Apple (AAPL) has disclosed that child labor was used in three supplier factories last year to build iPhones, iPods and Macintosh computers. The new report, designed to highlight its strong workplace standards, comes amid greater scrutiny of the working conditions at Apple's suppliers, particularly in Asia. Last year, a worker at Apple's massive Taiwanese supplier Foxconn jumped from his high-rise apartment after being beaten by guards during an investigation into a stolen iPhone prototype. And recently, at another Foxconn factory, this one in China, a Reuters employee was beaten by guards after photographing the facility.
Apple's report, entitled Supplier Responsibility, found 17 "core violations," including using underage labor and falsifying records. Apple's supplier standards program is much more robust than those found in the rest of the tech industry, and the company uses the results of its audits to pressure its suppliers to improve. Last year, the company said it terminated one repeat offender. Airing one's dirty laundry is laudable, but Apple should expect criticism when child labor and other workplace violations are found.
"Apple discovered three facilities that had previously hired 15-year-old workers in countries where the minimum age for employment is 16," Apple said. "Across the three facilities, our auditors found records of 11 workers who had been hired prior to reaching the legal age, although the workers were no longer underage or no longer in active employment at the time of our audit."
In the review of 102 factories around the world, Apple also discovered three cases of "falsified records," including one designed to conceal child labor violations: "One facility attempted to conceal evidence of historical cases of underage labor," the company said. "Two other facilities presented falsified records that concealed evidence of violations of Apple's Code regarding working hours and days of rest."
In one case, Apple said it terminated its relationship with a supplier that had been caught falsifying records in 2008, only to do the same thing the next year. "When Apple investigated further, we uncovered additional records and conducted worker interviews that revealed excessive working hours and seven days of continuous work," Apple said. "When confronted with this information, the facility provided Apple with accurate timecards. Based on the repeat core violation and inadequate actions, Apple is terminating all business with this facility."
"Noncompliance" With Labor Standards
The report contained other startling disclosures, including dozens of cases in which suppliers were found to be noncompliant with numerous labor standards. For example, at 60 facilities, the company "found records that indicated workers had exceeded weekly work-hour limits more than 50 percent of the time. Similarly, at 65 facilities, more than half of the records we reviewed indicated that workers had worked more than six consecutive days at least once per month."
"At 48 of the facilities audited, we found that overtime wages had been calculated improperly, resulting in underpayment of overtime wages," Apple said. "At 24 facilities, our auditors found that workers had been paid less than minimum wage for regular working hours."
The child labor and other violations were discovered as part of an annual on-site audit of suppliers in China, Taiwan, Thailand, Malaysia, Singapore, South Korea, the Czech Republic, Philippines and the U.S. The company did not specify where the violations occurred.
Apple is to be commended for its robust supplier practices audit. The real question is whether the company will use its influence to push even more aggressively for improved conditions. Merely identifying the problem is not enough.
What's your investing game plan?View Course »