Compliance issues

by:-Bhawna Vashisht(MFT)
NIFT Bangalore

Compliance
compliance means conforming to a rule, such as a
specification, policy, standard or law. Compliance in a
regulatory context is a prevalent business
concern, perhaps because of an ever-increasing
number of regulations and a fairly widespread lack of
understanding about what is required for a company to
be in compliance with new legislation.

Introduction
The lack of actual implementation of the compliance
codes on labour standards and working conditions
within the apparel industry poses a serious threat to
the image of the country.
India is the second largest manufacturer of garments
after China being the global leader in garment
production due to cheap labour

Introduction
Child labour, sweatshops, discrimination and poor
working conditions are just some of the risks that major
US and European apparel companies face when they
source clothing and footwear from developing
countries.
 Greater awareness and more independent monitoring of
overseas factories are slowly reducing those risks and a
new report by CSR World, one of India's leading
corporate social responsibility companies, now shows
just how much progress has been made by the industry
in tackling such issues.

Legal Requirements
 Factory License
 Contractors’ Registration & License
 Consent from Pollution Control Board
 Registration with Employees Provident Fund
 Registration with Employees State Insurance
 Corporation
 Certified Industrial Employment Standing orders
 Compliance with Factories Act – 1948
 Compliance with Payment of Gratuity Act
 Compliance with Minimum Wages Act
 Compliance with Payment of wages Act
 Compliance With State Factories Rules

Types of compliance
 Regulatory compliance
It describes the goal that corporations or public agencies
aspire to in their efforts to ensure that personnel are aware
of and take steps to comply with
relevant laws and regulation
 Statutory compliance
statutory compliance means you are following the laws on a
given issue. The term is most often used with
organizations, who must follow lots of regulations. When
they forget or refuse to follow some of those
regulations, they are out of statutory compliance. A
company that follows all the rules, is in statutory
compliance.

Code of Conduct
Child labour
Forced labour
Health and safety
Compensation
Working hours
Discrimination
Free association and collective bargaining

Child labour
 The Child Labour (Prohibition &
Regulation ) Act, 1986 / ILO
convention – 182 – Under the Act ,
‘child’ means a person who has not
completed his fourteenth year of
age. Any such person engaged for
wages, whether in cash or kind, is a
child worker. Child labour ( as
defined herein ) is completely
unacceptable in the garment
industry supply chain.

Child labour
Child labour is a universal problem. At present the
number of working children in the world ranges
between 100 and 200 million according to the
International Labour Organization.
India is the country with the largest number of working
children. There are no up-to-date and generally
accepted statistics on child labour in India. Official
estimates vary between 17 million and 44 million child
labourers under 14 years of age. Estimates made by
respected NGOs range between 55 million and over
100 million.

Distinction between 'child labour‘&
'child work'
Child labour- means that the child is being forced
to carry out the full-time work of adults.
Child work- means that the child has time for play
and education besides work.

Legal Requirements For Child Labour
Legal/Code – Compliance on Child Labour
Standards
 Proof of Age Documentation / Other Means of Age
verification
 Governments Permits and Parental Consent
Documentation
 Employment of Young Workers (those between the
minimum working age and the age of 18 years)
 Hazardous work for Young Workers Young Worker
Identification System

Causes
Child labour is cheaper than adult labour.
Inefficiency existing primary education facilities.
Do not demand social security benefits.

Case study on Child Labour
Violation: Child labour was found at the factory. It was confirmed
from the verification of personal document and the appearance
of the employee. From the workers interview, it was understood
that one worker was about 13 years old.
Corrective Action: According to The Factory Act of 1968 in the
Bangladesh Labour Code, any person who has not completed
sixteen years of age is defined as a child. Article 66 prohibits the
employment of any children under the age of fourteen. Factory
management agreed to take care of this matter.
Most child labourers have been cleared out of Bangladeshï¿½s
RMG sector under international pressure, but sporadic cases still
exist due to economic reason.

Forced labour
Bonded Labour System ( Abolition ) Act, 1976 / ILO
conventions – 29 & 105 - This Act seeks to provide for the
abolition of bonded labour system with a view to
preventing the economic and physical exploitation of the
weaker section of the people Forced labour is any work or
services which people are forced to do against their will
under the threat of some form punishment. Almost all
slavery practices, including trafficking in people and
bonded labour, contain some element of forced labour.

Forced labour
 The ILO defines forced labour as “all work or service which is
exacted from any person under the menace of any penalty
and for which the said person has not offered himself
voluntarily.
 The International Labour Organization (ILO) estimates that
there are at least 12.3 million people in forced labour
worldwide. Children are thought to make up between 40 and
50 per cent of all forced labourers. Of this total some 2.4
million people are in forced labour as a result of human
trafficking. Women and girls account for almost all those
trafficked into sexual exploitation and the majority of people
trafficked into labour exploitation. This means that some 80
per cent of all people trafficked for both economic and sexual
exploitation are women and girls.

Legal Requirements For forced labour
 Legal/Code – Compliance – Forced labour standards
 Employment is freely chosen
 Employment Terms – Voluntary Agreements/
 Prohibitions
 Debt/Bonded Labour/ Prison Labour/Involuntary
Labour
 wage advances
 Free disposal of wages/cash and In-Kind compensation
 Recruitment through referrals
 Freedom of movement/Employer Controlled Residence

Health and safety
Factories Act – 1948 / ILO convention – 187 – This
convention refers to a culture in which the right to a safe
and healthy working environment is respected at all
levels, where government, employers and workers
actively participate in securing a safe and healthy working
environment through a system of defined rights.
.

Occupational Health and Safety (OHS)
Occupational health and safety (OHS) primarily seeks to
maintain the working ability of the labour force as well
as to identify, assess and prevent hazards within the
working environment.
 These issues are important for many developing
countries (DCs), because the effects of poor health and
lack of safety facilities, and non-ergonomics conditions
exist in various workplaces are a hindrance to the
national economy and social progress.

Occupational Health and Safety (OHS)
OHS and ergonomics issues have a connection with
various components in the regional economy since the
provision of health, hygiene and safety in the workplace
contributes to economic growth processes in a number of
ways.
In many DCs, physical work practiced as manual materials
handling (MMH) and strenuous tasks which usually take a
toll as injuries, accidents and production loss, because
numerous risky and hazardous jobs and strenuous tasks
still have yet to be semi-automated or be transferred to
other forms of controlled environment.

Issues
Injuries caused by repetitive motion are common
within the textile industry at a global level.
Doctors and nurses in the textile sector rarely
implement preventive programs.
Respiratory problems and other common illnesses such
as the flu, colds, and headaches were also cited as
important issues.

Legal Requirements For Health & Safety
 Legal/Code compliance - Health and Safety standards
 Document Maintenance/Worker Accessibility and Awareness
 Written Health and Safety Policy
 Worker Consultation
 Health & Safety management systems
 Communication to Workers
 Notification and Record Maintenance
 Permits and Certificates
 Evacuation Requirements and Procedure
 Safety Equipment and First Aid Training
 Personal Protective Equipment and Use
 Chemical Management and Training

 Material Safety Data Sheets/Worker Access and Awareness
 Chemical Management for Pregnant Women and Young
 Workers
 Protection Reproductive Health
 Ventilation/Electrical/Facility Installation and Maintenance
 Lighting, Temperature and Noise
 Machinery Safety, Maintenance and Worker Training
 Proper Use of Machinery
 Worker Refusal to Use Unguarded or Unsafe Machinery
 Ergonomics Bodily Strain
 Medical Facilities

Sanitation in Factory Facilities
 Toilets
 Toilets/Restrictions
 Food Preparation
 Health & Hygiene
 Drinking Water
 Drinking Water/Restrictions
 Sanitation in Dormitories Dormitory Facilities
 Dormitories Separate From Production Facilities
 Child Care Facilities/Children on Premises

Problem and solution
Potential Hazards:
Employees use a pinch grip to hold small scissors
between the index finger and thumb. Repeated pinch grip
may cause hand or wrist injuries.
Holding small scissors between the index finger and
thumb also can cause contact stress on the fingers.
While holding scissors or manipulating fabric, employees
often maintain awkward arm, wrist, hand, and finger
posture.
Cutting and manipulating fabric requires the employee to
use repeated motions.

Possible Solutions
Invest in tools designed to promote neutral
joint postures and minimize contact
stresses.
Use electric, pneumatic, or otherwise
partially automated tools to reduce force
and repetition of pinch grip.
Use tools and work practices that
encourage workers to avoid using more
force and movement than the job requires.
Use job rotation through tasks that do not
require pinch grips.

Potential Hazards
Employees hold their
neck, trunk, and arms in
an awkward position as
they strain to see detail in
an object.
Insufficient lighting makes
it difficult for employees
to see their work, and
may cause eye fatigue and
headache.
Straining to inspect product

Possible Solutions
At the
workstation, adjustable task
lighting must shine on the
work area to make it easier
for the worker to see the
product.
Provide adjustable chairs
and training on how to
properly use them.
Provide magnifying glasses
at workstations where
necessary.

Case Study on Health & Safety
Violation: Workers did not use gloves and/or masks
while handling chemicals and dyes in chemical
storage area of Dyeing Department.
Corrective Action: In order to comply with The
Factories Act, 1965, of Bangladesh, management
shall provide adequate gloves and/or masks to the
appropriate workers. They must be motivated
through training to use such protective equipment
for safety.
Violation: Number of toilets in the production floor
are not sufficient to cover all the employees.
Corrective Action: Factory shall construct sufficient
number of toilets in accordance with The Factories

Case Study
 Violation: No soap and towels were there
inside all the toilets in a factory.
Corrective Action: Soaps and towels are to be
provided at all the toilets in the factory.
Violation: Fire extinguishers were found
blocked in some areas of the factory and were
not easily accessible.
Corrective Action: All fire extinguishers shall be
cleared from obstruction at all time. Area in
front of fire extinguishers shall be marked on
the ground with yellow lines to indicate that
the area must be kept clear at all times.

Case Study
Violation: Aisles were not marked at different
sections of the factory.
Corrective Action: Factory shall put marking on
the floor with yellow lines to indicate the
evacuation paths.
Violation: No evacuation plan was observed
throughout the factory.
Corrective Action: Factory shall prepare and post
evacuation plan at different areas of the factory
to facilitate smooth evacuation in the case of
emergency.

Case Study
 Violation: Drinking water closets were found very near (2-3 feet) to the toilets.
Corrective Action: As per The Factories Act, 1965 of Bangladesh, factory shall
place drinking water closets at a minimum of 20 feet distance from the toilets.
Violation: Primary/secondary aisles were found blocked by fabric
roll, cartons, garments etc. in different sections of the factory. Electrical control
panel was also found blocked.
Corrective Action: Factory, in accordance with The Factories Act in
Bangladesh, shall make sure that all the passages and control panels remain
unblocked at all times.
Violation: No protective hand gloves were in use by the fabric cutting knife
operators which might cause serious accident at any time.
Corrective action: Factory management shall supply metal hand gloves to the
operators and motivate them to use such protective equipments for safety

Compensation
Wage & Benefits - The Employees’ Provident Funds &
Miscellaneous Provisions Act, 1952, The Employees’
State Insurance Act, 1948, The Minimum Wages Act,
1948, The Payment of Bonus, Act, 1965, The Payment of
Gratuity Act, 1972 & The Payment of Wages Act, 1936 /
ILO Conventions – 130,131 & 132 - Members shall pay at
least the minimum wage required by local law or the
prevailing industry wage – when available, whichever is
higher, and who provide all legally mandated benefits. In
addition to their compensation for regular hours of work,
employees shall be compensated for overtime hours at
such premium rate as is legally required

Objectives
Social objective: - That is, by providing sufficient
purchasing power to the worker, enable him/her to
have a basic standard of living. In long run such a step
would help in abolishing labour exploitation and
poverty.
 Economic objective: - The rate of minimum wage
should be fixed at such a level which would motivate
workers and enable them to enjoy the benefits of
economic growth, and thereby contribute to the
economy.

Need for meaningful minimum wage policy
Vast number of workers in unorganized sector, and
their substantial contribution to the national
economy, they are amongst the poorest sections of
India’s population.
Abolishing the poverty
strengthening the enforcement machinery

Minimum wage
The minimum wage rate may be fixed at
 Time rate
 Piece rate
 Guaranteed time rate
 Overtime rate
Different minimum wage rate may be fixed for
 Different scheduled employments
 Different works in the same employment
 Adult, adolescent and children
 Different locations
 Male and female.

Minimum wage
Minimum wage may be fixed by
 An hour
 Day
 Month
 Any other period as may be prescribed by the
notified authority

Legal Requirements For MinimumWages
 Legal/Code compliance – standards on Wages &
 Benefits
 Form of Payment of Wages
 Minimum Wage
 Training and Probation Wage
 Timely Payment of Wages
 Holidays, Leave, Legal Benefits and Bonuses
 Production and Incentive Schemes
 Payment for All Hours Worked
 Calculation Basis for Overtime Payments
 Non Payment of Incentives
 Premium/Overtime Compensation

Legal Requirements For Minimum Wages
 Overtime Compensation Awareness
 Overtime Compensation for Piece Rates and Other Incentive
 Schemes
 Deposit of Legally Mandated Deductions
 Voluntary Wage Deductions / Loans & advances
 Voluntary Wage Deduction/Worker Access to Information
 Employer Provided Services
 Accurate Calculation and Recording of Wage Compensation
 Accurate Length of Service Calculation
 False / Multiple - Payroll Records
 Record Maintenance
 Payroll Record Maintenance/Worker Acknowledgement
 Worker Wage Awareness
 Contestation of Wage Payments
 Pay Statement

Steps Taken
Recent initiatives for providing social security to the
workers in the informal sector have been passed in the
parliament
 The National Rural Employment Guarantee (NREG) Act
2005 and,
 The Social Security for Unorganized (Informal) Sector
Workers.

Case Study
Violation: Overtime wages of the workers were deducted as a means of
punishment if they could not achieve the daily production target.
Violation: Employees, if fail to attend weekend work, were deliberately
made absent for 2 to 3 days from his working period.
Violation: In one of the factories in Chittagong, Bangladesh working for a
reputed brand of USA, physical torture was reported for simple mistakes
including no payment of wage.
Corrective Action: The factories shall not engage in or support the use of
corporal punishment, mental or physical coercion, and verbal abuse.
Wages shall not be deducted as a form of punishment.

Working hours
 Working time is the period of time
that an individual spends at paid
occupational labor. Unpaid labors
such as personal housework are
not considered part of the working
week. Many countries regulate the
work week by law, such as
stipulating minimum daily rest
periods, annual holidays and
a maximum number of working
hours per week

Importance
Several nations have imposed limits on working time in
an effort to combat unemployment. The theory is that
less work hours per a worker will create a demand for
more workers, and give those that are already hired
more leisure time. This has been done both on a
national level, as in France's 35-hour workweek, and
on the company-union level, for example the
agreement between Volkswagen and its union to
temporarily reduce the workweek to 29 hours to
preserve jobs. This policy is controversial among
economists

Legal Requirements For Working Hour
 Legal/Code compliance – standards on hours of work
 Rest Day & Rest Periods
 Meal and Rest Breaks
 Protected Workers (Women and Young Workers)/Regulations
 on Hours of Work
 Protected Workers (Women and Young Workers)/Record
 Keeping
 Time Recording System
 Maintenance of Reasonable Levels of Staff
 Forced Overtime/Extraordinary Business Circumstances.
 Extraordinary Business Circumstance/Overtime Explanation

Legal Requirements For Working Hour
 Public & National Holidays
 Annual Leave/Determination
 Leave/Retaliation
 Annual Leave/Wage Payments
 Sick Leave
 Sick Leave/Restrictions
 Calculation of Absences
 Suspension of Work
 Rotation of workers to prevent leave entitlement
 Over-booking of production capacities.

Case Study
Violation: Weekend and overnight worked hours
were not recorded in the time cards and payroll
sheets and also not compensated properly.
Corrective Action: Factory shall record all worked
hours in payroll sheets and time cards and shall
compensate those correctly. This is to satisfy The
Payment of Wage Rules, 1937 of Bangladesh.
Violation: Female workers were working from 8
a.m. to 12 a.m. as overtime.
Corrective Action: Factory shall allow female
workers to work between 7 a.m. to 8 p.m. only with
a view to comply with The Factories
Act, 1965, Bangladesh.

Case Study
 Violation: Overtime worked hours had exceeded the legal limits of
stipulated hours per month with a large margin.
Corrective Action: Factory shall not allow anyone to work more than
10 hours per day and 60 hours per week. The duration of 60 hours per
week shall be represented as 48 hours general duty plus 12 hours
overtime as per the local law of Bangladesh.
Violation: Factory did not comply with the local law of Bangladesh in
the payment of overtime wages for all the workers in the factory.
Corrective Action: Factory shall follow legal requirement for overtime
compensation, which is double of the basic pay.

Discrimination
The Equal Remuneration Act, 1976 / ILO convention –
111 – As per this convention discrimination means - any
distinction, exclusion or preference made on the basis of
race, color, sex, religion, political opinion, national
extraction or social origin, which has the effect of
nullifying or impairing equality of opportunity or
treatment in employment or occupation. Such practices
cannot be accepted.

Discrimination
 Discrimination is
the prejudicial treatment of an
individual based on their
membership in a certain group or
category. It involves the actual
behaviors towards groups such as
excluding or restricting members
of one group from opportunities
that are available to another
group. It involves excluding or
restricting members of one group
from opportunities that are
available to other groups.

Types of Discrimination
Discrimination on the basis of nationality
Caste discrimination
Employment discrimination
Sex, gender and gender identity discrimination

Effects of Discrimination
 On commercial deals: discrimination of favouritism can lead
to less better deals based on discriminatory criteria instead of
quality, price and social responsibility.
 On the work place: discrimination by unequal treatment can
cause stress, tension, aggressively and a loss of cohesion in
the factory which may affect productivity and quality.
 On skills: discrimination can lead to a higher turnover of
employees contributing to a loss of skills and experience for
the company.
 On market share: discrimination can deprive the firm of ready
to use assets and knowledge of niche markets or specific
suppliers with the appropriate competences.

Resolving Disputes
 Set up and advertise neutral job profiles for the various
positions to fill
 Train your managers (human resources, procurement, sales)
about the different forms of discrimination to be able to
detect them
 Create a bottom up communication system to ensure a
complaint system for the employees.
 Set up a series of indicators in order to monitor possible
discrimination: compensation and benefits, wage rate, gender
ratio in the team, age, social, racial and religious origin.
 Keep a list of suppliers to track place of orders and the
diversity.

Legal Requirements
 Legal/Code Compliance – Harassment and Abuse
 standards
 Progressive disciplinary practices
 Discipline/Fair and Non-Discriminatory
 Monetary fines & penalties
 Gender appropriate and non-intrusive security practices
 Sexual harassment
 Psychological harassment
 Physical/Verbal – Abuse
 Freedom of movement

Legal Requirements For Non-Discrimination
 Legal / Code compliance - Non-Discrimination standards
 Employment Decisions
 Work-force Demographics
 Recruitment and Employment Practices/Job
 Advertisements, Job Descriptions and Evaluation
 Policies
 Equal Pay for Equal Work
 Marital Discrimination
 Pregnancy Testing
 Possible Marriage or Pregnancy Discrimination
 Apparel Export Promotion

Case Study on Discrimination:
Violation: Factory management is reluctant to recruit
employees from the area where the factory is situated.
This is not only to avoid local protests against working
condition, but also due to fear of post scenario of a
disciplinary case. Thus, there is discrimination in hiring
workforce.
Corrective Action: To comply with social accountability
standard, recruitment shall not be biased towards
avoiding local candidate at the time of recruitment.

Freedom of Association and
Collective Bargaining
 Freedom of Association – The Trade Unions Act, 1926 / ILO
convention – 87 – As per this convention - Considering that the
Preamble to the Constitution of the International Labour
Organization declares "recognition of the principle of freedom of
association" to be a means of improving conditions of labour and
of establishing peace3
 The Right to Collective bargaining - ILO convention – 98 -
Workers' and employers'organizations shall enjoy adequate
protection against any acts of interference by each other or each
other's agents or members in their establishment, functioning or
administration

How to Improve the Freedom Association
and Collective Bargaining
 Enquire if the workers' rights are respected, as set forth in local
laws: to elect workers representatives or to form or join a union
of their choice and to negotiate collectively, and without
interference from the employer.
 In countries where freedom of association is prohibited, decided
by the State or limited (like in free zones), a company should
facilitate all parallel means of freely elected representation, i.e.
leave the liberty to all its workers to gather, elect representatives
and negotiate collectively without reprisal. To have an overview
of these countries, please consult the ILO ratifications table
 Make sure workers are able to communicate openly with
management regarding working conditions without threat of
reprisal, intimidation or harassment, between themselves and
with the management, in the working place.

Legal Requirements
 Legal / Code compliance - Freedom of Association
 standards
 Right to Freely Associate
 Anti-Union Violence/Harassment/Abuse
 Anti-Union Discrimination/Dismissal, Other Loss of
 Rights, and Blacklisting
 Restoration of Worker Rights/Reinstatement
 Production Shift/Factory Closure to Prevent Exercise of
 Freedom of Association
 Severance Pay
 Employer Interference and Financial Control

Legal Requirements
Employer Interference/Constitution, Elections,
Administration, Activities and Programs
 Employer Interference/Registration
 Employer Interference/Favoritism
 Employer Interference/Favoritism Formation of
Alternative Organizations
 Facilities for Worker Representatives
 Right to Collective Bargaining
 Deduction of Union Dues and Other Fees
 Grievance Procedures / Channels of Communication

Case Study
 Violation: Employees were not permitted to bargain
collectively about their requirements.
Corrective Action: All employees shall be permitted to
bargain collectively about their rights

Organizations
International labour organization (ILO)
Fair Labor Association (FLA)
Worldwide Responsible Apparel production (WRAP)
Council on Economic Priorities Accreditation Agency
(CEPAA)
 The Ethical Trading Initiative (ETI)
Business for Social Responsibility (BSR)
(DISHA)
Self Employed Women Association (SEWA) in Ahmadabad
Occupational Safety &Health Administration(OSHA)

WRAP
Worldwide Responsible Accredited Production (WRAP)
It is an independent, global non-profit organization
dedicated to the certification of facilities engaged in
lawful, humane and ethical production. Headquartered in
Arlington, Virginia, WRAP has offices in Hong Kong and
Bangladesh with staff in the UK, Mexico and East Africa.

Principle of WRAP
Compliance with Laws and Workplace Regulations Facilities will comply with
laws and regulations in all locations where they conduct business.
Prohibition of Forced Labor Facilities will not use involuntary, forced or
trafficked labor.
Prohibition of Child Labor Facilities will not hire any employee under the age
of 14 or under the minimum age established by law for employment,
whichever is greater, or any employee whose employment would interfere
with compulsory schooling.
Prohibition of Harassment or Abuse Facilities will provide a work
environment free of supervisory or co-worker harassment or abuse, and free
of corporal punishment in any form.
Compensation and Benefits Facilities will pay at least the minimum total
compensation required by local law, including all mandated wages,
allowances & benefits.

Principle of WRAP
Hours of Work Hours worked each day, and days worked each week, shall
not exceed the limitations of the country’s law. Facilities will provide at
least one day off in every seven-day period, except as required to meet
urgent business needs.
Prohibition of Discrimination Facilities will employ, pay, promote, and
terminate workers on the basis of their ability to do the job, rather than
on the basis of personal characteristics or beliefs.
Health and Safety Facilities will provide a safe and healthy work
environment. Where residential housing is provided for workers, facilities
will provide safe and healthy housing.
Freedom of Association and Collective Bargaining Facilities will recognize
and respect the right of employees to exercise their lawful rights of free
association and collective bargaining.

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