WRC report on the efforts to remediate violations previously found at Lianglong Socks, a producer of hosiery for RJ McCarthy Ltd, a supplier of school uniforms. Describes persistence of labor violations and finds that RJ McCarthy is not responsible due to their lack of influence in the matter

Worker Rights Consortium

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WRC report on the efforts to remediate violations previously found at Lianglong Socks, a producer of hosiery for RJ McCarthy Ltd, a supplier of school uniforms. Describes persistence of labor violations and finds that RJ McCarthy is not responsible due to their lack of influence in the matter.WRC_Report_Lianglong_2009.pdf: 81 downloads, before Oct. 1, 2020

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Worker Rights Consortium Remediation Report re Lianglog Socks Co. Ltd (China)

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WORKER RIGHTS CONSORTIUM REMEDIATION REPORT 
re LIANGLONG SOCKS CO. LTD (CHINA) 
 
May 15, 2009 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 Thomas Circle NW     Fifth Floor     Washington, DC  20005      
(202) 387-4884     Fax: (202) 387-3292      
wrc@workersrights.org     www.workersrights.org 
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
                                                
I. Introduction 
 
This memorandum updates the previous findings of the WRC regarding labor 
conditions at Lianglong Socks Company, Ltd., a factory located in the Chinese city of 
Zhujie, in Zhejiang province. Lianglong was a producer of school uniform socks for 
R.J. McCarthy, Ltd., a supplier for a number of the Catholic District School Boards in 
Ontario that are part of the joint affiliate with the WRC. The memorandum also 
contains our recommendations to R.J. McCarthy concerning engagement with this 
supplier and some recommendations concerning R.J. McCarthy’s sourcing and 
compliance practices generally. 
 
The WRC provided an investigative report to the affiliate on conditions at Lianglong 
on April 3, 2008,1 which identified significant labor rights violations and made 
recommendations for remedial action. On June 11, 2008, R.J. McCarthy issued a 
letter outlining its response to the WRC report. R.J. McCarthy provided an additional 
update to the WRC on the situation at the plant in March 2009.  
 
In early 2009, the WRC initiated a new round of assessment of the labor conditions at 
Lianglong. The WRC’s methods of collecting information included a formal visit to 
the factory in March, arranged with the assistance of R.J. McCarthy, and other offsite 
research, including worker interviews. In both this recent research and the March 
factory inspection, the WRC found, unfortunately, that significant violations of 
Chinese labor law and of the labor policies of the Catholic District School Boards 
persist at Lianglong and that the factory management has not demonstrated a 
commitment to correcting these problems.  
 
The WRC does not believe that the persistence of violations at the factory are 
reflective of a lack of effort on the part of R.J. McCarthy to try to convince the factory 
to take appropriate action. Instead, it is apparent that Lianglong’s continued 
unwillingness to comply with Chinese labor law indicates that R.J. McCarthy – whose 
orders, by the former’s own estimate, amount to less than 1% of Lianglong’s total 
production – lacks sufficient influence to compel Lianglong to reform its practices. 
R.J. McCarthy pressed the factory to correct the violations, after being notified of the 
problems by the WRC, and made it clear that future orders were contingent on full 
remediation. As we discuss later, the fact that the factory failed to take adequate 
corrective action, despite these entreaties, speaks clearly to the need for R.J. 
McCarthy and other buyers to consider modifying their sourcing policies – by, among 
other measures, directing their orders to manufacturers for whom the buyer represents 
a significant portion of their total business. 
 
The WRC cannot recommend at this time that R.J. McCarthy place any orders with 
Lianglong, unless and until the latter can first demonstrate that it has corrected the 
outstanding violations. At the end of this report, however, the WRC makes certain  
recommendations regarding steps that R.J McCarthy should take in regard to its 
overall sourcing and compliance practices. 
 
 
1 See WRC, “Assessment Regarding Lianglong Socks Company Limited (China),” 
http://www.workersrights.org/freports/Lianglong.asp. 
 2
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
                                                
On a more positive note, during the March factory visit, the WRC also worked with a 
local labor law expert to conduct a training session on Chinese labor law with the 
Lianglong workers. Two classes were held, with a total of sixty-four out of an 
estimated 200 workers at the factory attending, in which relevant portions of China’s 
2007 Labor Contract Law and other legal stipulations on wage levels and wage 
payment were explained. Notably, more than 75% of the workers who attended the 
training were new hires at the factory. The WRC appreciates R.J. McCarthy’s effort to 
help coordinate the training and Lianglong’s provision of the venue. 
 
II. Findings 
  
A. Withholding of Wages 
 
According to recent interviews with workers, the company still persists in the practice 
of withholding the bulk of employees’ wages until the end of the Chinese New Year, 
as was previously documented in the April 2008 WRC report. Workers reported that 
they receive “pocket money” from management twice a month, in the amount of 300 
Yuan (roughly CA$54) on the 15th and 30th of every month.  
 
As was also stated in the WRC’s previous report, this practice, while reportedly 
prevalent in the hosiery industry in Zhujie, violates Chinese Labor Law, which 
requires monthly payment of the full amount of wages owed.2 It is worth noting that 
the amount Lianglong workers receive as “pocket money” is well below the current 
monthly legal minimum wage in Zhejiang of 850 Yuan (CA$151). 
 
According to R.J. McCarthy’s previous communications to the WRC, the factory has 
claimed that managers have ceased withholding workers’ wages and, instead, deposit 
these wages into two separate bank accounts for each employee. According to R.J. 
McCarthy, this system was justified by Lianglong as providing employees with both 
an account for daily expenditures and a savings account.   
 
In the March factory visit, the WRC investigator asked factory managers whether they 
could show him the relevant bank receipts for these deposits and the numbers of the 
accounts to which they are depositing wages.  To respond this question, the factory 
managers said they had told R.J. McCarthy that they “have a plan” to pay wages to 
workers’ banks account at the time they are earned, but that this plan has not been 
implemented owing to a “technical reason.” Lianglong management claimed the 
factory had only reopened on February 20 after having been closed for the Chinese 
Lunar New Year3. This would have been less than a month before the March factory 
visit.  However, other research by the WRC indicated that some workers had been 
working at the factory since February 8. In addition, other persons interviewed by the 
WRC indicated that the factory manager and owner had admitted maintaining the 
practice of paying back workers for the entire year’s wages at the end of each Chinese 
New Year. 
 
2 Labor Law, Art. 50 (“Wages shall be paid monthly to laborers themselves in form of currency. The 
wages paid to laborers shall not be deducted or delayed without justification.”). 
3 In China, it is typical for factories to close during the Chinese Lunar New Year so that workers may 
return to their home villages to visit with family. Chinese Lunar New Year typically lasts for seven 
days. 
 3
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
 
Conclusion: Lianglong continues to violate Chinese law by withholding 
employees’ wages for a period of more than one month at a time, and, moreover, 
appears to have made inaccurate claims regarding its remediation of this 
violation. 
 
B. Nonpayment of Minimum Wage and Excessive Hours of Work 
 
The WRC finds that Lianglong still does not pay the required legal minimum wage. 
Like many other sock factories in the area, Lianglong has adopted a piece rate system 
of compensation. According to national and provincial law and regulations, however, 
minimum wage requirements still apply.4 Overtime hours must be paid at a piece rate 
that reflects the legally required premium for such work – 150% of the regular wage 
rate for all work over eight hours in a day and 200% of the regular wage rate for work 
on weekends. 
 
The WRC finds that Lianglong fails to provide employees with legally required time 
off from work. Workers in the factory’s major departments (knitting, fixing and 
packing) said that they work almost every day, sometimes working nearly an entire 
month without a single rest day – a clear violation of Chinese law, which mandates 
that employees must receive at least one day off per week.5  Workers described their 
daily work schedules and monthly wages as follows: 
 
 
Department Working hours Monthly wages 
Fixing 0730 – 2000, with two 30 
minute breaks 
1150 Yuan 
Knitting Almost 12 hours a day, 
two shifts a day 
1500 to 1650 Yuan, 
depending on the worker’s 
skill 
Packing Similar to fixing 1100 – 1200 Yuan 
 
 
 
In September 2008, the city of Zhujie raised the local minimum wage applicable to 
Lianglong’s employees to 850 Yuan per month. This represents a minimum hourly 
wage of 4.89 Yuan for a monthly schedule of five 8 hour days per week. Therefore, if 
an employee works thirty days in a month, and roughly 11.5 hours per day, and is 
                                                 
4 Labor Law, Article 48, (“The State shall implement a system of guaranteed minimum wages. Specific 
standards on minimum wages shall be determined by the people’s governments of provinces, 
autonomous regions or municipalities directly under the Central Government and reported to the State 
Council for the record. Wages paid to laborers by the employing unit shall not be lower than the local 
standards on minimum wages.”) 
5 Labor Law, Arts. 38 (“The employing unit shall guarantee that its staff and workers have at least one 
day off in a week.”) and 41 (“The employing unit may extend working hours due to the requirements of 
its production or business after consultation with the trade union and laborers, but the extended 
working hour for a day shall generally not exceed one hour; if such extension is called for due to 
special reasons, the extended hours shall not exceed three hours a day under the condition that the 
health of laborers is guaranteed. However, the total extension in a month shall not exceed thirty-six 
hours.”). 
 4
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
                                                
paid the legally required premiums for overtime and weekend work, the legal 
minimum monthly compensation is 2,312 Yuan.6
 
Lianglong factory managers have repeatedly claimed that they are paying workers a 
wage of roughly 1500 Yuan per month – which, as shown above, accurately describes 
wages for employees in the knitting department – but even this figure is far below the 
legal minimum wage due for the working hours that employees have reported. R.J. 
McCarthy reported that factory management also asserted, and that employees 
interviewed on site also stated, that Lianglong no longer requires employees to work 
mandatory overtime, and properly compensates all overtime worked.  In light of 
management’s previous dishonesty and obvious coaching of employees during the 
WRC’s earlier investigation of Lianglong, these statements can be given little 
credence when, as here, they are contradicted by multiple off-site worker interviews. 
Moreover, as noted in the WRC’s previous report and recently reconfirmed by R.J. 
McCarthy, factory management has repeatedly failed to provide accurate payroll 
information to either R.J. McCarthy or the WRC, so it is impossible to verify 
management’s claims in this regard. 
 
Conclusion: Lianglong continues to violate Chinese law regarding minimum 
wage and maximum hours of work and has failed to give a verifiable accounting 
of its actual practices in this area. 
 
C. Terms of Employment 
 
In its prior inspection of Lianglong, the WRC found that the employment contracts 
that the factory executes with individual employees contain an illegal clause requiring 
the employee to compensate the company if the worker stops working at the factory.  
In the most recent inspection, the WRC did not ask the factory to provide a copy of 
the contract, but, instead, during our presentation to employees on their rights under 
the labor laws (detailed below), the WRC asked the employees in attendance – most 
of them new hires – whether they have received an employment contract.  The 
employees, however, appeared to have no idea what a labor contract was, indicating 
that they had not received one from the company. Failure to execute an employment 
contract with a worker at the time the employment relationship is established is a clear 
violation of the 2007 Labor Contract Law.7
 
Conclusion: Lianglong continues to be in violation of China’s Labor Contract 
Law because it fails to provide all employees with employment contracts. 
 
 
 
 
 
6 (850 Yuan + 4.89 Yuan / hour x 3.5 hours x 22 weekdays x 150%) + (4.89 Yuan / hour x 11.5 hours x 
8 weekend days x 200%) = 2,312 Yuan. 
7 Labor Contract Law, Arts. 10 (“To establish an employment relationship, a written employment 
contract shall be concluded. In the event that no written employment contract was concluded at the 
time of establishment of an employment relationship, a written employment contract shall be concluded 
within one month after the date on which the Employer starts using the worker.”); and 16 (“The 
Employer and the worker shall each hold one copy of the employment contract.”). 
 5
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
                                                
D. Social Benefits 
 
Under Chinese law, employers must provide various forms of social insurance to 
workers under the required individual employment contracts, including social security 
(pension), workers’ (injury) compensation, disability insurance, and maternity 
benefits to employees. 8 Lianglong admitted at the time of the WRC’s previous 
inspection that it did not provide any of these benefits. Management stated that the 
factory intended to begin providing the first three benefits (social security, workers’ 
compensation, and disability insurance) in the near future. 
 
Lianglong management subsequently informed R.J. McCarthy that such enrollment 
had been implemented in August 2008. During the most recent factory inspection, 
management was asked to document that enrollment of its employees in these 
mandatory government social benefit programs had actually occurred.  The 
information provided by the company only indicated that twelve of its employees 
were covered by only two of these programs – social security and workers’ 
compensation. 
 
Conclusion: Lianglong has failed to demonstrate that it has enrolled the majority 
of its workforce in any of the legally-mandated social benefit programs, or that it 
has enrolled any of its employees in all these programs.   
 
E. Physical Facilities 
 
In the WRC’s previous report, we cited the inadequate and unsanitary nature of the 
employee dormitories and restrooms, a condition which we found of considerable 
importance given that nearly all workers live in dormitories on the factory premises. 
In our most recent visit to the factory, management showed us a new building, which, 
when completed, will be a new toilet facility for workers. As R.J. McCarthy had 
previously reported to WRC, the factory has not, however, demonstrated any 
significant improvements to its dormitory facilities.  
 
Conclusion: The WRC is hopeful that, when completed, the building will provide 
adequate toilet facilities for workers. Currently, however, we cannot verify that 
employees have either adequate toilet or dormitory facilities. 
 
III. Recommendations 
   
Lianglong repeatedly failed to demonstrate a commitment to correcting the extensive 
violations of worker rights found in the WRC’s previous report. As this is the case, 
we cannot recommend to R.J. McCarthy that it place additional orders with the 
company until and unless these violations have been verified as remedied. The WRC 
understands that, although R.J. McCarthy on multiple occasions requested that the 
company correct these violations, its business represents only a small percentage of 
Lianglong’s business. Therefore, R.J. McCarthy alone lacks meaningful influence 
with Lianglong.   
 
 
8 Labor Contract Law, Art. 17, (“An employment contract shall specify the following matters: … (7) 
social insurance.”) 
 6
Worker Rights Consortium Remediation Report 
re: Lianglong Sock Co. Ltd (China) 
May 15, 2009 
 
We therefore recommend that R.J. McCarthy take the following steps with regard to 
this factory: 
 
(1) Inform Lianglong management that any future orders are contingent on 
verification that the labor rights violations identified in this memorandum 
and/or the WRC’s previous report have been corrected; 
 
(2) Work with the WRC to locate an attorney or other person who can assist 
workers in obtaining compensation from the factory for the labor rights 
violations occurring during the period of R.J. McCarthy’s business 
relationship with the factory; 
 
More generally, the WRC observes that this case underscores the utility to R.J. 
McCarthy, and other suppliers, of: 
 
(3) Consolidating future orders into factories for whom the supplier represents a 
substantial share of production; 
 
(4) Verifying, before placing any initial order, that a factory is in compliance with 
local labor law and the District Schools Boards’ labor policies. The WRC is 
willing to consult with R.J. McCarthy and other suppliers regarding the 
process and methodology for such verifications. 
 
(5) In countries like China, where very few means of recourse exist for workers to 
defend their rights, arranging, at the time orders are placed, for the supplier to 
permit the WRC and/or its designees to conduct a training program for 
workers, on company time, regarding: (a) their rights under local labor law, (b) 
their rights under the District School Boards’ labor policies, and (c) avenues 
for workers to bring complaints to the supplier and the WRC.    
 
 
 7


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Worker Rights Consortium Remediation Report re Lianglog Socks Co. Ltd (China)

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