Bloomberg News

Samsung Says China Suppliers Violated Overtime Regulations

November 26, 2012

Samsung Says Suppliers in China Violated Overtime Regulations

A customer inspects mobile devices at a kiosk selling Samsung Electronics Co. products in Ambience Mall in Gurgaon, India. Photographer: Brent Lewin/Bloomberg

Samsung Electronics Co. (005930), the world’s largest maker of TVs and mobile phones, said an internal audit of suppliers in China found “inadequate practices” that include employees working more overtime than allowed by law.

Samsung found that some of the 105 suppliers checked in September were fining workers for being late or absent and were holding copies of labor contracts, the company said in an e- mailed statement today. The review didn’t identify any instance of child labor at the suppliers, Samsung said. A New York-based labor group said in August an assembler contracted by the South Korean company hired children.

Labor advocates are widening monitoring of electronics factories in Asia to Samsung, Dell Inc. (DELL:US) and Hewlett-Packard Co. after suicides at a China plant of Apple Inc. (AAPL:US) supplier Foxconn Technology Group in 2010 drew increased attention to working conditions. China Labor Watch said in a report in September it discovered “severe labor abuses” at factories owned and operated by Samsung and its suppliers.

“Samsung takes concerns about working conditions in China seriously,” the Suwon, South Korea-based company said in today’s statement. “Whenever an issue is identified, we take immediate and appropriate steps to correct it.”

Samsung is developing and implementing corrective actions to address every violation, it said in the statement. Those may include new hiring policies, work hours and overtime practices, it said.

Verifying IDs

The company said all candidates will be interviewed in person before hiring to strengthen identity verification measures and to detect fake IDs. Measures to eliminate working hours beyond legal limits will be implemented by the end of 2014, the company said.

Samsung said it examined 105 companies in China, with a total of more than 65,000 workers, during a four-week period in response to China Labor Watch’s reports on its suppliers. The company said it will review another 144 suppliers by year’s end.

“It’s all about corporate image when it comes to consumer electronics,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $31 billion. “The standards people set for every aspect of Samsung’s business are very high as a global name and, as Samsung indicated today, improvements will and need to be made.”

Child Labor

The labor group said in August that seven children younger than 16 were working in a factory of HEG Electronics (Huizhou) Co. that makes phones and DVD players for Samsung.

“Although we did not identify any child labor during our audits in September, we have demanded all suppliers to adopt a new hiring process immediately, and contracts with suppliers who use child labor will be terminated,” Samsung said in today’s statement.

In a Sept. 4 report, China Labor Watch said it found abuses at six factories owned and operated by Samsung and two of its suppliers’ facilities. The violations included forced overtime work amounting to more than 100 hours a month, unpaid work and 11 to 12 hours of standing, the group said.

The eight plants investigated by the labor group employed a combined 24,000 workers making mobile phones, DVD players, mobile displays and air conditioners, the Sept. 4 report said. The base salary for workers at a printer factory owned by Samsung is about $250 a month, the report said.

IBM, Dell

The group said its investigators either posed as workers to enter the factories or interviewed workers outside.

Samsung plans to have the Electronic Industry Citizenship Coalition, a Washington-based industry group, regularly check its own plants and all of its suppliers in China from 2013.

The EICC is a group monitoring industry supply chains, with electronics and technology companies as members. Its current board members include officials from International Business Machines Corp. (IBM:US), Dell, HP and Intel Corp., according to its website.

Foxconn, the Apple supplier targeted by human-rights activists after the suicides, has cut working hours and improved safety at a faster pace than it was required, the Fair Labor Association said in a report in August.

Apple opened factories making its products to the FLA, becoming the first electronics company to join the Washington- based independent labor monitoring group.

To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net


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