The University of Wisconsin-Madison has become the first university in the world to end a licensing agreement with Nike -- effective this month. The university said it took the action because the company failed to explain the problems behind two Honduran factories that closed without paying severance to workers.
To shed light on the issue, the university hosted two Honduran workers, Gina Cano from the Hugger de Honduras factory and Lowlee Urquia from Vision Tex factory in Honduras, both of whom lost their jobs on Jan. 19, 2009. Nike denied severance fee payments for both of them. The two former factory workers will travel to other American universities to educate students about their experience and urge them to end licensing agreements with Nike.
Both Hugger de Honduras and Vision Tex factory were contracted by Nike to produce college apparel. The factories closed without notice in January 2009 -- and since then the owners have not paid more than $2 million combined for workers in a legally mandated severance. The university learned of these allegations in a report from the Worker RIghts Consortium, said Dawn Crim, special assistant to the chancellor and director of community relations.
"When we heard about the factory closures at the University of Wisconsin last year, they told us that [Nike was] in the process of addressing it and there was a report," Crim said in a telephone interview.
Chancellor Biddy Martin wrote to Nike asking for a detailed plan on solving its abuses. The Worker Rights Consortium, an independent labor rights monitoring organization that investigates global working conditions for American universities, reviewed the situation and contacted Nike multiple times. This led to a sit down with Nike executives.
The university allowed Nike 120 days to find solutions for the workers. At the end of this time period, Nike did not make a change. Student Labor Action Coalition, a student group, suggested the university end the contract with Nike.
"The way we handle allegations of violations here is we talk as an administration here about the issue and we also talk to our labor licensing and policy issues," Crim said. "It was their recommendation that we take the advice written in the workers rights report to talk to subcontractors about these claims."
The university cut the contract with Nike, which gave the company had the rights to university logos and generated a royalty income of $49,000 to University of Wisconsin-Madison in the 2008-09 school year. Because Nike was a university licensee, Nike was legally required to follow the university's code of conduct. This code pertains to issues such as working hours; workers' wages; overtime compensation; child labor; forced labor; health and safety; nondiscrimination; women's rights; harassment or abuse; and public disclosure of where factories are located.
Nike disagrees and does not believe it is under the university's code of conduct.
"No University of Wisconsin product was made at Vision Tex or Hugger factories. Apart from a one-time order for 800 units of college apparel at Vision Tex, no collegiate licensed product was made in either Vision Tex or Hugger and, as such, Nike does not operate under the University of Wisconsin Code of Conduct," according to a statement sent by e-mail from Kate Myers, Nike Corporate Communication, to Money College on the subject of the University of Wisconsin-Madison.
Scott Nova, executive director of Workers Rights Consortium, believes that Nike has made a false statement by saying no university products were created at these factories.
"Nike said we're making college apparel at these two factories every year in their corporate reports," Nova said. "For every university we know of that licenses with Nike, they disclosed Hugger as the factory. [Nike] suddenly tried to retract this information when it became an embarrassment, and frankly they don't have any credibility on this. You can't un-ring a bell. Nike has an obligation to universities to make sure that factories reach university standards."
The Workers Rights Consortium brought the factory closing to the attention of Nike, Nova said.
"Only after the report became public did they say that they had made a mistake," he said. "This is the second time that Nike has done this."
Nova referred to another investigation following Australia's Channel 7 report of human trafficking and human rights abuses at a Nike factory in Malaysia.
"After the Australian television story ran, [Nike] said, 'We never put that factory on the [collegiate list],'" Nova said.
Nike has issued a statement on its website that the company, its contracted factories in Honduras and local service providers would offer training and a vocational program for workers who were not paid severance after Hugger and Vision Tex closed last year.
Nike will not pay severance to workers who worked at the closed factories.
"Severance is not on the table," Meyers said. "[Nike] didn't own the factory and the workers aren't Nike employees. The employers, their direct responsibility is to help the employees. What we are doing is trying to get work and training programs up and running so they can re-enter the work force, but we aren't the guarantors for the factory and we won't be paying severance."
No specific date has been set for Nike to begin training. Nike has several employees talking to local stakeholders and service providers in Honduras to provide training. There are current discussion with the unions there for reaching out to the former workers to let them know about the new program.
Scott Nova with the Workers Rights Consortium believes this solution will not solve the workers' problems.
"It's important to understand it's Nike's obligation to protect the right of the workers and to pay them," he said. The workers are owned millions of dollars in legal severance, not to provide job training which the workers didn't even ask for."
This isn't the only time the university has faced fair wage compensation for workers problems. In addition, other cases such as Russell Athletic in 2009 and New Era in 2008 licenses were ended.
Though the university has ended its contract with Nike, this action does not end all business with the company. If the company does comply to fair labor from the university's code of conduct, then the university may do business with the company again.
For Nike, losing the University of Wisconsin-Madison will not hurt the company's business, Kate Meyers said in a telephone interview with Money College.
"I would say that certainly these are issues we take very seriously at Nike corporate," said Meyers. "Absolutely we're disappointed that University of Wisconsin has ended the contract. However, [$49,000] worth of business is not significant."