UW News

April 2, 2009

Guatemalan workers get severance pay, thanks to UW student efforts

News and Information

A discovery by a UW student task force about the treatment of workers being laid off from a Guatemalan apparel factory in February 2008 has finally led to legally due severance payments for most of those workers.

About 95 percent of the 987 former workers at the Estofel Apparel Factory in Guatemala City who were eligible for payment have been located. A total of 871 have received payments of $534,288, made by the Ghim Li Group, the Singapore-based former owner of Estofel.

“This unprecedented case benefits these factory workers and provides a groundbreaking example of a university’s involvement in enforcing labor rights in the international apparel production industry,” said Kathy Hoggan, UW director of trademarks and licensing.

“It was clearly understood that the international pressure led to the ultimate back payment of the workers, and it helped resolve the case fairly quickly,” said Margaret Levi, professor of political science and former chair of the UW Licensing Advisory Committee.

The case was brought to the attention of the UW when the student task force led by Associate Professor of International Studies Angelina Godoy visited Guatemala City in February 2008. They learned that employees of the recently closed Estofel apparel plant had not received their legally due severance pay. The information was reported to the University’s Licensing Advisory Committee, which authorized further research.

Shortly thereafter the UW involved their member associations, the Worker Rights Consortium and the Fair Labor Association (FLA).

The UW learned that a UW licensee, Gear for Sports Inc. (GFSI), had utilized the Estofel factory to produce Champion brand shirts, but none of the shirts produced were UW apparel.

Even though no UW products were involved, the Licensing Advisory Committee urged the formation of an Estofel Remediation Team that included representatives from the Fair Labor Association, the Worker Rights Consortium, Gear for Sports Inc, Hanesbrands Inc. (licensor of the Champion brand to Gear for Sports Inc.), The Collegiate Licensing Company (UW’s licensing agent), Ghim Li Group, and UW Trademarks and Licensing.

Coverco, an independent monitor in Guatemala, was hired by the FLA to review employment records and identify former Estofel workers, any severance they may have received, and the outstanding balance legally due.

The Coverco report identified 974 workers due a total of 8.685 million Guatemalan Quetzals ($648,000) in unpaid severance. They also recommended payment of “economic advantage” benefits (a benefits-related payment that laid-off workers should receive under Guatemalan law) to the workers equaling Q 2.475 million ($185,000). Ghim Li Group agreed to provide the financial support for Estofel to pay the $648,000 in unpaid severance, with the stipulation that workers who had already filed lawsuits against the company must choose to: (a) continue to pursue the lawsuits and waive rights to any Estofel payment, or (b) withdraw the lawsuits and receive the payment.

Coverco then was hired to design and implement a plan to locate workers and assist in distributing correct payment. Subsequently, Coverco identified an additional 13 eligible workers, bringing the total count to 987.

Coverco officials believe that this is the most successful case ever in Guatemala in securing legally-required compensation for workers. Jeremy Blasi, director of research and investigations at the Worker Rights Consortium, said the success in reaching affected workers far exceeded their expectations.

Jorge Perez-Lopez, executive director of the Fair Labor Association, said, “The Estofel Remediation Team has spent much time over many weeks working though this case. I did not expect that the number of workers reached would be as high as it was, but we kept our eye on the outcome and all things considered, it went pretty smoothly. This case must be viewed as a remarkable delivery of benefits to deserving workers. Credit should be given to all involved for setting an example of what can and should happen.”

Despite apparent violations of Guatemalan law, no charges have been brought against anyone associated with the Estofel factory.