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Labor Issues Still Pervasive In Contract Factory World

Managing labor issues for the major sporting goods brands is a challenge. They often get their goods made in Asian countries that sometimes have no union support at factories that are charged with making many brands.

Omada Rowing shoe
Nike
Omada Rowing shoe

Nike, who has worked harder to solve labor problems that plagued them in the 1990s, is getting challenged again.

The owner of an Indonesian factory—called PT Kizone—that makes a variety of brands, including Nike, adidas and Dallas Cowboys apparel, fled, without paying the more than 2,000 workers the severance they are legally owed.

According to Scott Nova of the Workers Rights Coalition, a labor watchdog group that serves more than 100 colleges and universities, the workers were paid about 60 cents per hour.

"These workers are not paid enough to accumulate any savings and they have no social programs to fall back on— the severance is all they get," Nova said. "What has happened here is the equivalent of robbing these workers of more than half a year’s wages."

"The brands that were using this factory have an obligation to make this right and they possess the financial wherewithal to do so," Nova wend on to say. "We expect Nike, adidas, the Dallas Cowboys and any other brands that used this factory to do the right thing and we will be keeping our affiliate universities closely informed."

Nike actually said it heard about the situation and told the WRC, who were among a few groups to put pressure on them last year to remedy workers pay in Honduras when two subcontractors failed to make employees whole. Nike eventually paid $1.54 million, but lost its licensing deal with the University of Wisconsin-Madison in the process.

Green Textile, a South Korean intermediary for ordering between the brands and the Indonesian factory, signed a deal with the local workers union to pay the workers $1 million of their owed severance, according to WRC's Nova. The settlement of any outstanding workers severance is believed to be in the hands of a court appointed receiver.

Nike spokesman Derek Kent said that it is of the company's belief that Green Textile is "in the process of seeking legal ownership of the factory assets of PT Kizone and aims to reopen the factory in several months."

Adidas spokesperson Katja Schreiber said the adidas Group no longer has a relationship with PT Kizone. Their relationship, she said, ended months before the closing in February.

The Dallas Cowboys' head of merchandising, Bill Priakos, was not available for comment.

Update: Dallas Cowboys spokesman Rich Dalrymple tells CNBC that Cowboys gear was not made by the Indonesian factory in question at the time of its closing. Dalrymple said the last time gear was made by this factory for the team was May 2010.

Questions? Comments? SportsBiz@cnbc.com