On Friday, the University of Wisconsin canceled its licensing agreement with Nike Inc. over the non-payment of more than $2 million in severance due workers of two plants that closed in Honduras. Nike claims it has a limited obligation to the workers since it only subcontracted apparel production from the factories.
In December, UW Chancellor Biddy Martin gave Nike 120 days to rectify the situation involving the layoff of 1,800 employees at the factories, Hugger and Vision Tex, in January 2009. On Friday, she concluded that Nike hadn't done enough.
"[Nike] has not presented clear long-range plans to prevent or respond to similar problems in the future. For this combination of reasons, we have decided to end our relationship for now," said Ms. Martin, in a statement.
Wisconsin's code of conduct requires the 500 companies that make products bearing its name or logos to take responsibility for its subcontractors' actions. Its contract with Nike generated $49,000 in royalty income for the university last year. Martin's decision came after student activists held several rallies on UW's campus over the situation.
She added, "We remain hopeful that Nike -- which has had a positive impact on working conditions in the industry overall over the past several years -- will ultimately decide that it is in everyone's best interest to ensure that the workers receive severance or to establish a meaningful alternative plan."
In response, Nike said that while it regretted UW's decision, it sees the factory's owners, Anvil and New Holland, as responsible for the compensation.
"It remains Nike's position that factories which directly employ workers are responsible for ensuring that their employees receive their correct entitlements and, as such, Nike will not be paying severance to workers that were employed by Hugger and Vision Tex," said Nike in a statement. "Hugger and Vision Tex were subcontracted factories to two factories, Anvil and New Holland, that took orders from Nike. Nike paid in full for all products ordered from Anvil and New Holland and we understand that those factories, in turn, paid in full to Vision Tex and Hugger."
Nonetheless, Nike said it is working with Anvil and New Holland in developing job training and placement for the displaced workers. It also touted its past record around labor standards and said it is undertaking a "deeper review" to further improve oversight of its subcontractor factories.
UW's decision to cut Nike's contract comes after anti-sweatshop groups scored by a landmark victory last fall when Russell Athletic agreed to rehire 1,200 Honduran workers who had lost their jobs in a factory closing. Nearly 100 universities had cancelled their Russell contracts over alleged anti-unionizing efforts that Russell has refuted. The major difference is that Russell owned the factory while Nike only subtracted production.
Under the 'Just Pay It' slogan, Cornell University, Purdue University and the University of Maryland have also seen campus protests over the Nike/Honduras situation.
Discussion Questions: Do you agree with Nike's statement that the "factories which directly employ workers are responsible for ensuring that their employees receive their correct entitlements"? How should Nike respond to any future student activism over the Honduran plants closings?