Better Work Lesotho Thematic Synthesis Report: Contracts

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1 Better Work Lesotho Thematic Synthesis Report: Contracts Produced on: 24 April 2014 Page 1 of 15 Better Work Lesotho is funded by the US Department of Labor.

2 Copyright International Labour Organization (ILO) and International Finance Corporation (IFC) (2014) First published (2014) Publications of the ILO enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to the ILO, acting on behalf of both organisations: ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by pubdroit@ilo.org. The IFC and ILO welcome such applications. Libraries, institutions and other users registered with reproduction rights organisations may make copies in accordance with the licenses issued to them for this purpose. Visit to find the reproduction rights organization in your country. ILO Cataloguing in Publication Data Better work Lesotho: thematic synthesis report: contracts / International Labour Organization ; International Finance Corporation. - Geneva: ILO, 2014 Global synthesis report, ISSN: X (web pdf) International Labour Organization; International Finance Corporation clothing industry / textile industry / workers rights / working conditions / labour contract / conditions of employment / labour relations / labour dispute / role of ILO / Lesotho The designations employed in this, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the IFC or ILO concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the IFC or ILO of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the IFC or ILO, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free of charge from the above address, or by pubvente@ilo.org Visit our website: Copyright International Labour Organization (ILO) and International Finance Corporation (IFC) (2014) First published (2014) Page i of 15

3 Acknowledgements Better Work Lesotho is supported by the United States Department of Labor. The Better Work Global programme is supported by the following (in alphabetical order): Australian Government Levi Strauss Foundation Netherlands Ministry of Foreign Affairs State Secretariat for Economic Affairs, Switzerland (SECO) The United States Council Foundation (funds provided by The Walt Disney Company) This publication does not necessarily reflect the views or policies of the organizations or agencies listed above, nor does mention of trade names, commercial products, or organizations imply endorsement by them. Page ii of 15

4 Table of Contents Acknowledgements...ii Table of Contents... iii Executive Summary... 4 Section I: Introduction and Methodology... 5 Introduction... 5 Better Work Methodology for Thematic Reports... 6 Note on the factories represented in this report... 6 Section II: Findings... 7 Average Non-Compliance Rates... 7 Section III: Initiatives to Date Section IV: Conclusions and Policy Recommendations Annexes Annex A: Factories Covered in this Report Page iii of 15

5 Executive Summary Better Work Lesotho is a partnership programme between the International Labour Organization (ILO) and the International Finance Corporation (IFC). In operation since May 2010, it is its ultimate goal to reduce poverty by creating decent work opportunities in Lesotho s garment industry. By conducting independent factory assessments against national and international labour standards as well as advisory and training services, the programme assists factories in the remediation of noncompliances. It currently works with 17 garment factories and one footwear company who have subscribed to Better Work Lesotho services. The programme s first thematic synthesis report focuses on an analysis of findings under the Contracts and Human Resources cluster. It emphasizes Dialogue, Discipline and Disputes issues where average non-compliance rates have been high, amounting to 80% and 79% respectively in the programme s first and second Synthesis Reports. Additionally, it will look at a number of other closely related compliance issues, including grievance handling, disciplinary measures and termination. The report covers selected contract issues assessed by Better Work Lesotho in all factories that have had more than one assessment visit. Since its inception, Better Work Lesotho has visited 23 factories in total. Of these, 13 have been visited twice and 7 have been visited a third time. The analysis that follows is based on the aggregate non-compliance findings from each cycle. It also takes into account data provided by the Department of Dispute Prevention and Resolution (DDPR) and information gathered through advisory visits and stakeholder interviews. Latest assessment findings for factories that had been assessed two and three times show that incidences of verbal harassment are decreasing. Also, factory management, union officials and workers report that overall workplace communication in BWL participating factories has improved. This is predominantly the case in companies that have been receiving Better Work Lesotho services for at least a year or longer and that have functioning labour-management dialogue structures, such as Performance Improvement Consultative Committees. Findings for non-compliance with grievance handling procedures, disciplinary measures and termination proceedings did decline as well for factories with two or more assessments. While these are encouraging results, the number of cases brought to the DDPR by garment factories participating in Better Work Lesotho still remains high. The number of cases fell from 2011 to 2012 but increased again slightly from 2012 to Most cases related to unfair dismissals (44.3%), followed by unpaid wages (12.8%). Better Work Lesotho is offering various services to help factories develop a respectful workplace culture and sound HR skills, including training on supervisory skills, HR Management and problemsolving, and seminars on effective grievance handling. The DDPR and the Labour Department can assist factories by engaging in training on dispute prevention, labour law and following correct procedures. Factory management and worker representatives should be encouraged to handle issues initially at factory level. Page 4 of 15

6 Section I: Introduction and Methodology Introduction Better Work Lesotho is a partnership programme between the International Labour Organization (ILO) and the International Finance Corporation (IFC). In operation since May 2010, it is the programme s ultimate goal to reduce poverty by creating decent work opportunities in Lesotho s garment industry, which is the most important formal provider of jobs and income in the country, particularly for women. By conducting independent factory assessments against national and international labour standards as well as advisory and training services, the programme assists factories in the remediation of non-compliances. It is doing so with the aim to enhance working conditions in the garment sector, promote its overall competitiveness in global supply chains and make a contribution to generating and sustaining employment. At the end of its first phase (December 2013), the programme was able to reach out to 65% of garment industry workers and 84% of factories exporting to the US. It currently works with 17 garment factories and one footwear company who have subscribed to Better Work Lesotho services. It is funded by the US Department of Labor. Better Work Lesotho s first two compliance synthesis reports, published in May 2012 and April 2013, revealed high average non-compliance findings relating to Dialogue, Discipline and Disputes under the Contracts and Human Resources assessment cluster, amounting to 80% and 79% respectively. It is the area with most non-compliance findings (only exceeded by those found under occupational safety and health) due to a large number of cases where workers had been subjected to verbal harassment by supervisors. The programme s first thematic synthesis report focuses on an analysis of these findings. Additionally, it looks at a number of other closely related compliance issues, including grievance handling, disciplinary measures and termination. Lesotho s garment industry, which is driven by foreign investment, employs a high percentage of supervisors who are non-basotho nationals. Most factories are characterized by a multi-cultural environment where mid-level management consists of different nationalities, including from Lesotho, mainland China, Taiwan, the Philippines and South Africa. Communication barriers, cultural differences and pressure to achieve targets often lead to situations where language is used at the factory floor that is inappropriate and counterproductive, resulting in absenteeism and the production of faulty garments. Also, in factories where grievance handling mechanisms are not functioning properly, workers complaints often remain unresolved and improvements in creating a respectful workplace communication culture are short-lived and not sustainable. Latest assessment findings for factories that had been assessed two and three times, however, indicate that incidences of verbal harassment are decreasing. Also, factory management, union officials and workers report that overall workplace communication in factories participating in Better Work Lesotho has improved. This is particularly the case in companies that have been receiving Better Work Lesotho services for at least a year or longer and that have functioning labourmanagement dialogue structures, such as Performance Improvement Consultative Committees (PICCs). Legal requirements relating to grievances and dispute solving, disciplinary measures and termination can be found either in the Labour Code of 1992 or the Codes of Good Practice of The Codes of Good Practice are a soft law that, among others, emphasize the need to apply fair procedures when carrying out disciplinary action or dismissals. Page 5 of 15

7 Better Work Methodology for Thematic Reports Better Work carries out factory assessments to monitor compliance with international core labour standards and national labour law. Where national law either fails to address or lacks clarity around a relevant issue regarding conditions at work, it uses benchmarks established by Better Work based on international labour standards and good practice. Following an assessment, a detailed report is shared with the factory and with its buyers. An aggregated industry-level report is issued once a year. In its factory and industry-level reports, Better Work highlights non-compliance findings. It reports these figures to help factories and other stakeholders easily identify areas in need of improvement. Collecting and reporting these data over time will help factories demonstrate their commitment to improving working conditions. In its factory assessments and in traditional synthesis reports, Better Work organizes reporting into eight areas, or clusters, of labour standards. Four of the clusters are based on fundamental rights at work (Child Labour, Discrimination, Forced Labour and Freedom of Association and Collective Bargaining) and four are based on national labour law relating to working conditions (Compensation, Contracts and Human Resources, Occupational Safety and Health and Working Time). In its first thematic synthesis report BWL focuses on themes under the Contracts and Human Resources cluster, including Dialogue, Discipline and Disputes, Employment Contracts and Termination. The table below lists these sub-categories and related questions: Compliance Points and Questions Dialogue, Discipline and Disputes Did the employer resolve grievances and disputes in compliance with legal requirements? Do the disciplinary measures comply with the Codes of Good Practice? Have any workers been bullied, harassed or subjected to humiliating treatment? Employment Contracts Do the employment contracts specify the terms and conditions of employment? Do the internal work rules comply with the law? Do workers understand the terms and conditions of employment? Termination Do workers have an opportunity to defend themselves before they are dismissed based on their conduct or performance? Does the employer only terminate workers for valid reasons? Does the employer provide 2 weeks severance pay per completed year of continuous service? In this thematic report, Better Work presents non-compliance findings at the question level. Answers to each questions are recorded in binary format, and then averaged across factories in consideration. For example, an average 61% non-compliance finding for a question pertaining to workers understanding the terms and conditions of employment means that 14 out of 23 participating factories were found to have a violation in that area (see table 1). Note on the factories represented in this report This synthesis report covers selected contract issues assessed by Better Work Lesotho in all factories that have had received at least one assessment visit by the programme, including those which are no longer a part of the programme. Since the inception of the programme, Better Work Lesotho has visited 23 factories in total. Of these, 13 have been visited twice and 7 of these have been visited a third time. The analysis that follows is based on the aggregate non-compliance findings from each cycle. It also takes into account DDPR data and information gathered through advisory visits and stakeholder interviews. Page 6 of 15

8 Section II: Findings This section describes non-compliance on issues of contracts in factories participating in Better Work Lesotho. The findings are divided in two parts. Average Non-Compliance Rates A detailed analysis of non-compliance for each question is shown in Table 1. Chart 1 is a visual representation of the numbers from this table. Given that the figures show non-compliance, higher percentages indicate a greater number of issues. For the purpose of space, the chart only includes those indicators which experienced a change of 5% or more in non-compliance between the first and second visit. Table 1 : Percentages and number of factories in non-compliance at the question level, by visit Dialogue, Discipline and Disputes Did the employer resolve grievances and disputes in compliance with legal requirements? Do the disciplinary measures comply with the Codes of Good Practice? Have any workers been bullied, harassed or subjected to humiliating treatment? Employment Contracts Do the employment contracts specify the terms and conditions of employment? Cycle 1 (23) Cycle 2 (13) Cycle 3 (7) 13% (3) 15% (0) 0% (0) 4% (1) 8% (0) 0% (0) 61% (14) 54% (1) 29% (2) 4% (1) 0% (0) 0% (0) Do the internal work rules comply with the law? 9% (2) 0% (0) 0% (0) Do workers understand the terms and conditions of employment? 61% (14) 46% (0) 0% (0) Termination Do workers have an opportunity to defend themselves before they are dismissed based on their conduct or performance? 4% (1) 0% (0) 0% (0) Does the employer only terminate workers for valid reasons? 4% (1) 0% (0) 0% (0) Does the employer provide 2 weeks severance pay per completed year of continuous service? 4% (1) 0% (0) 0% (0) Note: The number of factories is indicated in parenthesis. Table 1 shows that when assessed by Better Work Lesotho for the first time factories average noncompliance rates under the Contracts cluster were highest for workers having been bullied, harassed or subjected to humiliating treatment (61%) and workers not understanding terms and conditions of employment (61%). For all other questions average non-compliance rates were considerably lower, including for resolving grievances and disputes in compliance with legal requirements (13%) and compliance with internal work rules (9%). Non-compliance rates of 4% were calculated for: disciplinary measures in compliance with the Codes of Good Practice, employment contracts specifying the terms and conditions of employment, workers opportunity to defend themselves before dismissal, terminating workers for valid reasons, and provision of two week severance pay. The non-compliance rate was zero for providing workers with contracts and the majority of questions under Termination, including consultation with workers or their representatives prior to retrenchment and compliance with orders to reinstate or compensate workers who had been dismissed unfairly. In summary, the number of findings was and has remained particularly low for questions relating to Termination. When looking at changes over time (see Chart 1), there has been a decline in non-compliances under all questions analysed in this section. Most noteworthy are changes for workers being bullied, Page 7 of 15

9 harassed or subjected to humiliating treatment where the average non-compliance rate fell from 61% to 54% to 29%, which illustrates that most factories with a third assessment had been able to address disrespectful supervisor behavior successfully. Factories among this group engaged in one or more of the following: strong management commitment to stop the practice of verbal harassment, efforts to improve the factory s grievance handling and disciplinary procedures, and participation in supervisory skills training. Observations made during the advisory cycle indicate, though, that some factories face challenges regarding the sustainability of improvements. The establishment of an effective grievance handling mechanism workers have trust in can take time. The system needs to allow them to report harassment cases without having to fear retaliation. Similarly, it needs to function with respect to disciplinary measures should these become necessary. Workers will continue to report cases only if they see that their grievances are taken seriously and appropriate measures taken against those who still act and/or speak to them disrespectfully. Additionally, in order to sustain improvements, supervisory skills training needs to be conducted on a regular basis, in form of refresher trainings, especially in factory environments where supervisors change frequently. Also, more effort needs to be made in identifying the root causes for verbal harassment. If for instance high production targets that to achieve put supervisors under constant pressure, then factories may want to look into reorganizing their production planning to reduce stress levels of their supervisors. Factories were also successful in addressing the finding of workers not understanding the terms and conditions of their employment. The average non-compliance rate fell from 61% to 46% from the 1 st to the 2nd cycle and down to zero in the 3 rd cycle. In most cases the root cause for the initially high non-compliance rate was twofold - workers had not been given copies of their contracts and had received no or insufficient induction training. In order to address this issue factories adopted systems to ensure that all workers get a copy of their contracts and that induction training is being held regularly. There was a slight increase in the average non-compliance rate for resolving grievances and disputes with legal requirements from 13% (1 st cycle) to 15% (2 nd cycle). However, for the 3 rd cycle the noncompliance rate for this issue was zero. The most common reason for workers grievances is a dispute with the supervisor. Should it not be possible to settle the grievance or dispute internally based on the factory s grievance or dispute handling rules and systems, the issue can be referred to an external party (Labour Code 1992, sections , amendments of 2000). Page 8 of 15

10 Chart 1 : Non-compliance findings, by visit Page 9 of 15

11 Parties can seek assistance from the Department of Dispute Prevention and Resolution (DDPR), the Lesotho National Development Corporation (LNDC), the Labour Department of the Ministry of Labour and Employment (MoLE). The DDPR is the national dispute prevention and resolution agency under the MoLE for both the public and the private sector. Its mandate is to solve rights- and interest-based disputes 1. It employs conciliators and arbitrators as well as trainers. Its services are free of charge. Factories may also call the Labour Department to assist them in handling labour disputes. The Labour Commissioner and Labour Inspectors can be asked to conciliate, advise on the interpretation of the labour law in relation to disputes and assist in resolving strikes. Services by the Labour Department are free of charge. The LNDC, through its Labour-Management Relationship Manager, engages in dispute resolution upon request of factories. The Relationship Manager acts as an adviser and conciliator. LNDC has developed a number of sample documents, including standard disciplinary and retrenchment procedures, that it shares with factories to promote good practice and compliance with legal requirements. LNDC s dispute handling services are covered by member fees factories pay to the organization. As an industry-wide practice, labour disputes are quickly made a case at the DDPR. Chart 2 illustrates the number of cases referred to the Department by Maseru-based garment factories between January 2011 to December In 2011, 185 cases were counted, brought to the Department by just 17 factories included in this analysis (76% of these factories currently participate in Better Work Lesotho). The number of cases fell from 2011 to 2012 by 26% but then increased again slightly from 2012 to Also, since 2011 about 80% of the 17 factories established a PICC. This, in many instances, had a positive impact on labour-management relations which may have contributed to the decline in DDPR cases. It is noteworthy that in factories were responsible for 58% of cases in total, indicating that the reasons for a high number of cases seem to be rather factory-specific than systemic. Chart 2 : Number of cases referred to the DDPR by garment factories based in Maseru, Over the last three years, 44.3% of cases referred to the DDPR related to unfair dismissals, followed by unpaid wages (12.8%). For all other areas in relation to compensation and benefits the case load was considerably lower. 1 The DDPR does not determine the lawfulness of industrial action as the latter falls under the jurisdiction of the Labour Court. It is the Labour Court s mandate to resolve disputes concerning the application or interpretation of any provision of the Labour Code or any other labour law. Page 10 of 15

12 Similar to the trend in grievance and dispute solving the occurrence of NC findings for disciplinary measures being in non-compliance with the Code of Good Practice first increased from 4% (1 st cycle) to 8% (2 nd cycle) and then fell to zero with the third assessment. The Codes of Good Practice (sections 9 and 10) require a factory to have a system of graduated disciplinary measures in place (e.g. verbal, written and final warnings, counseling) and to apply sanctions in proportion to the misconduct. For all questions on Termination, the average non-compliance rate was zero for factories with a second and third assessment. Findings in the first assessment of workers not having the opportunity to defend themselves before dismissal, reasons for valid termination and for severance pay did not reappear. As per the Codes of Good Practice (section 7) an employee needs to be given an opportunity to respond to reasons for dismissal (disciplinary hearing) before the final decision to dismiss the employee is being made. The employee can be represented in the dismissal proceedings by a workplace union representative or a co-worker. Disputes in relation to contract termination are usually handled by the DDPR. If a worker has been dismissed unfairly, upon analysis of the case and decision by the DDPR, a factory has to reinstate and/or compensate the worker. Valid reason for contract termination include misconduct (e.g. theft or unauthorized absenteeism) and underperformance. Section III: Initiatives to Date Better Work Lesotho offers the following training and advisory services that aim to assist factories in addressing issues under the Contracts cluster: Supervisory Skills Training (SST): Since 2011 Better Work Lesotho has been conducting SST on a regular basis. The training aims to equip supervisors with managerial and communication skills to foster a respectful workplace environment. Supervisors are taught, among other things, to understand and perform better their roles and responsibilities, motivate staff through effective interpersonal relations and improve their communication with workers and other supervisors. Since a high percentage of supervisors in Lesotho s garment industry are Chinese, the SST is also offered in Mandarin. From 2014, in line with a wider Better Work scheme to promote sector-wide change of supervisory practices in its country programmes as part of an initiative supported by the Walt Disney Company - Better Work Lesotho has been adding new elements to its SST. With a view to increase factories inhouse capacity to conduct SST, the program is also providing Training-of-Trainer (ToT) courses to HR Officers and supervisors who have the potential to become good trainers. The SST ToT will be rolled out to trainers from the employer associations and other training providers as well. Supervisor network meetings to refresh knowledge and exchange good practice in communication and supervision for a group of emerging trainers will complement the ToTs. Lastly, the scheme also entails the identification and training of young female workers to become qualified supervisors. Building on current achievements, the SST initiative is expected to help reduce incidences of verbal harassment further and capacitate factories to conduct SST for newly hired supervisors or as a refresher course, independent from external providers and according to their own schedules. HR Management Training: The training focuses on main HR topics in relation to Lesotho labour law requirements and good practice. Its modules cover key knowledge HR practitioners should possess to handle grievances, disputes and termination as per legal requirements, conduct effective worker induction programs and improve the working environment. Between May 2012 and February 2014 HR personnel of about 70% of factories under the program participated in this training. Page 11 of 15

13 Grievance Handling Seminars: Since August 2013, Better Work Lesotho is offering Grievance Handling Seminars for management and worker representatives of PICCs. The Seminars introduce participants to different types of grievance mechanisms, tools and good practice on how to handle workplace grievances, and the benefits of handling grievances effectively. Participants are coming from different factories to promote an exchange of experience and knowledge sharing. As functioning grievance handling systems are key to creating a respectful workplace environment, Better Work Lesotho will offer more training and advisory services on this topic in the future. This approach will allow factories to build further their in-house capacity to address grievances in a timely, fair and sustainable manner. Problem-solving sessions: The sessions are delivered during PICC meetings at an early stage of PICC operations. They aim to improve PICC members knowledge on problem-solving techniques, including root cause analysis, how to achieve win-win outcomes etc. The sessions equip factory personnel with the tools and methods to solve smaller problems at factory level wherever possible. Zero Tolerance Protocol: In May 2013 Better Work Lesotho and the MoLE signed a Zero Tolerance Protocol which lists severe verbal harassment, among other human rights violations, as zero tolerance issues. Better Work Lesotho Project Advisory Committee members decided to include severe verbal harassment in the protocol to signal to the industry that this practice is unacceptable and, if detected, would be further investigated by the Labour Department. Section IV: Conclusions and Policy Recommendations While there has been an encouraging decline in the average non-compliance rates for issues where non-compliance has been relatively high in the past, further effort is needed to ensure that improvement is sustainable. The programme will therefore continue to assist factories in: training their supervisors and establishing functioning grievance handling mechanism with the aim to strengthen factories in-house capacities in establishing and maintaining a respectful and fair workplace environment, strengthening their HR skills, including effective worker induction training programs to ensure that all workers understand the terms and conditions of their contracts, improving dialogue in the workplace through the facilitation of PICC meetings and building labour and management s problem solving skills. The fact that a substantial number of issues are still being referred to the DDPR requires more indepth analysis into the nature of labour disputes as well as their root causes and whether they could have been solved at factory level. Better Work Lesotho recommends that stakeholders consider the following: Taking steps to reduce the case load of the DDPR to enable the Department to engage more in dispute prevention activities (e.g. training on labour law, workplace cooperation, procedural requirements for termination procedures). Increasing dispute prevention activities would further reduce the number of cases. Additionally, the Government could consider increasing the DDPR s budget to better cover the industry s dispute prevention training needs. The MoLE, in managing the labour law revision process, should work with social partners on clarifying any grey areas around the interpretation of issues relating to internal work rules, termination procedures and disciplinary measures. Depending on the availability of resources, the Labour Department could support the DDPR in conducting labour dispute prevention training. Page 12 of 15

14 Both factory management and worker representatives should be enabled and encouraged by all parties involved in dispute prevention activities to solve issues initially at the factory level. HR managers in particular, will spend less time at the DDPR attending hearings and could instead take care of other HR matters. Also, factory management and workers need to build confidence in factorybased grievance handling mechanisms. Page 13 of 15

15 Annexes Annex A: Factories Covered in this Report C&Y Garments (Pty) Ltd CGM Industrial (Pty) Ltd Chainex Textiles (Pty) Ltd Eclat Evergood Textiles (Pty) Ltd Everunison Garments Lesotho (Pty) Ltd Formosa Textile (Pty) Ltd Global Garments (Pty) Ltd Hippo Knitting (Pty) Ltd Humin Jeans (Pty) Ltd J&S Fashions (Pty) Ltd Jonsson Manufacturing (Pty) Ltd Kopano Textiles (Pty) Ltd Lesotho Precious Garments (Pty) Ltd Maseru-E Textiles (Pty) Ltd Mauri Garments (Pty) Ltd Nien Hsing Textile International (Pty) Ltd Presitex Enterprises (Pty) Ltd Shinning Century Limited (Pty) Ltd Springfield Manufacturers (Pty) Ltd Sun Textiles (Pty) Ltd Super Knitting (Pty) Ltd Tai-Yuan Garments (Pty) Ltd TZICC Clothing Manufacturers (Pty) Ltd Page 14 of 15