Seven major U.S. retailers, including Gap Inc. and J.C. Penney Co., agreed to a groundbreaking legal settlement Thursday that attorneys and human rights activists say will change global corporate behavior and protect the rights of Third World workers.
The settlement, which does not include admissions of wrongdoing, essentially ends a lawsuit filed four years ago that alleged a pattern of indentured servitude and other abuses at garment factories on the island of Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands.
The seven companies join 19 other U.S. retailers that had settled. Together, the retailers will contribute about $20 million to a fund that will pay back wages to several thousand workers and underwrite an extensive monitoring program.
Although the settlement is modest in the context of U.S. business litigation, attorneys for the workers say it is the largest amount to date in an international human rights case. Workers will receive back wages of as much as $4,000--nearly a year’s pay.
More important, attorneys said, the settlement establishes a system for independent monitoring at factories that includes surveillance and unannounced visits as well as the training of workers in labor rights. Monitoring will be overseen by a panel of three retired judges who will have the authority to order payment for back wages and to place manufacturers on probation for persistent noncompliance.
All 23 manufacturers that still operate factories on the island signed the settlement. Other retailers who joined include Target Corp., Limited Brands Inc., Abercrombie & Fitch Co., Lane Bryant and Talbots Inc. One remaining defendant, San Francisco-based Levi Strauss & Co., refused to sign but stopped doing business on the island soon after the suit was filed.
“The allegations are simply not true, and we believe that settling untrue claims compromises our company’s values,” Levi spokeswoman Linda Butler said.
The litigation took plaintiffs and defendants from courthouses in Los Angeles and San Francisco to Honolulu and finally Saipan, which has become a garment-producing center for the United States and is notorious for labor abuses.
Initially, most retailers named in the suit disavowed responsibility for practices in the contracted factories. The settlement sets up a direct link between those retailers and the workers, who primarily were immigrants from rural China, Taiwan and the Philippines.
The workers’ attorneys were thrilled with the settlement.
“It’s still sinking in that we accomplished this,” said lead attorney Al Meyerhoff of Milberg, Weiss, Bershad, Hynes & Lerach, which waived more than $10 million in fees. “These were extraordinarily difficult negotiations. Days and days in Hong Kong hotel rooms filled with dozens of factory owners and lawyers and retailers on one hand and labor and human rights groups on the other. These are parties that normally can’t agree on the sun coming up in the morning.”
The seven retailers had insisted they would not settle when earlier deals were reached, but they suffered two major legal defeats in May. A U.S. District Court judge ruled that all garment workers on the island could sue the retailers as a class, even though their working experiences might have varied significantly. Judge Alex R. Munson, based in Saipan, also allowed the earlier settlement to go forward over the remaining merchants’ objections.
Gap, the most vocal of the seven remaining retailers, issued a statement Thursday saying the company was “pleased to have helped develop an enhanced monitoring program that includes remediation efforts and has the full support of the manufacturers.”
“We’ve worked very hard to develop a sustainable, independent monitoring program that complements our own efforts to achieve sustained improvement in factory conditions over time,” it said.
Target Vice President James T. Hale said his company signed the settlement only because litigation would have been too costly.
“It is a sad fact that these lawsuits were never about the public good,” Hale said. “They were simply one more instance of class- action lawyers acting as publicity profiteers by using the media to smear a company’s reputation without regard for the truth.”
The case is part of a growing body of litigation addressing corporate behavior in an increasingly global market by using once- obscure laws such as the Alien Tort Claims Act and the Racketeer Influenced and Corrupt Organizations Act, both invoked in this case. The suit was filed on behalf of the island’s workers by the garment workers union UNITE and several anti-sweatshop groups.
Attorneys said the arguments they developed in the Saipan case are being applied to other human rights lawsuits targeting international corporations. The settlement may deter exploitative behavior elsewhere in the Third World, they said.
“Litigation is an unwieldy tool, but it sends a powerful message and it gets people’s attention--enough to bring them to the bargaining table and negotiate something like this,” said San Francisco attorney Michael Rubin, who also worked on the case and said he reduced his fees by 40%.
As a territory, Saipan is subject to all U.S. laws. But in 1989, to encourage economic development, the first Bush administration loosened immigration and set a lower minimum wage, which today is $3.05 an hour.
Garment manufacturing on the island exploded after those changes, as factory owners imported workers from China, Taiwan and the Philippines. Most are young women who pay $3,000 to $5,000 to recruiters, then spend years paying them back from meager earnings. Many also were charged $100 a month for food and an equal amount for lodging.
The Department of Labor has levied many multimillion-dollar fines against Saipan factory owners for wage and hour violations.
“Although some progress has been made, we continue to see substantial violations and obviously need to continue our efforts in Saipan,” said department spokeswoman Sue Hensley.
Although monitoring has not begun, workers on the island already have reported improvements, lawyer Rubin said.
“We’re already seeing more toilets,” he said. “And hot water is starting to be piped in.”