which should be no less than
                                                      30 minutes each) are indeed considered
                                                      worktime, and the workday should therefore be
                                                      considered complete; especially when at lunch
                                                      time workers are not free to leave the facilities;
                                                      if they want to do so they must get 2 signed
                                                      authorizations from management. For all these
                                                      reason, management does not pay 3.75 hours
                                                      of work per week.

HOW.3 Meal and Rest Breaks        Risk of             Workers do have 1 hour for taking their lunch                         1. Factory management must also allow workers 5/6/2008                                                                            Ongoing
                                  noncompliance       and there are no terms which expressly confine                        to exit factory during lunch period, as prohibition
                                                      workers but at lunch time they are not free to                        of such is a violation to the workers freedom of
                                                      leave the facilities. If they want to go out for                      movement. Factory must draft, adopt, and
                                                      lunch (or do anything else) they have to follow                       communicate to all workers that they are allowed
                                                      a procedure to ask for authorization. First, they                     to exit factory should they choose to during their
                                                      must talk with the production manager and                             lunch period, without having to seek permission of
                                                      secondly with the human resources manager.                            their supervisor.
                                                      When both have signed the authorization, the
                                                      worker can leave the facilities, but he/she must
                                                      justify the leave.

HOW.7 Maintenance of Reasonable   Risk of             Factory has dismissed 223 workers between                             1. Factory management must create a termination 5/6/2008                                                                          Ongoing
Levels of Staff                   noncompliance       January 2007 and October 2007.                                        procedure that describes the steps needed to
                                                                                                                            terminate a worker, including how/when worker
                                                                                                                            will be communicated of termination, calculation
                                                                                                                            of legal payments/severance, and exit interview
                                                                                                                            procedures. 2. Should factory management
                                                                                                                            decide to terminate a worker, management must
                                                                                                                            ensure to document all supporting documentation
                                                                                                                            explaining reasons for workers termination, and
                                                                                                                            maintain such documents in worker's files.
                                                                                                                            Reasons for termination should be in strict
                                                                                                                            compliance with legal/adidas-Group standards.


HOW.8 Overtime/Reduced Mandated Noncompliance         The factory has a system to document                                  1. Factory management must create and adopt a 5/6/2008                                                                            Ongoing
Overtime                                              voluntary overtime consent; however, 8 workers                        voluntary OT policy indicating that all OT is strictly
                                                      considered overtime not to be voluntary. They                         voluntary. 2. Factory management to verbally train
                                                      feel pressure to work overtime. Supervisors or                        all managers, supervisors, and workers on
                                                      production manager always insist on overtime                          voluntary OT policy. 3. Management must also
                                                      even when they have said "no" at first.                               ensure to verify reasons that OT is needed in
                                                      Management assures that overtime work is                              order to ensure that production orders are
                                                      voluntary.                                                            calculated based on the regular hours of work,
                                                                                                                            and not OT.
HOW.9 Overtime/Positive Incentives Risk of            15 workers said that management does not use                          1. Factory management must create and adopt a 5/6/2008                                                                            Ongoing
                                   noncompliance      positive incentives to induce overtime. 8 of                          voluntary OT policy indicating that all OT is strictly
                                                      them said that they felt pressure to work                             voluntary. 2. Factory management to verbally train
                                                      overtime.                                                             all managers, supervisors, and workers on
                                                                                                                            voluntary OT policy. 3. Management must also
                                                                                                                            ensure to verify reasons that OT is needed in
                                                                                                                            order to ensure that production orders are
                                                                                                                            calculated based on the regular hours of work,
                                                                                                                            and not OT.
                                                                                                                                                                                                                                                                    18
FLA Code/Benchmark                  Compliance Status                                                                         Remediation                                                                                                                       Status
                                                        Description of noncompliance, risk of                Company          Company Remediation Plan                             Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                        noncompliance or uncorroborated evidence of          Internal Audit                                                        Date              (optional)         (cite date of follow-                   On-going
                                                        noncompliance                                        Findings                                                                                                   up)
                                                                                                             (optional)

HOW.10 Overtime/Calculation over    Noncompliance       Based on the regular work day established in                          1. It is factory practice to allow its workers to take 5/6/2008                                                                   Ongoing
Period Longer than One Week                             the employment contract, all employees work a                         their meals in a divided work schedule and not a
                                                        47.75-hour work week, exceeding the ordinary                          continuous one. Management must seek MOL
                                                        44-hour work week established by national law                         written approval of the divided work schedule in
                                                        (Article 38, Subsection 6 of the Constitution                         order to do so. 2. Factory management must also
                                                        and Article 16, paragraph 3 of the Labor Code).                       allow workers to exit factory during lunch period,
                                                        This means that workers do not receive                                as prohibition of such is a violation to the workers
                                                        compensation for 3.75 overtime hours per                              freedom of movement. Factory must draft, adopt,
                                                        week. In the packaging area, there was an                             and communicate to all workers that they are
                                                        instance in which an employee worked an                               allowed to exit factory should they choose to
                                                        average of 64 hours per week during the                               during their lunch period, without having to seek
                                                        second week of July which corresponds to                              permission of their supervisor. 3. Factory
                                                        excessive overtime of 4 hours per week. In                            management must create a procedure to monitor
                                                        another case, a worker in the ironing section                         workers hours of work on a daily basis. Once
                                                        worked 64 hours per week during 2                                     worker completes 60 hours/week, he/she should
                                                        consecutive weeks (from July 9-14 and from                            not be allowed to work additional OT in order to
                                                        July 16-21, 2007).                                                    not surpass limits.
HOW.11 Extraordinary Business       Noncompliance       10 workers said that in extraordinary business                        1. Factory management must create and adopt a 5/6/2008                                                                            Ongoing
Circumstance/Forced Overtime                            circumstance the overtime is not voluntary,                           voluntary OT policy indicating that all OT is strictly
                                                        although they sign the voluntary overtime                             voluntary. 2. Factory management to verbally train
                                                        registry.                                                             all managers, supervisors, and workers on
                                                                                                                              voluntary OT policy. 3. Management must also
                                                                                                                              ensure to verify reasons that OT is needed in
                                                                                                                              order to ensure that production orders are
                                                                                                                              calculated based on the regular hours of work,
                                                                                                                              and not OT.
HOW.12 Extraordinary Business       Noncompliance       6 workers claimed that the factory does not                           1. Factory management must verbally                5/6/2008                                                                       Ongoing
Circumstance/Overtime Explanation                       provide them with explanations about                                  communicate to workers reasons why OT is
                                                        extraordinary business circumstances; they are                        needed. Under no circumstances should workers
                                                        just told to sign the voluntary overtime registry.                    be forced to work OT, or be penalized for
                                                                                                                              choosing to not work OT. 2. Factory daily
                                                                                                                              production goals should be based on regular work
                                                                                                                              hours, and NOT OT hours. 3. In instances when
                                                                                                                              OT is needed, workers should be provided with at
                                                                                                                              least 24 hour's notice to allow workers who want
                                                                                                                              to work OT, make necessary arrangements. 4.
                                                                                                                              Factory management must verbally communicate
                                                                                                                              to all managers, supervisors, and workers that all
                                                                                                                              OT is voluntary. 5. In order to ensure factory has
                                                                                                                              enough workers to work OT, factory should cross
                                                                                                                              train workers in various jobs to ensure that if a
                                                                                                                              worker declines to work OT there are other
                                                                                                                              workers who can replace him/her.

HOW.13 Public Holidays              Noncompliance       January 16th is a public holiday since 2007, but                      1. Factory management must respect legally        5/6/2008                                                                        Ongoing
                                                        the factory operated as a normal day. The                             mandated holidays as required by law. Under no
                                                        Human Resources Manager explained to                                  circumstances should factory schedule a work
                                                        auditors that management agreed with                                  day unless there is an unforeseen circumstance
                                                        employees to work this day and that workers                           that puts production at risk 2. In instances when
                                                        could take 2 consecutive Saturdays off.                               workers are asked to work OT on public holidays,
                                                        However, it was corroborated in 8 cases that                          workers must be provided with time off as
                                                        not all employees rested the following                                required by local law, in addition to OT premium.
                                                        Saturdays. Also, there were 3 cases in which                          3. Under NO circumstances should workers be
                                                        employees worked on January 1st and 1 case                            forced to work on a holiday. If OT is needed on
                                                        in which an employee worked on May 1st.                               holiday, factory management must allow workers
                                                                                                                              to decline to work OT as it would with any other
                                                                                                                              type of OT.




                                                                                                                                                                                                                                                                      19
FLA Code/Benchmark                Compliance Status                                                                       Remediation                                                                                                                     Status
                                                      Description of noncompliance, risk of              Company          Company Remediation Plan                           Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                      noncompliance or uncorroborated evidence of        Internal Audit                                                      Date              (optional)         (cite date of follow-                   On-going
                                                      noncompliance                                      Findings                                                                                                 up)
                                                                                                         (optional)

HOW.17 Leave/Retaliation          Uncorroborated      There was a case of a worker who was fired                          1. Factory management must create a termination 5/6/2008                                                                        Ongoing
                                  noncompliance       after she had been through 84 days of                               procedure that describes the steps needed to
                                                      postnatal maternity leave established by law.                       terminate a worker, including how/when worker
                                                      Management said that they always respect this                       will be communicated of termination, calculation
                                                      right to all women who have given birth.                            of legal payments/severance, and exit interview
                                                                                                                          procedures. 2. Should factory management
                                                                                                                          decide to terminate a worker, management must
                                                                                                                          ensure to document all supporting documentation
                                                                                                                          explaining reasons for workers termination, and
                                                                                                                          maintain such document's in worker's files.
                                                                                                                          Reasons for termination should be in strict
                                                                                                                          compliance with legal/adidas-Group standards.
                                                                                                                          Please note that workers may NOT be terminated
                                                                                                                          for going on maternity leave.

WBOT.1 General Compliance         Noncompliance       There are noncompliances with regard to                             1. Please see remediation for this noncompliance 5/6/2008                                                                       Ongoing
Wages, Benefits and Overtime                          overtime payment and other legal benefits such                      under D.9 protection and Accommodation of
Compensation                                          as year-end bonuses and nursing leave.                              Pregnant Workers and New Mothers. 2. Please
                                                                                                                          see remediation plan under HoW. 13 Public
                                                                                                                          Holidays. 3. Please see remediation plan under
                                                                                                                          HOW. 1 General Compliance Hours of Work. 4
                                                                                                                          Factory management must provide OT payment
                                                                                                                          for every OT hour completed by each worker. OT
                                                                                                                          payment must be reported in the payroll system
                                                                                                                          and social security payroll as required by law. 5.
                                                                                                                          Factory management must revise its production
                                                                                                                          goal system, and ensure that such is achievable
                                                                                                                          within the regular daily work hour. Factory should
                                                                                                                          assess percentage of workers who do not achieve
                                                                                                                          daily production goal. If the majority of workers
                                                                                                                          (more than 50%) do not achieve production goal
                                                                                                                          during 8 hour period, production goal must be
                                                                                                                          revised.

WBOT.5 Holidays, Leave, Legal     Noncompliance       The 1 paid hour daily benefit for nursing                           1. Factory management must provide workers          5/6/2008                                                                    Ongoing
Benefits and Bonuses                                  mothers is not granted, and the year-end bonus                      with 1 hour daily nurse time, and communicate all
                                                      did not factory in worker seniority into                            pregnant/nursing workers of this right. 2. Factory
                                                      calculations up to last year. Also, January 16th                    management must provide end of the year bonus
                                                      is a public holiday since 2007, but the factory                     based on workers' seniority, in other words,
                                                      operated as a normal day. The Human                                 basing it on workers original starting date. Please
                                                      Resources Manager explained to auditors that                        note that this is threshold issue. 3. Please see
                                                      management agreed with employees to work                            remediation under HoW.13 Public Holidays.
                                                      this day, and workers could then take 2
                                                      consecutive Saturdays off. However, it was
                                                      corroborated in 8 cases that not all employees
                                                      rested the following Saturdays. There were also
                                                      3 cases in which employees worked on January
                                                      1st and 1 case in which an employee worked
                                                      on May 1st.
WBOT.6 Production and Incentive   Noncompliance       Usually, workers do not reach their production                      1. Factory management must revise its production 5/6/2008                                                                       Ongoing
Schemes                                               targets and if they want to earn bonuses they                       goal system, and ensure that such is achievable
                                                      have to work overtime because the ordinary                          within the regular daily work hour. 2. Factory
                                                      working day is not enough. Auditors                                 should assess percentage of workers who do not
                                                      corroborated this situation through worker                          achieve daily production goal. If the majority of
                                                      interviews and by reviewing payroll. Payroll                        workers (more than 50%) do not achieve
                                                      showed that frequently workers do not reach                         production goal during 8 hour period, production
                                                      their production targets.                                           goal must be revised. Under no circumstances
                                                                                                                          should production goal be based on more hours
                                                                                                                          than the regular work day.




                                                                                                                                                                                                                                                                20
FLA Code/Benchmark              Compliance Status                                                                          Remediation                                                                                                                       Status
                                                    Description of noncompliance, risk of                 Company          Company Remediation Plan                             Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                    noncompliance or uncorroborated evidence of           Internal Audit                                                        Date              (optional)         (cite date of follow-                   On-going
                                                    noncompliance                                         Findings                                                                                                   up)
                                                                                                          (optional)

WBOT.7 Payment for All Hours    Noncompliance       There is a noncompliance in a contract term                            1. It is factory practice to allow its workers to take 5/6/2008                                                                   Ongoing
Worked                                              which establishes a 44-hour ordinary work                              their meals in a divided work schedule and not a
                                                    week when employees really work 47 hours                               continuous one. Management must seek MOL
                                                    and 45 minutes per week. Management does                               written approval of the divided work schedule in
                                                    not count this 3.75 hours as time worked, and                          order to do so. 2. Factory management must also
                                                    consequently does not compensate it as part of                         allow workers to exit factory during lunch period,
                                                    the overtime employees work in a week.                                 as prohibition of such is a violation to the workers
                                                                                                                           freedom of movement. Factory must draft, adopt,
                                                                                                                           and communicate to all workers that they are
                                                                                                                           allowed to exit factory should they choose to
                                                                                                                           during their lunch period, without having to seek
                                                                                                                           permission of their supervisor.

WBOT.8 Calculation Basis for    Noncompliance       Even when workers agree with this situation,                           1. Factory management must provide workers        5/6/2008                                                                        Ongoing
Overtime Payments                                   the right to paid overtime is constitutional and                       with OT premium pay for each hour of OT worked.
                                                    inalienable. In addition, it is factory practice to                    2. Payment for all OT must be reported as such in
                                                    provide workers compensation for the                                   the payroll system AND factory social security
                                                    production targets achieved, so management                             payroll, i.e. management must report OT
                                                    must pay the corresponding bonuses as an                               payments to social security. 3. Factory
                                                    incentive provided voluntary. At the same time,                        management must revise its production goal
                                                    factory must recognize overtime worked by                              system, and ensure that such is achievable within
                                                    employees.                                                             the regular daily work hour. 2. Factory should
                                                                                                                           assess percentage of workers who do not achieve
                                                                                                                           daily production goal. If the majority of workers
                                                                                                                           (more than 50%) do not achieve production goal
                                                                                                                           during 8 hour period, production goal must be
                                                                                                                           revised. Under no circumstances should
                                                                                                                           production goal be based on more hours than the
                                                                                                                           regular work day.
WBOT.10 Premium/Overtime        Noncompliance       The factory has not complied with applicable                           1. Factory management must respect legally        5/6/2008                                                                        Ongoing
Compensation                                        laws regarding holidays. 8 workers worked on                           mandated holidays as required by law. Under no
                                                    January 16th and they were not compensated.                            circumstances should factory schedule a work
                                                    Another 3 workers worked on January 1st and                            day unless there is an unforeseen circumstance
                                                    1 worker worked on May 1st.                                            that puts production at risk 2. In instances when
                                                                                                                           workers are asked to work OT on public holidays,
                                                                                                                           workers must be provided with time off as
                                                                                                                           required by local law, in addition to OT premium.
                                                                                                                           3. Under NO circumstances should workers be
                                                                                                                           forced to work on a holiday. If OT is needed on
                                                                                                                           holiday, factory management must allow workers
                                                                                                                           to decline to work OT as it would with any other
                                                                                                                           type of OT. 4. Factory management must provide
                                                                                                                           workers with OT premium pay for each hour of OT
                                                                                                                           worked. 5. Payment for all OT must be reported
                                                                                                                           as such in the payroll system AND factory social
                                                                                                                           security payroll, i.e. management must report OT
                                                                                                                           payments to social security. 6. Factory
                                                                                                                           management must revise its production goal
                                                                                                                           system, and ensure that such is achievable within
                                                                                                                           the regular daily work hour. 7. Factory should
                                                                                                                           assess percentage of workers who do not achieve
                                                                                                                           daily production goal. If the majority of workers
                                                                                                                           (more than 50%) do not achieve

                                                                                                                           production goal during 8 hour period, production
                                                                                                                           goal must be revised. Under no circumstances
                                                                                                                           should production goal be based on more hours
                                                                                                                           than the regular work day.
WBOT.11 Overtime Compensation   Noncompliance       Workers have not been properly informed of                             1. Factory management must provide verbal            5/6/2008                                                                     Ongoing
Awareness                                           the value of overtime, since it is not paid.                           training to all workers on wage calculation,
                                                                                                                           including calculation of OT, vacation pay,
                                                                                                                           Christmas bonus, etc. 2. Wage calculation
                                                                                                                           training should be included in induction training
                                                                                                                           and annual factory policy training. 3. Wage
                                                                                                                           calculation information should be posted in
                                                                                                                           accessible areas to workers along with factory
                                                                                                                           policies and procedures.



                                                                                                                                                                                                                                                                   21
FLA Code/Benchmark                    Compliance Status                                                                       Remediation                                                                                                                      Status
                                                          Description of noncompliance, risk of              Company          Company Remediation Plan                            Target Completion Factory Response   Company Follow-Up       Documentation   Completed, Pending,
                                                          noncompliance or uncorroborated evidence of        Internal Audit                                                       Date              (optional)         (cite date of follow-                   On-going
                                                          noncompliance                                      Findings                                                                                                  up)
                                                                                                             (optional)

WBOT.12 Overtime Compensation         Risk of             Since production targets are too high, workers                      1. Factory management must provide workers         5/6/2008                                                                      Ongoing
for Piece Rates and Other Incentive   noncompliance       must perfom overtime to achieve them.                               with OT premium pay for each hour of OT worked.
Schemes                                                                                                                       2. Payment for all OT must be reported as such in
                                                                                                                              the payroll system AND factory social security
                                                                                                                              payroll, ie management must report OT payments
                                                                                                                              to social security. 3. Factory management must
                                                                                                                              revise its production goal system, and ensure that
                                                                                                                              such is achievable within the regular daily work
                                                                                                                              hour. 2. Factory should assess percentage of
                                                                                                                              workers who do not achieve daily production goal.
                                                                                                                              If the majority of workers (more than 50%) do not
                                                                                                                              achieve production goal during 8 hour period,
                                                                                                                              production goal must be revised. Under no
                                                                                                                              circumstances should production goal be based
                                                                                                                              on more hours than the regular work day.


WBOT.16 Employer Provided             Risk of             Workers are not free to go out at lunch time. If                    1. Factory management must discontinue this           5/6/2008                                                                   Ongoing
Services                              noncompliance       they want to go out for lunch, they must ask for                    practice and allow workers to exit lunch period as
                                                          2 signed authorizations.                                            needed without having to ask for permission. 2.
                                                                                                                              Factory management may control who enters and
                                                                                                                              leaves the factory, but it must not restrict workers'
                                                                                                                              ability to exit as needed during lunch. 3. Factory
                                                                                                                              management to communicate to all managers,
                                                                                                                              supervisors, and workers that for now on workers
                                                                                                                              may leave factory during lunch if desired.


WBOT.17 Accurate Calculation and      Noncompliance       For the payment of year-end bonuses, factory                        1. Factory management must respect workers'           5/6/2008                                                                   Ongoing
Recording of Wage Compensation                            did not consider the seniority in the years                         seniority in the calculation of all seniority related
                                                          before the audit period (the audit period is:                       benefits, including Christmas bonus. 2. All wages,
                                                          October 2006-October 2007). The policy of the                       including regular wages, OT, vacation leave
                                                          factory is to divide payment of the year-end                        payment, end of the year bonus must be paid
                                                          bonus - one part is paid in December and the                        within time frame required by law. By no means
                                                          other one when they complete a work year.                           can factory divide payment of wages in 2.
                                                          Last year, the factory consider seniority but
                                                          only in the payment made in December. This
                                                          year, management told auditors that they will
                                                          probably take account of workers' seniority to
                                                          calculate year-end bonuses. Also, overtime is
                                                          not paid due to the factory practice to pay
                                                          bonuses instead of overtime as explained
                                                          above.
WBOT.18 Accurate Length of Service Noncompliance          During 2006, just the portion of the year-end                       1. Factory management must respect workers'           5/6/2008                                                                   Ongoing
Calculation                                               bonuses paid in December was calcuted                               seniority in the calculation of all seniority related
                                                          legally; the other portion was not. This year,                      benefits, including Christmas bonus. 2. All wages,
                                                          management assured that they will consider                          including regular wages, OT, vacation leave
                                                          seniority if economic conditions allow them.                        payment, end of the year bonus must be paid
                                                                                                                              within time frame required by law. By no means
                                                                                                                              can factory divide payment of wages in 2.
WBOT.22 Worker Wage Awareness         Uncorroborated      While workers are unaware of how to calculate                       1. Factory management must provide verbal           5/6/2008                                                                     Ongoing
                                      noncompliance       year-end bonuses or the value of overtime, it                       training to all workers on wage calculation,
                                                          was not possible to confirm whether or not                          including calculation of OT, vacation pay,
                                                          management had made sufficient efforts to                           Christmas bonus, etc. 2. Wage calculation
                                                          explain this information.                                           training should be included in induction training
                                                                                                                              and annual factory policy training. 3. Wage
                                                                                                                              calculation information should be posted in
                                                                                                                              accessible areas to workers along with factory
                                                                                                                              policies and procedures.




                                                                                                                                                                                                                                                                     22
FLA Audit Profile
Country                              El Salvador
Name of Factory                      530022699F
Independent External Monitoring      Grupo de Monitoreo Independiente de El Salvador (GMIES)
Organization
Date(s) in Facility                  October 29-31 and November 1, 2007
FLA Affiliated Compan(ies)           adidas-Group AG
Number of Workers                    672
Product(s)                           Blouses and children's shirts
Production Processes                 Cutting, piece production, whole packaging

FLA Code/Benchmark                     Compliance Status [Status]     Description of noncompliance, risk of  Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                         Completed, noncompliance or uncorroborated          Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                         Pending, On- evidence of noncompliance                                                        Verification                 date of planned or follow-up
                                                         going                                                                                         (Date)                       visit, if appropriate)
GEN 1: Establish and articulate clear, Uncorroborated    Ongoing      There was an adidas labor standards
written workplace standards. Formally noncompliance                   posted, but it is important to mention
convey those standards to Company                                     that since March 2007, factory does
factories as well as to licensees,                                    not produce for adidas any more;
contractors and suppliers.                                            therefore, it was not possible for
                                                                      monitors to know whether the company
                                                                      formally conveyed these standards to
                                                                      licensees, suppliers and
                                                                      subcontractors.
GEN 2: Ensure that all Company         Noncompliance     Ongoing       The factory has posted information
factories as well as contractors and                                   related to labor standards and once a
suppliers inform their employees about                                 year workers are orally informed about
the workplace standards orally and                                     these standards. Also there is
through the posting of standards in a                                  information posted about adidas labor
prominent place (in the local                                          standards. However, most of workers
languages spoken by employees and                                      claimed they do not know the factories
managers) a                                                            policies and procedures meaning it is
                                                                       necessary to develop more effective
                                                                       mechanisms to communicate policies
                                                                       and procedures to workers and to
                                                                       educate them about the standards.

GEN 3: Develop a secure                Noncompliance     Ongoing       The Company established a
communications channel, in a manner                                    communication channel: a telephone
appropriate to the culture and                                         number, which workers could use to
situation, to enable Company                                           report any noncompliance. However,
employees and employees of                                             this mechanism is limited, because
contractors and suppliers to report to                                 such telephone number was posted in
the Company on noncompliance with                                      the management office which workers
the workplace standards, with secur                                    rarely pass. Consequently, the
                                                                       possibilities that workers use this
                                                                       communication channel are restricted.
F.10 Freedom of Movement             Risk of             Ongoing       There are no terms which expressly
                                     noncompliance                     confine workers but at lunch time they
                                                                       are not quite free to leave the facilities.
                                                                       If they want to go out for lunch (or do
                                                                       anything else) they have to follow a
                                                                       procedure to ask for authorization: first
                                                                       of all, they must talk with the
                                                                       production manager and secondly with
                                                                       the human resources manager. When
                                                                       both have signed the authorization the
                                                                       worker can go out of the facilities, but
                                                                       he/she must justify the leave.



                                                                                                                                                                                                                     23
FLA Code/Benchmark                      Compliance Status [Status]     Description of noncompliance, risk of         Updates (Cite Date of Follow-Up)        Third-Party Verification     Company Verification Follow-Up
                                                          Completed, noncompliance or uncorroborated                 Company Follow-Up         Documentation External     Documentation   Company Follow-Up (cite      Documentation
                                                          Pending, On- evidence of noncompliance                                                             Verification                 date of planned or follow-up
                                                          going                                                                                              (Date)                       visit, if appropriate)
F.14 Forced Overtime                    Noncompliance     Ongoing      8 workers said they feel pressured to
                                                                       work overtime. Supervisors or
                                                                       Production Manager always insist on
                                                                       doing overtime even when they have
                                                                       said "no" at first.
CL.11 Child Care Facilities             Noncompliance     Ongoing      There are no childcare facilities. The
                                                                       lack of worksite children centers is a
                                                                       generalized noncompliance in the
                                                                       garment industry in El Salvador.
H&A.1 General Compliance                Risk of             Ongoing      No evidence of systematic abuses, but
Harassment and Abuse                    noncompliance                    there was a case of verbal
                                                                         confrontation between a worker and a
                                                                         supervisor. At first, the worker received
                                                                         a written warning but then she
                                                                         appealed and the disciplinary measure
                                                                         was revoked by the Human Resources
                                                                         Manager because the worker proved,
                                                                         by means of a witness, that the
                                                                         supervisor spoke to her in an
                                                                         inappropriate way. However, the
                                                                         supervisor then gave her a 2-day
                                                                         suspension. According to the
                                                                         disciplinary policy, disciplinary
                                                                         measures will be adopted by a
                                                                         supervisor in coordination with the
                                                                         Human Resources Manager. The
                                                                         worker decided not to report this act to
                                                                         the Hurman Resources Management in
                                                                         order to avoid "more problems."
                                                                         Auditors reviewed her time card
                                                                         records and, in fact, she did miss 2
                                                                         working days. She asked us not to
                                                                         comment on this situation with
                                                                         management. Also, 4 workers told
                                                                         auditors that some supervisors display
                                                                         behavior that constitutes verbal abuse.
                                                                         For instance, they use rude words such
                                                                         as "they are good for nothing", or
                                                                         "work, lazy people."
H&A.3 Discipline/Review of              Risk of             Ongoing      Written disciplinary policy does not
Disciplinary Action                     noncompliance                    specify what person is responsible to
                                                                         receive an appeal.
H&A.4 Discipline/Fair and Non-          Noncompliance       Ongoing      Noncomplinace due to the unfair
discriminatory Application                                               disciplinary rule application by the
                                                                         supervisor against a worker (situation
                                                                         explained in H&A.1).
H&A.5 Discipline/Written Disciplinary   Risk of             #REF!        The factory has a system of written
System                                  noncompliance                    disciplinary rules and procedures.
                                                                         Management informs employees twice
                                                                         a year but these rules are not clearly
                                                                         communicated to workers because
                                                                         most of those interviewed did not know
                                                                         the disciplinary procedure and few of
                                                                         them had just a little idea of the
                                                                         disciplinary procedure. No workers
                                                                         knew the procedure completely.

                                                                                                                                                                                                                           24
FLA Code/Benchmark               Compliance Status [Status]     Description of noncompliance, risk of     Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                   Completed, noncompliance or uncorroborated             Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                   Pending, On- evidence of noncompliance                                                           Verification                 date of planned or follow-up
                                                   going                                                                                            (Date)                       visit, if appropriate)
H&A.11 Discipline/Verbal Abuse   Noncompliance     Ongoing      Noncompliance due to supervisor's
                                                                attitude, supervisor screaming at a
                                                                worker and then imposing a disciplinary
                                                                measure. Human Resources Manager
                                                                did not have knowledge of this situation
                                                                since the worker decided not to report
                                                                it, so management did not have the
                                                                opportunity to correct this irregularity.
                                                                However, management must take all
                                                                measures to make sure workers are
                                                                not victims of abuse. Also, 4 workers
                                                                told auditors that some supervisors
                                                                display behavior that constitutes verbal
                                                                abuse. For instance, they use rude
                                                                words such as "they are good for
                                                                nothing", or "work, lazy people."

H&A.15 Security Practices/Body   Noncompliance       Ongoing      10 workers complained about the way
Searches                                                          that the female security guard conducts
                                                                  the body search procedure. Workers
                                                                  also said that the female security guard
                                                                  is rude. It was corroborated through the
                                                                  observation tour that she conducts
                                                                  body searches in such a way as to
                                                                  make workers feel unconfortable - she
                                                                  touches female and male workers in an
                                                                  unnecessary and excessive manner. 1
                                                                  female worker said that this security
                                                                  guard had put her hand under her
                                                                  brassiere.

H&A.16 Punishment of Abusive     Noncompliance       Ongoing      There was a case of verbal
Workers/Supervisors/Managers                                      confrontation between a worker and a
                                                                  supervisor in which just the worker
                                                                  received a written warning. The
                                                                  worker appealed and the disciplinary
                                                                  measure was revoked by the Human
                                                                  Resources Manager because the
                                                                  worker proved, by means of a witness,
                                                                  that the supervisor spoke to her in an
                                                                  inappropriate way. However, the
                                                                  supervisor gave the worker a 2-day
                                                                  suspension. According to the
                                                                  disciplinary policy, disciplinary
                                                                  measures will be adopted by the
                                                                  supervisor in coordination with the
                                                                  Human Resources Manager. The
                                                                  worker decided not to report this act to
                                                                  the Human Resources Management in
                                                                  order to avoid "more problems."
                                                                  Auditors reviewed her time card
                                                                  records and, in fact, the worker had
                                                                  missed 2 working days. The worker
                                                                  asked us not to comment on this
                                                                  situation with the management.




                                                                                                                                                                                                                  25
FLA Code/Benchmark                      Compliance Status [Status]     Description of noncompliance, risk of     Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                          Completed, noncompliance or uncorroborated             Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                          Pending, On- evidence of noncompliance                                                           Verification                 date of planned or follow-up
                                                          going                                                                                            (Date)                       visit, if appropriate)
D.1 General Compliance Non-             Noncompliance     Ongoing      There is discrimination in gender-based
Discrimination                                                         assignment of tasks as confirmed in
                                                                       cutting and ironing positions. There is a
                                                                       lack of measures to promote the
                                                                       participation of male or female
                                                                       employees in non-traditional roles or
                                                                       occupations (as is the case of no
                                                                       women in the cutting and ironing
                                                                       sections). A worker with a physical
                                                                       disability (deaf-mute) said he feels that
                                                                       his co-workers make jokes around him.
                                                                       Management has not taken the
                                                                       neccesary measures to avoid this
                                                                       situation.
D.3 Recruitment and Employment          Risk of             Ongoing      This risk was identified at the begining
Practices (Job Advertisements, Job      noncompliance                    of the hiring process. Requesting date
Descriptions and Evaluation Policies)                                    of birth in the employment application
                                                                         could lead to age-based discriminatory
                                                                         distinctions.
D.5 Marital Discrimination              Risk of             Ongoing      Job applications request information
                                        noncompliance                    concerning marital status, which is not
                                                                         relevant to job requirements.
D.7 Possible Marriage or Pregnancy      Risk of             Ongoing      A woman who had just returned from
                                        noncompliance                    maternity leave could not be
                                                                         interviewed because she had been
                                                                         fired at the moment the audit took
                                                                         place. Management was asked about
                                                                         this situation and they said that their
                                                                         policy is to keep the workers after they
                                                                         have given birth and have been
                                                                         through their maternity leave.
D.9 Protection and Accommodation of Noncompliance           Ongoing      The right of working mothers to 1 paid
Pregnant Workers and New Mothers                                         hour daily to nurse her baby is not
                                                                         respected. Also 1 pregnant woman
                                                                         said she did not feel comfortable with
                                                                         the position in which she performed her
                                                                         work while pregnant. Although she has
                                                                         not asked her supervisor for a change
                                                                         of position, the factory does not have a
                                                                         clear policy about the change of
                                                                         positions for pregnant workers.

D.14 Discriminatory                     Noncompliance       Ongoing      Also, 4 workers told auditors that some
Violence/Harassment/Abuse                                                supervisors display behavior that
                                                                         constitutes verbal abuse. For instance,
                                                                         they use rude words such as "they are
                                                                         good for nothing", or "work, lazy
                                                                         people." There is also the case of the
                                                                         supervisor who screamed at a worker
                                                                         and then unfairly imposed a disciplinary
                                                                         measure.




                                                                                                                                                                                                                         26
FLA Code/Benchmark                       Compliance Status [Status]     Description of noncompliance, risk of   Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                           Completed, noncompliance or uncorroborated           Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                           Pending, On- evidence of noncompliance                                                         Verification                 date of planned or follow-up
                                                           going                                                                                          (Date)                       visit, if appropriate)
H&S.1 General Compliance Health          Risk of           Ongoing      Visible and accessible information for
and Safety                               noncompliance                  workers regarding safety regulations is
                                                                        lacking. In the heat transfer area, due
                                                                        to the techniques used to print on
                                                                        fabric, the lighting tends not to be
                                                                        enough (78 lux) and this could affect
                                                                        the sight of workers.
H&S.4 Worker Consultation                Noncompliance      Ongoing      16 workers said that they do not know
                                                                         how the safety policy is developed and
                                                                         implemented. Management admitted
                                                                         that they do not consult workers to
                                                                         develop the health and safety policy.

H&S.6 Communication to Workers           Risk of            Ongoing      Workers know some health and safety
                                         noncompliance                   regulations but the safety policy and
                                                                         procedures must be communicated in a
                                                                         more effective way. Despite the annual
                                                                         lecture that Human Resources
                                                                         Management provides, 16 workers did
                                                                         not know the procedures factory
                                                                         applies to implement health and safety
                                                                         regulations and 12 workers did not
                                                                         even know the health and safety policy.


H&S.9 Evacuation Requirements and        Noncompliance      Ongoing      In the aisles the demarcation lines are
Procedure                                                                faded and need painting.
H&S.10 Safety Equipment and First        Noncompliance      Ongoing      Even though factory has provided a
Aid Training                                                             first aid kit, there is lack of silverdiazine
                                                                         (cream for burns), which is necessary
                                                                         for workers in the ironing section.

H&S.17 Ventilation/Electrical/Facility   Noncompliance      Ongoing      In the heat transfer area, due to the
Installation and Maintenance                                             techniques used to print on fabric, the
                                                                         lighting tends not be enough (78 lux)
                                                                         and this could affect the sight of
                                                                         workers.
Other                                    Risk of            Ongoing      Despite the fact that workers do not
                                         noncompliance                   incur any cost related to personal
                                                                         protective equipment, the majority of
                                                                         workers in the sewing section do not
                                                                         use masks when it becomes necessary
                                                                         to do so in order to prevent respiratory
                                                                         diseases.
FOA.1 General Compliance Freedom         Risk of            Ongoing      Management does not have a policy
of Association                           noncompliance                   related to freedom of association. In
                                                                         the annual lectures that the Human
                                                                         Resources Manager provides, workers
                                                                         are not informed that they have a right
                                                                         to constitute workers' associations or
                                                                         trade unions. In this way, they do not
                                                                         feel free to exercise freedom of
                                                                         association and collective bargaining,
                                                                         because they think it could have
                                                                         negative consequences. 5 workers
                                                                         support that argument.

                                                                                                                                                                                                                        27
FLA Code/Benchmark                Compliance Status [Status]     Description of noncompliance, risk of  Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                    Completed, noncompliance or uncorroborated          Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                    Pending, On- evidence of noncompliance                                                        Verification                 date of planned or follow-up
                                                    going                                                                                         (Date)                       visit, if appropriate)
FOA.2 Right to Freely Associate   Uncorroborated    Ongoing      According to 3 workers, around the
                                  noncompliance                  year 2000 a group of workers was fired
                                                                 because of an attempt to constitute a
                                                                 trade union. Auditors inquired about
                                                                 this with management but they said
                                                                 that workers have never tried to
                                                                 constitute a trade union.
HOW.1 General Compliance Hours of Noncompliance      Ongoing      There is a noncompliance in a contract
Work                                                              term which establishes a 44-hour
                                                                  ordinary work week when employees
                                                                  really work 47 hours and 45 minutes
                                                                  per week. That is because
                                                                  management does not count lunch time
                                                                  as worktime, and consequently does
                                                                  not compensate it. Management
                                                                  explained that the work day is divided;
                                                                  it considers the workday to be
                                                                  interrupted by lunch time, which total 1
                                                                  hour. The 1-hour lunch is not
                                                                  considered worktime and therefore not
                                                                  compensated as part ot the ordinary
                                                                  work day. This situation is a
                                                                  generalized practice in the garment
                                                                  industy. Article 166 of the Labor Code,
                                                                  related to Article 163 of the same
                                                                  Code, stipulates that recesses and
                                                                  lunch breaks (which should be no less
                                                                  than 30 minutes each) are indeed
                                                                  considered worktime, and the workday
                                                                  should therefore be considered
                                                                  complete; especially when at lunch
                                                                  time workers are not free to leave the
                                                                  facilities; if they want to do so they
                                                                  must get 2 signed authorizations from
                                                                  management. For all these reason,
                                                                  management does not pay 3.75 hours
                                                                  of work per week.

HOW.3 Meal and Rest Breaks        Risk of            Ongoing      Workers do have 1 hour for taking their
                                  noncompliance                   lunch and there are no terms which
                                                                  expressly confine workers but at lunch
                                                                  time they are not free to leave the
                                                                  facilities. If they want to go out for
                                                                  lunch (or do anything else) they have to
                                                                  follow a procedure to ask for
                                                                  authorization. First, they must talk with
                                                                  the production manager and secondly
                                                                  with the human resources manager.
                                                                  When both have signed the
                                                                  authorization, the worker can leave the
                                                                  facilities, but he/she must justify the
                                                                  leave.
HOW.7 Maintenance of Reasonable   Risk of            Ongoing      Factory has dismissed 223 workers
Levels of Staff                   noncompliance                   between January 2007 and October
                                                                  2007.




                                                                                                                                                                                                                28
FLA Code/Benchmark              Compliance Status [Status]     Description of noncompliance, risk of   Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                  Completed, noncompliance or uncorroborated           Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                  Pending, On- evidence of noncompliance                                                         Verification                 date of planned or follow-up
                                                  going                                                                                          (Date)                       visit, if appropriate)
HOW.8 Overtime/Reduced Mandated Noncompliance     Ongoing      The factory has a system to document
Overtime                                                       voluntary overtime consent; however, 8
                                                               workers considered overtime not to be
                                                               voluntary. They feel pressure to work
                                                               overtime. Supervisors or production
                                                               manager always insist on overtime
                                                               even when they have said "no" at first.
                                                               Management assures that overtime
                                                               work is voluntary.


HOW.9 Overtime/Positive Incentives   Risk of          Ongoing      15 workers said that management does
                                     noncompliance                 not use positive incentives to induce
                                                                   overtime. 8 of them said that they felt
                                                                   pressure to work overtime.
HOW.10 Overtime/Calculation over     Noncompliance    Ongoing      Based on the regular work day
Period Longer than One Week                                        established in the employment
                                                                   contract, all employees work a 47.75-
                                                                   hour work week, exceeding the
                                                                   ordinary 44-hour work week
                                                                   established by national law (Article 38,
                                                                   Subsection 6 of the Constitution and
                                                                   Article 16, paragraph 3 of the Labor
                                                                   Code). This means that workers do
                                                                   not receive compensation for 3.75
                                                                   overtime hours per week. In the
                                                                   packaging area, there was an instance
                                                                   in which an employee worked an
                                                                   average of 64 hours per week during
                                                                   the second week of July which
                                                                   corresponds to excessive overtime of 4
                                                                   hours per week. In another case, a
                                                                   worker in the ironing section worked 64
                                                                   hours per week during 2 consecutive
                                                                   weeks (from July 9-14 and from July 16-
                                                                   21, 2007).
HOW.11 Extraordinary Business        Noncompliance    Ongoing      10 workers said that in extraordinary
Circumstance/Forced Overtime                                       business circumstance the overtime is
                                                                   not voluntary, although they sign the
                                                                   voluntary overtime registry.
HOW.12 Extraordinary Business        Noncompliance    Ongoing      6 workers claimed that the factory does
Circumstance/Overtime Explanation                                  not provide them with explanations
                                                                   about extraordinary business
                                                                   circumstances; they are just told to
                                                                   sign the voluntary overtime registry.




                                                                                                                                                                                                               29
FLA Code/Benchmark                Compliance Status [Status]     Description of noncompliance, risk of   Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                    Completed, noncompliance or uncorroborated           Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                    Pending, On- evidence of noncompliance                                                         Verification                 date of planned or follow-up
                                                    going                                                                                          (Date)                       visit, if appropriate)
HOW.13 Public Holidays            Noncompliance     Ongoing      January 16th is a public holiday since
                                                                 2007, but the factory operated as a
                                                                 normal day. The Human Resources
                                                                 Manager explained to auditors that
                                                                 management agreed with employees to
                                                                 work this day and that workers could
                                                                 take 2 consecutive Saturdays off.
                                                                 However, it was corroborated in 8
                                                                 cases that not all employees rested the
                                                                 following Saturdays. Also, there were 3
                                                                 cases in which employees worked on
                                                                 January 1st and 1 case in which an
                                                                 employee worked on May 1st.

HOW.17 Leave/Retaliation          Uncorroborated     Ongoing      There was a case of a worker who was
                                  noncompliance                   fired after she had been through 84
                                                                  days of postnatal maternity leave
                                                                  established by law. Management said
                                                                  that they always respect this right to all
                                                                  women who have given birth.
WBOT.1 General Compliance Wages, Noncompliance       Ongoing      There are noncompliances with regard
Benefits and Overtime Compensation                                to overtime payment and other legal
                                                                  benefits such as year-end bonuses and
                                                                  nursing leave.
WBOT.5 Holidays, Leave, Legal     Noncompliance      Ongoing      The 1 paid hour daily benefit for
Benefits and Bonuses                                              nursing mothers is not granted, and the
                                                                  year-end bonus did not factory in
                                                                  worker seniority into calculations up to
                                                                  last year. Also, January 16th is a
                                                                  public holiday since 2007, but the
                                                                  factory operated as a normal day. The
                                                                  Human Resources Manager explained
                                                                  to auditors that management agreed
                                                                  with employees to work this day, and
                                                                  workers could then take 2 consecutive
                                                                  Saturdays off. However, it was
                                                                  corroborated in 8 cases that not all
                                                                  employees rested the following
                                                                  Saturdays. There were also 3 cases in
                                                                  which employees worked on January
                                                                  1st and 1 case in which an employee
                                                                  worked on May 1st.
WBOT.6 Production and Incentive   Noncompliance      Ongoing      Usually, workers do not reach their
Schemes                                                           production targets and if they want to
                                                                  earn bonuses they have to work
                                                                  overtime because the ordinary working
                                                                  day is not enough. Auditors
                                                                  corroborated this situation through
                                                                  worker interviews and by reviewing
                                                                  payroll. Payroll showed that frequently
                                                                  workers do not reach their production
                                                                  targets.




                                                                                                                                                                                                                 30
FLA Code/Benchmark                  Compliance Status [Status]     Description of noncompliance, risk of  Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                      Completed, noncompliance or uncorroborated          Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                      Pending, On- evidence of noncompliance                                                        Verification                 date of planned or follow-up
                                                      going                                                                                         (Date)                       visit, if appropriate)
WBOT.7 Payment for All Hours        Noncompliance     Ongoing      There is a noncompliance in a contract
Worked                                                             term which establishes a 44-hour
                                                                   ordinary work week when employees
                                                                   really work 47 hours and 45 minutes
                                                                   per week. Management does not count
                                                                   this 3.75 hours as time worked, and
                                                                   consequently does not compensate it
                                                                   as part of the overtime employees work
                                                                   in a week.
WBOT.8 Calculation Basis for        Noncompliance      Ongoing      Even when workers agree with this
Overtime Payments                                                   situation, the right to paid overtime is
                                                                    constitutional and inalienable. In
                                                                    addition, it is factory practice to provide
                                                                    workers compensation for the
                                                                    production targets achieved, so
                                                                    management must pay the
                                                                    corresponding bonuses as an incentive
                                                                    provided voluntary. At the same time,
                                                                    factory must recognize overtime
                                                                    worked by employees.
WBOT.10 Premium/Overtime            Noncompliance      Ongoing      The factory has not complied with
Compensation                                                        applicable laws regarding holidays. 8
                                                                    workers worked on January 16th and
                                                                    they were not compensated. Another 3
                                                                    workers worked on January 1st and 1
                                                                    worker worked on May 1st.
WBOT.11 Overtime Compensation       Noncompliance      Ongoing      Workers have not been properly
Awareness                                                           informed of the value of overtime, since
                                                                    it is not paid.
WBOT.12 Overtime Compensation for   Risk of            Ongoing      Since production targets are too high,
Piece Rates and Other Incentive     noncompliance                   workers must perfom overtime to
Schemes                                                             achieve them.
WBOT.16 Employer Provided           Risk of            Ongoing      Workers are not free to go out at lunch
Services                            noncompliance                   time. If they want to go out for lunch,
                                                                    they must ask for 2 signed
                                                                    authorizations.
WBOT.17 Accurate Calculation and    Noncompliance      Ongoing      For the payment of year-end bonuses,
Recording of Wage Compensation                                      factory did not consider the seniority in
                                                                    the years before the audit period (the
                                                                    audit period is: October 2006-October
                                                                    2007). The policy of the factory is to
                                                                    divide payment of the year-end bonus -
                                                                    one part is paid in December and the
                                                                    other one when they complete a work
                                                                    year. Last year, the factory consider
                                                                    seniority but only in the payment made
                                                                    in December. This year, management
                                                                    told auditors that they will probably take
                                                                    account of workers' seniority to
                                                                    calculate year-end bonuses. Also,
                                                                    overtime is not paid due to the factory
                                                                    practice to pay bonuses instead of
                                                                    overtime as explained above.




                                                                                                                                                                                                                  31
FLA Code/Benchmark                 Compliance Status [Status]     Description of noncompliance, risk of     Updates (Cite Date of Follow-Up)          Third-Party Verification     Company Verification Follow-Up
                                                     Completed, noncompliance or uncorroborated             Company Follow-Up         Documentation   External     Documentation   Company Follow-Up (cite      Documentation
                                                     Pending, On- evidence of noncompliance                                                           Verification                 date of planned or follow-up
                                                     going                                                                                            (Date)                       visit, if appropriate)
WBOT.18 Accurate Length of Service Noncompliance     Ongoing      During 2006, just the portion of the
Calculation                                                       year-end bonuses paid in December
                                                                  was calcuted legally; the other portion
                                                                  was not. This year, management
                                                                  assured that they will consider seniority
                                                                  if economic conditions allow them.

WBOT.22 Worker Wage Awareness        Uncorroborated     Ongoing       While workers are unaware of how to
                                     noncompliance                    calculate year-end bonuses or the
                                                                      value of overtime, it was not possible to
                                                                      confirm whether or not management
                                                                      had made sufficient efforts to explain
                                                                      this information.




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