WASHINGTON – 2,000 Indonesian garment workers have received a total of US$4.5m in severance pay – the largest recorded amount workers have won in a single case of illegally denied severance. The pay came in relation to PT Kahoindah Citragarment (Kahoindah), an Indonesian garment factory owned by the South Korean firm Hojeon LLC, which announced the factory would be closing in 2018.
The business said the decision to close was taken in response to Nike’s decision to end its sourcing relationship with Kahoindah. The factory, which at the time of the announcement employed 2,001 workers, produced collegiate apparel for Nike and non-collegiate apparel for Fanatics.
The Worker Rights Consortium conducted an investigation of the factory in response to complaints from workers.
The WRC’s investigation found PT Kahoindah Bekasi violated Indonesian law, and by extension university labour standards, by failing to pay workers a substantial portion of their legally mandated terminal compensation. Specifically, in the months leading up to its closure, it was found PT Kahoindah Bekasi unlawfully used coercion and false representations to convince workers to resign from the factory. As a result, workers received only half of the severance to which they would have been legally entitled had they remained in the factory’s employ and been terminated upon its closure. The average financial loss to each worker, as a result of being compelled or misled to resign, was seven months’ wages.
Said a statement from WRC: “After concluding its investigation, WRC approached Hojeon and key brands sourcing from Hojeon’s Indonesian factories. After Fanatics, Gap, and Under Armour told Hojeon that they expected the firm to make workers whole, Hojeon reached an agreement with the WRC.
“Hojeon agreed to pay the 2,001 affected workers an additional US$4.5 million to make them whole. These payments were made in two tranches, in August and November 2019. On average, workers received the equivalent of seven months’ pay.”