Sweatshop workers at the Pung Kook factory who made international name-brand gear in La Paz, Baja California Sur, Mexico, organized themselves to improve conditions on the job. But then their corporate employer beheaded their union local and moved operations overseas, leaving them jobless and without compensation due to them under the law. It was a textbook case of transnational corporations’ manipulation of global trade rules to reduce production costs at the expense of producers. So the workers stepped up to the plate, enlisting help from a U.S. non-profit group in a cross-border effort that achieved reparations in December 2004. Thanks to innovative fight-back tactics, the movement became a prime example of citizen activists’ success in allying to beat the sometimes overwhelming odds posed by the forces of regional political-economic integration.

Since its opening in 1995, the Korea-based Pung Kook factory in La Paz hired people to make luggage and backpacks for Adidas Salomon, Lands’ End and Patagonia. At times, as many as 800 workers labored for less than the Mexican minimum wage at the plant. In the face of hostile treatment by the transnational employer, they decided to join a democratic union in 1998. They voted to become part of the Independent Union of Workers in the Maquiladora Industry (Sindicato Independiente de Trabajadores y Trabajadoras de la Industria Maquiladora, or SINTTIM).

In March of 2003, Pung Kook shut down its factory in La Paz. Following the closure, the company refused to properly compensate workers as stipulated in Mexican labor law, despite the fact that some of them had been working in the plant for more than eight years. The corporation moved all of its business operations to Asia, beyond the reach of Mexican law and the North American Free Trade Agreement (NAFTA).

SINTTIM saw this as part of a pattern of abuse in global business-labor relations that results in the working poor sinking deeper into poverty, widening the income distribution gap. Pung Kook’s La Paz employees realized that theirs was just one of many instances in which corporations seek to minimize payroll costs through periodic plant closures and shifting of production to locations where workers can be employed at lower wages. Determined to hold the line for fair labor practices, union members requested help from Enlace, a non-governmental organization (NGO) based in Portland, OR.

Key Problems
For Pung Kook Workforce

  • Illegal wages:
    Pung Kook consistently paid workers 2 pesos per day less than the
    minimum wage, gouging about 6% out of wages due.
  • Safety: Carpal tunnel syndrome was widely reported due to the repetitive motion, speed, and stress of the assembly line.
  • Health: Both adults and children suffered lung problems because of burning plastic. As a concession for 12-hour shifts, the company allowed employees to bring their children to work. Part of the process for manufacturing luggage and backpacks included melting plastic trim to mold it into required shapes. The company provided no protection for the workers or their children present on the factory floor.
  • Organizing rights violations: In June 2001, Pung Kook fired union local President Raquel Espinoza for organizing.
  • Severance pay: In March 2003, Pung Kook shut down the plant. Management informed the workers that the shutdown was temporary and paid the severance amount required for a temporary closure-considerably less than the amount required for a permanent plant closing.
  • Labor law compliance: Pung Kook then pulled out of Mexico, beyond the reach of Mexican labor laws. Under these laws, for a permanent plant closure, they should have paid workers three months severance plus 32 days pay for each year of service.

Enlace activists viewed Mexico as one of many national economies dependent on an export manufacturing sector controlled by transnational corporations. This dependence leads to regularly overlooking violations of domestic laws that are designed to protect worker rights to a minimum wage and severance pay in the event of job loss due to plant closures. Workers who are financially abused by these illegal practices then have no legal recourse. In addition, domestically owned companies are pressured to flout local labor laws or be driven out of business by the transnational companies that operate with lower labor costs.

So Enlace joined with SINTTIM in a yearlong campaign lasting from the day the factory closed in 2003 to the day in 2004 when Pung Kook acted to pay the workers what they were owed under Mexican law and
provide restitution for damages to their independent union.

Along with the workers at the factory, Enlace developed a multi-tiered and international strategy to pressure Pung Kook into complying with the law. It recruited groups in Portland, Los Angeles, Mexico City, Toronto, and Seoul, while SINTTIM stepped up the heat in Baja California Sur.

The first phase began on Enlace home turf in Oregon. The group organized support among local labor organizations, including Portland Jobs with Justice and the Cross Border Organizing Labor Coalition (CBLOC), to confront Adidas at its headquarters in Portland. But the confrontation never came to pass, because Adidas, eager to avert a public relations debacle, almost immediately contacted Enlace to discuss the situation. The NGO representatives knew, through member organization Koreatown Immigrant Workers Advocates (KIWA) in Los Angeles, that Pung Kook still manufactured items for Adidas at its Singapore plant and therefore was susceptible to pressure from Adidas. Enlace responded to Adidas’ request for a Mexican legal opinion, arranging for a consultation with Mexican labor attorney Arturo Alcalde. Adidas subsequently agreed to bring pressure on Pung Kook to pay SINTTIM’s members the severance pay they were owed.

The Pung Kook case looked like a hard one to win, especially in the context of the dismal record of unions’ failures to organize and defend labor in the Mexican maquiladora sector.

Pung Kook violated Mexican law regarding severance pay to workers of a permanently closed plant, paying them a fraction of the required amounts on the pretext of a temporary closure. Apparently, corruption in the local labor board in La Paz facilitated this.

Key Challenges in Resolving Problems at
Pung Kook

  • Pung Kook was not subject to Mexican law once it no longer conducted business in Mexico.
  • Pung Kook was not subject to the NAFTA labor side agreement, once it had pulled all its operations out of North America.
  • Pressure from one of Pung Kook’s major customers, Adidas, was not enough. During negotiations, Pung Kook told Adidas it had another potential customer (implying it was Wal-Mart) that could take up the slack in orders if Adidas terminated its contract.
  • Pung Kook’s name was unknown in the United States and Canada, which made a primary boycott action impossible to organize.
  • Evidence showed corruption in the local labor commission in La Paz.
  • SINTTIM had no presence in Mexico City, so it couldn’t directly pressure the Korean Embassy, and it was geographically isolated from allies in most of Mexico. (La Paz is more than 2,000 miles from Mexico City and travel money was lacking.)
  • Geographic, cultural, and language barriers separated SINTTIM and its U.S. allies.
  • Adidas insisted on a supportive legal opinion from a respected Mexican labor lawyer before acting on SINTTIM’s behalf.

Pung Kook required the workers to sign a blank sheet of paper as a prerequisite to receive their final paychecks. Company officials then attached to the sheet a document stating that the signatories were satisfied and had no desire for further compensation from the company. Pung Kook provided these signatures to Adidas as “proof that the workers had no grievance with Pung Kook.” The labor commission accepted these documents without question despite workers’ protests. Further, evidence that commission members had accepted bribes from the company to bury the case heightened suspicions of the commission charged with Mexican labor law compliance.

New Corporate Approach Sparks Alternative Agenda

Pung Kook was seeking to lower its costs by running away to a cheaper labor market. It attempted a new approach to avoid paying workers what they were owed: not only skimping on severance pay, but also moving out of Mexico and out of North America, beyond the reach of domestic law and NAFTA altogether. Since La Paz was the company’s only location in North America, the pullout decision left no legal recourse for the former workers.

By cheating the Baja California Sur factory workers out of the normal severance pay owed them due to a plant closure, Pung Kook was attempting to achieve a new level of cost-cutting that exceeded that of its global corporate peers operating in Mexico’s export factory sector. Had Pung Kook succeeded in getting this cost-cutting strategy, it would have contributed significantly to a trend among global corporations to violate the already weak labor standards in poor countries and move outside of any jurisdiction to which those standards could apply.

In addition to the dire situation of the workers, these factors contributed to Enlace’s decision to focus on Pung Kook as a case model for defense of labor rights in a globalized work environment. Enlace and SINTTIM sought to hold Pung Kook, its corporate
customers, and the Korean Department of Commerce responsible for Pung Kook’s
treatment of the workers in Mexico. Since its inception in 1998, Enlace has developed an organizing system to confront the conundrum: How can a small, under-funded organization with limited capacity, such as SINTTIM, succeed in a campaign against a giant, predatory transnational corporation?

Enlace’s prescription is to take an approach that integrates the use of specific planning and development processes to strengthen the organization internally, with strategies to increase the organization’s capability to carry out a unique and far-reaching campaign. The campaign is based on the creative use of research into the corporation with a focus on its business plan, fostering solidarity activities against specific corporate targets by selected allies, and ongoing evaluation of the campaign as it unfolds.

The SINTTIM campaign against Pung Kook included these elements and became an example of how an independent union local or worker center can win groundbreaking victories over global corporations. SINTTIM’s demands of Pung Kook were: compensation for lost time and damage payments for the firing of local President Raquel Espinoza; three months’ pay plus 32 days’ pay for each year of service for laid-off workers; and restitution and damage payments to the union.

Citizens Taking Action: SINTTIM Reaches Out

SINTTIM has deep roots in its community. In 1993, workers in at least five maquiladoras organized a registration drive and successfully achieved government required union recognition as representatives for the entire maquiladora industry in the state of Baja California Sur. The achievement was lauded at a time when independent unions scarcely existed in Mexico, much less in the nascent offshore assembly sector.

When the Pung Kook case arose, SINTTIM asked for Enlace’s assistance. Enlace lead organizer Mary Mendez traveled to Mexico and together with SINTTIM leadership designed a joint strategic action plan to pressure Pung Kook to pay the workers what they were owed following the plant closure. Enlace and SINTTIM established regular communication to coordinate activities of the campaign.

Workers’ Demands

  • Compensate union local President Raquel Espinoza with lost-time and damage payments.
  • Pay three months’, plus 32 days’ wages for each year of service to laid-off workers.
  • Make restitution and damage payments due the union.

As part of the strategic plan to pressure Pung Kook, SINTTIM developed effective local alliances with the Frente Sindical, a group of unions that made public declarations of support. In addition, the union of academic staff at the Universidad Aut

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