Labour exploitation in Saipan (again): what difference does 20 years make?

Aaron Halegua, New York University School of Law

Labour practices on the Pacific island of Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands (CNMI), are making headlines again. Twenty years ago, the media exposed how Saipan factories shipping clothes to the United States were staffed by nearly 30,000 trafficked and abused migrant workers from Asia. The mostly female workers incurred large debts to pay recruitment fees, earned below minimum wage, lived in barracks surrounded by barbed wire, and were forced to have abortions. These abuses triggered several precedent-setting class action lawsuits, resulting in a USD 20 million settlement that included compensation for the victims and a new industry code of conduct and independent monitoring mechanism. A key takeaway from this episode was that remedying labour abuses and improving working conditions requires holding liable those at the top of the supply chain – in that case, the global clothing brands.

This time around, the victims of labour abuse were migrant construction workers from China. After the garment industry died and tourism was lagging, CNMI legislators decided to legalise gambling and granted an exclusive license to build and operate a hotel and casino to Imperial Pacific, a Hong Kong-based company. Imperial Pacific then hired numerous Chinese construction firms – including MCC International Saipan Ltd. Co., Beilida New Materials System Engineering Co. Ltd., Gold Mantis Construction Decoration, and Sino Great Wall International Engineering Co. LLC – that employed thousands of Chinese migrants, who often paid large recruitment fees for the opportunity to work in “America.” Some received guest worker permits, but many were instructed by their brokers to enter Saipan as “tourists.”

The firms forced employees to work 13-hour days, offered no day off, paid below minimum wage, served insect-infested meals, provided abysmal living quarters, and confiscated worker passports. Injury rates on the site were far above average; several workers died; and in an effort to conceal the illegal workforce, the firms avoided taking workers to the hospital for treatment. The companies also actively concealed their illegal practices from government authorities. One leading expert on litigating human trafficking claims called this “a pretty classic trafficking and forced labour scenario.”

The fact that such horrifying exploitation happened on U.S. soil is bad enough; the fact that it occurred in Saipan again is particularly discouraging.

However, there have been a few positive elements in the response to this episode that are worth noting. One is that the U.S. federal government, working with advocates like me, was able to remedy some of the abuses suffered by the Chinese workers. The Occupational Safety and Health Administration (OSHA) charged the Chinese firms with dozens of “serious violations” and issued over USD 200,000 in fines. The Department of Justice criminally prosecuted firm managers for illegal employment and immigration practices.

Most significant for the workers is that the U.S. Department of Labor (USDOL) reached settlements requiring four of the Chinese construction firms to pay USD 13.9 million in back wages and liquidated damages to over 2,400 employees. By adopting my recommendation to establish a WeChat account staffed by Chinese speakers, USDOL was able to contact and obtain evidence from workers even after they returned to China, providing useful leverage over the construction firms. Additional pressure for the companies to settle came from a barrage of local and international media attention on the labour abuses perpetrated by these firms. While USDOL has not formally held Imperial Pacific liable as a “joint employer” of the construction workers, the negative media attention compelled the casino to itself pay the wages owed to several dozen individuals who remained in Saipan staging protests until they were compensated.

From a legal perspective, one particularly significant aspect of the USDOL settlements is that the compensation included reimbursement by the construction firms of the recruitment fees paid in China by the workers, often amounting to USD 6,000 or more.

There is a growing international consensus that a worker should not pay for his job, but the reality is that many migrants still pay fees to obtain work.

Moreover, workers rarely recover these fees due to the difficulty of proving the connection between the employer and the complex web of brokers and intermediaries, and because actually getting money from an undercapitalized, informal recruitment agent in the home country is often impossible. Therefore, making real this goal of eliminating recruitment fees requires holding responsible the employers who benefit from bonded labour, so the USDOL settlement is a positive precedent in this regard.

This chapter of the Saipan saga does not have an entirely happy ending though. While some remedy was obtained for the Chinese migrants, the workers who replaced them also suffered abuses. Imperial Pacific initially retained a U.S.-based contractor to complete the project, but then delayed payments to that firm, forcing the company to puts its workers on temporary leave and eventually send them home. Imperial Pacific’s next move was to replace the expensive U.S. workers by directly hiring hundreds of H-2B guest workers, primarily from the Philippines, but it has now terminated their contracts months early while providing only minimal severance pay.

The lesson learned with the garment industry is equally applicable here: meaningful change requires accountability at the top of the chain.

In the former case, this meant liability for the apparel brands; in this instance, Imperial Pacific must be held responsible for its own actions and those of the contractors it hires. Otherwise, it will just cycle through construction firms and point the finger at each one, instead of at itself.

Labour rights advocates have been pushing for such reforms. When Congress was considering a bill (that has now been signed into law) to extend the CNMI guest worker program, I organised a group of labour advocates who successfully added language banning from the program not only companies that commit labour abuses, but also those which “knowingly benefit” from that mistreatment. This means that companies higher up the chain that know or should know about abusive practices by their contractors will also face consequences if the violations are not curbed.

But government regulation and enforcement alone, which is too often reactive instead of proactive, is insufficient to prevent future labour abuse. Accordingly, both progressive local legislators in Saipan and a coalition of labour advocates, drawing on recent examples in Bangladesh and Qatar, have called for the establishment of an independent and transparent labour monitoring mechanism in which the voice of workers and their representatives plays a crucial role.

In dealing with Saipan’s garment industry, the need to focus on the top of the supply chain and establish an independent monitoring mechanism became readily apparent. It is unfortunate that rather than apply these lessons to the construction of the casino, history repeated itself and workers have suffered and died. As construction is expected to continue for several years, Imperial Pacific should be compelled to establish such a mechanism immediately.

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* Aaron Halegua is a research fellow at the New York University School of Law and the Founding Member of Aaron Halegua, PLLC. He made several trips to Saipan in order to assist the Chinese migrant construction workers.