Apple Admits Breaking Chinese Labor Law

Apple Inc. (NASDAQ: AAPL) has admitted to violating a Chinese labor rule following a report on the matter by non-profit advocacy group China Labor Watch (CLW). The group was founded in 2000 as a 501(c)(3) organization to investigate conditions in Chinese factories that make products for some of the world’s largest multinational companies. The group issued its report ahead of an Apple event this week to announce new iPhones.

The issues were apparently occurring at a plant operated by Apple’s manufacturing partner Foxconn, officially known as Hon Hai Precision Industry Co. CLW reportedly got its information from undercover investigators who worked in Foxconn’s Zhengzhou plant in China. One of the investigators has been employed at the factory for four years.

One of the issues raised by the report was the factory’s excessive use of dispatch workers, which would be called temporary workers in the United States. Many product manufacturers in China use these workers for assembly because they don’t receive benefits that full-time employees get and are paid by third-party firms on a short-term basis, so they are technically not employed by the company they are manufacturing products for. Dispatch workers can get the opportunity to become official factory workers after an initial three-month period.

CLW said in its report that dispatch workers made up about 50 percent the workforce at the Zhengzhou plant in August. This number included student interns, many of which returned to school at the end of August, so that number is now closer to 30 percent. However, that is still a violation, as Chinese labor law stipulates a maximum of 10 percent.

Apple admitted that, after conducting an investigation, it found the “percentage of dispatch workers exceeded our standards.” The company’s statement went on to say that it is “working closely with Foxconn to resolve this issue.” In its own statement, Foxconn said it found “evidence that the use of dispatch workers and the number of hours of overtime work carried out by employees, which we have confirmed was always voluntary, was not consistent with company guidelines,” and vowed to work to resolve the issue.