Levi’s Drops Firm Hit With Labor Charges

Despite a clean report by officials investigating media reports of “slave labor” conditions, Levi Strauss & Co. severed ties to the owner of a garment factory in Saipan that federal prosecutors accused of failing to pay overtime to contract workers.

Levi’s contracts with five other garment factories on the Pacific island are not affected by the decision, spokesman Dave Samson said.

The U.S. Labor Department is seeking $20 million in overtime pay and damages from American International Knitter’s Corp., which owns the factory, on behalf of 1,350 contract workers.

American International is owned by Willie Tan, a well-known island businessman who runs an extensive apparel operation, shopping malls and banks, said another Levi’s spokesman, Bob Dunn.

The decision also means that the San Francisco-based clothier no longer will do business with Tan’s factory in the Philippines, Dunn said.

Producing Levi’s knit and woven shirts and casual pants, the Pacific island factories have accounted for 3% of the clothier’s worldwide production, Samson said.

Last week, Levi’s sent a delegation to Saipan to investigate reports of “slave labor” conditions at the factory. “We really found no support at all” of the reports, said Dunn, who was part of the group. However, Dunn said Levi’s was concerned about the overtime issue, including separate criminal charges the U.S. attorney’s office filed against the factory on the matter last year.

An order issued by a federal judge in July allows the Labor Department to monitor payroll operations at the Tan factory and set up a hot line for worker complaints.

In December, American International pleaded no contest to a felony charge of falsifying a government document relating to overtime pay and agreed to pay a $500,000 fine, Dunn said.

“When we looked at the action already taken by the federal judge in the civil case and the problems that had existed in the past, it was clear to us that these folks did not measure up to the standards we require for our business partners,” Dunn said.