Apple to Probe Claims of Pegatron Labor Violations

Photographer: Imaginechina via AP Images

Chinese migrant workers walk past the plant of Pegatron-Unihan in Pudong, Shanghai, China, on July 25, 2013. A new report from a Chinese workers-rights group alleges labor abuses against Pegatron, a major Apple Inc. contractor. Apple has been using the company more, as it shifts some work from longtime supplier Foxconn. Close

Chinese migrant workers walk past the plant of Pegatron-Unihan in Pudong, Shanghai,... Read More

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Photographer: Imaginechina via AP Images

Chinese migrant workers walk past the plant of Pegatron-Unihan in Pudong, Shanghai, China, on July 25, 2013. A new report from a Chinese workers-rights group alleges labor abuses against Pegatron, a major Apple Inc. contractor. Apple has been using the company more, as it shifts some work from longtime supplier Foxconn.

Apple Inc. (AAPL) will investigate allegations by advocacy group China Labor Watch that factories run by Taiwanese supplier Pegatron Corp. (4938) use underage workers, pay insufficient wages and force employees to work overtime.

The New York-based group found at least 86 labor rights violations while investigating three Pegatron factories from March to July, it said in a report issued today. Apple has been in close contact with the group for several months, yet the report contains “claims that are new to us,” and those will be probed immediately, Carolyn Wu, a Beijing-based spokeswoman for Apple, said in a phone interview today.

Apple became the first technology company to join the Washington-based Fair Labor Association last year after criticism by human-rights organizations about conditions at suppliers including Foxconn Technology Group. Pegatron factories “are even worse than those at Foxconn,” CLW Executive Director Li Qiang said in a statement today.

“We will investigate these new claims thoroughly, ensure that corrective actions are taken where needed and report any violations of our code of conduct,” Wu said. “We will not tolerate deviations from our code.”

Pegatron will investigate the allegations, President and Chief Executive Officer Jason Cheng said in an e-mailed statement. Pegatron hasn’t seen the China Labor Watch report, Pegatron plants in China haven’t hired any underage workers, and weekly work hours during the past two to three months have averaged 45-50 hours, Chief Financial Officer Charles Lin said by phone.

‘Workers’ Rights’

“Pegatron’s problems have become a reflection on Apple,” said Colin Gillis, an analyst at BGC Partners LP in New York who has a buy rating on Apple shares. “Consumers will get to vote with their wallets if it’s that much of a concern, but they’re not necessarily voting with their wallets right now.”

Cupertino, California-based Apple has conducted 15 audits at Pegatron facilities since 2007, covering more than 130,000 workers making the company’s products, Wu said. The most recent survey in June found that Pegatron employees making Apple products worked 46 hours per week on average, she said.

China Labor Watch said the 86 infractions include 36 violations of the law and 50 ethical breaches. The group said its findings are based on almost 200 interviews with workers outside the factories.

Overtime Hours

Average weekly working hours in the three factories investigated by CLW were between 66 hours and 69 hours, a direct violation of China’s 49-hour statutory limit, China Labor Watch said. The group also claimed that workers were forced to sign forms indicating that their overtime hours were less than the actual levels.

“Apple has not lived up to its own standards,” CLW’s Li said in the statement. “This will lead to Apple’s suppliers abusing labor in order to strengthen their position for receiving orders. In this way, Apple is worsening conditions for workers, not improving them.”

Pegatron shares rose 1.4 percent to close at NT$46 in Taipei trading today. Apple increased 1.5 percent to $447.79 at the close in New York.

--Edmond Lococo and Chinmei Sung, with assistance from Callie Bost and Lisa Rapaport in New York and Michael Tighe in Hong Kong. Editors: Robert Fenner, Terje Langeland

To contact Bloomberg News staff for this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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