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Apple supplier accused of labour violations

Sarah Mishkin
Monday, 29 Jul 2013 | 8:50 PM ET
Getty Images

One of Apple's big suppliers employed underage workers and pressured its employees to work illegal overtime, according to a Chinese workers' rights group, in the latest allegations of poor conditions at factories making the iPhone and other devices.

New York-based China Labor Watch said it sent undercover researchers into three Shanghai factories operated by Pegatron, the Taiwanese company producing the low-cost iPhone that is expected to hit the market later this year. It said they found employees under the age of 18 working 10.5 hours a day, discriminatory hiring procedures, harassment and overtime hours that exceeded Chinese limits.

Jason Cheng, Pegatron chief executive, said his company would "investigate fully and take immediate action to correct any violations to Chinese labor laws and our own code of conduct".

(Read more: Apple vs. Samsung debate: Which really makes more money?)

Apple said it had been working with China Labor Watch to address some of the violations and that the group's latest report "contains claims that are new to us and we will investigate them immediately". Its audit teams – which have audited Pegatron 15 times since 2007 – will visit the relevant factories this week.

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The California-based company confirmed the claim by China Labor Watch that some recruiters had been holding on to workers' identification cards while setting up bank accounts for them. The company said it required Pegatron set up a system that did not require recruiters to hold on to IDs, a practice that prevents workers from leaving the factory to find employment elsewhere.

Apple has faced continued criticism from workers' rights groups over conditions in its supply chain. Last August, the company said it had addressed concerns around working hours and employee safety raised in audits at Foxconn, one of its largest suppliers.

(Read more: Samsung trumps Apple sparking calls for low-cost iPhone)

But complaints of excessive overtime increased in the wake of a demanding production cycle last autumn for the iPhone 5 and updates to the iPad and Mac computers, culminating in a 2,000-worker riot at factories operated by Foxconn.

Tim Cook, Apple's chief executive, vowed last year to move some of the company's manufacturing to the US in 2013 to address some of the instability in overseas low-cost labor. "We want to be as innovative with supply responsibility as we are with our products," he said in December.

Read more from the Financial Times

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Pegatron came to prominence after Apple started to give it contracts previously fulfilled by Foxconn. It is increasing its 100,000-strong workforce by 30-40 percent this year to meet demand from the iPhone maker and other customers including Sony and Asus.

Limiting overtime has been a particular challenge for Chinese manufacturers. Recent audits by third-party labor groups have found that Foxconn has also struggled to ensure its staff work fewer than China's maximum 49-hour week.

Labor experts say part of the challenge is that low base pay at electronics factories encourages assembly-line workers, many of whom are poor migrants from rural provinces, to seek overtime to boost their wages.

China Labor Watch's report also said that Riteng, which makes iPad casings, had continued to pollute a local river after earlier pledges to stop releasing waste into it.

(Read more: An 'emerging' threat to Samsung, and it's not Apple)

Riteng – which Pegatron owns through another company called Casetek – was sanctioned earlier this year after reports that its factory in the Songjiang industrial zone outside Shanghai discharged waste water into a local river.

According to a government notice, the Songjiang district government slapped Riteng with an "administrative penalty" for the incident. While the government did not specify the size of the fine, such penalties are usually capped at Rmb200,000 ($32,600). Riteng declined to comment on the penalty.

At the time, Riteng said workers cleaning the factory over Chinese New Year had accidentally let the waste out, but residents told the Financial Times that the pollution had occurred as often as weekly since the factory opened two years ago, leading locals to start calling it the "milky river".

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