Adidas lawsuit (re University of Wisconsin)
Sources
Snapshot: Plaintiffs are the University of Wisconsin trustees who allege Adidas failed to comply with contractual provisions regarding severance pay in their Indonesian factory. Defendants argue while benefits are owed to the workers, they are not obligated to pay. After pressure from student campaign groups and NGOs, Adidas settled with the workers.
Factual Background
PT Kizone was an Adidas supplier in Indonesia. As far back as September 2010, PT Kizone failed to pay severance to workers who resigned as well as death benefits to families of employees who had passed away. The factory closed in April 2011 and PT Kizone was declared bankrupt.
For years, the workers tried to recover almost USD$3.4 million of severance money owed. While other buyers eventually contributed to a USD$1.6 million fund to provide severance pay, this was insufficient to adequately compensate the workers. Adidas refused to contribute to the fund.
In the summer of 2012, members of United Students Against Sweatshops (USAS) organised student activism efforts against Adidas. This included flyering at basketball games where Adidas-sponsored teams were playing and going after its celebrity spokespeople, most notably Selena Gomez. Students also campaigned for their schools to terminate their university apparel contracts with Adidas.
Legal Argument
On 13 July 2012, trustees of the University of Wisconsin filed a lawsuit against Adidas in US federal court seeking a declaratory judgement on whether the company had breached its contract with the university. They argued that Adidas failed to comply with contractual provisions requiring Adidas to provide legally mandated benefits to workers who produce goods bearing the university logo. Furthermore, they argued that Adidas is contractually obliged to pay up to USD$2 million to the workers.
Legal Proceedings
While Adidas did not dispute that benefits are owed to the workers, it argued that it did not need to pay workers because (i) Adidas had ceased business relations with PT Kizone at the time of its closure; and (ii) Adidas is not required to assume responsibility for a breach of law committed by their supplier.
Latest Legal News
In April 2013, Adidas announced that it would pay severance to 2700 Indonesian workers. While the contents of the agreement remain confidential, the former workers received a “substantial sum” from Adidas.
As a result of the settlement, the Indonesian district labour union representing the workers – Dewan Pimpinan Cabang, Serikat Pekerja Textil, Sandang Kulit-SPSI Kabupatan Tangerang – will ask the Wisconsin state court to dismiss its claims against the company.
News Items
- Adidas settles with Indonesian workers over PT Kizone, The Oregonian, 24 Apr 2013
- "Adidas Agrees to Pay Severance to Workers", Christopher Yates, Cornell Daily Sun [USA], 25 Apr 2013
- “University of Wisconsin Launches Historic Challenge to Adidas over Sweatshop Conditions for College-Branded Apparel”, Jonathan Rosenblum, Center for Media and Democracy's PR Watch, 14 Jul 2012
- “Campus Connection: UW-Madison seeks court’s opinion on Adidas situation, Todd Finkelmeyer”, Capital Times, 13 Jul 2012
Documents from Companies
Documents from NGOs
- Adidas Caves, Pays Garment Workers What They’re Owed, Labor Notes, 2 May 2013
- WE WON! adidas pays Kizone workers, Clean Clothes Campaign, 29 Apr 2013
- Background on PT Kizone, Indonesia, Clean Clothes Campaign, 29 Apr 2013
Legal/Cout Documents