Apple Puts Major Asian Supplier on Probation After Workers Riot in India

People exit from the gate of Wistron, a Taiwanese-run iPhone factory at Narsapura, about 60 km from Bangalore on December 13, 2020. - Authorities vowed to crack down on workers who went on a violent rampage at a Taiwanese-run iPhone factory in southern India over allegations of unpaid wages and …
MANJUNATH KIRAN/AFP via Getty Images

Apple, Inc. announced Monday that it has placed Taiwan-based manufacturer Wistron on probation after workers rioted at a plant near Bangalore over unpaid wages.

Another major Asian supplier, Pegatron, received probation for labor violations in November.

“Our main objective is to make sure all the workers are treated with dignity and respect, and fully compensated promptly. We are very disappointed and taking immediate steps to address these issues,” Apple told CNN Business on Monday. 

The Wistron plant in Narasapura was the scene of an angry demonstration that turned violent on December 12, resulting in substantial damage to the factory. The workers said they were angry about unpaid wages and salary promises that management did not keep.

Wistron’s response to the incident implied outside agitators whipped up unrest and claimed a third-party management company was responsible for any paycheck problems experienced by employees.

On Sunday, Wistron apologized for mishandling wages at the plant, which employs about 12,000 people to make iPhones under contract for Apple. A corporate statement said an internal investigation confirmed the workers had “legitimate complaints.”

Wistron’s vice president of operations in India, Vincent Lee, was terminated as a result of the investigation, and the company opened a hotline for worker grievances. Further “restructuring” of the management team was promised, and the company said it would settle all outstanding wage payments.

“We deeply regret this and apologize to all of our workers. This is a new facility, and we recognize that we made mistakes as we expanded. Some of the processes we put in place to manage labor agencies and payments need to be strengthened and upgraded,” said a company spokeswoman.

Apple said its own investigation determined Wistron violated its “Supplier Code of Conduct” by delaying salary payments and mismanaging work hours. Excessively long shifts were one of the major worker grievances. The demonstration on December 12 began after employees emerged from working a late shift at the factory and congregated outside.

“As always, our focus is on making sure everyone in our supply chain is protected and treated with dignity and respect. We are very disappointed and taking immediate steps to address these issues. Wistron has taken disciplinary action and is restructuring their recruitment and payroll teams in Narasapura. Apple employees, along with independent auditors, will monitor their progress,” Apple’s statement said.

The South China Morning Post (SCMP) reviewed an internal investigation conducted by the government of Karnataka state, where Narasapura is located, and said there were allegations of serious labor law violations by local management coupled with poor oversight by Wistron. 

“There have also been allegations of middlemen exploiting the contract workers and skimming their wages, with police looking into the role of six contractors who acted as go-betweens for Wistron. They reportedly lured workers by promising them an additional allowance if they forewent breaks,” the SCMP reported.

According to local labor activists who spoke to the SCMP, the Wistron factory is a major source of employment of impoverished Nasapura, so local workers are reluctant to complain in public for fear of losing their jobs.

The Wall Street Journal (WSJ) noted the Wistron case has significant political implications for India, which would explain why state officials told the SCMP the Indian federal government is eager to resolve the situation and get the factory up and running again quickly:

Wistron’s operations in Bangalore were often pointed to by policy makers and economists as an example of India’s ability to attract investment by luring companies looking to diversify away from China.

India’s prime minister has been trying to make it easier to invest and expand in India for years. Narendra Modi’s “Make in India” campaign gained more firepower this year as foreign investment is seen as a crucial component for India to dig its way out of its current Covid-19 [Chinese coronavirus] recession. He has promised a more predictable and open regulatory regime, a simpler corporate tax structure and incentives for targeted industries.

This year, India made it easier for some types of companies to fire workers as part of its efforts to deregulate the economy and boost growth. It has also made it harder for workers to unionize and strike. At the same time, it expanded social security programs to include many contract workers.

The fallout for Modi could be mitigated by local labor leaders stating “the outburst of violence wasn’t a result of any new government rules, but instead was triggered by a lack of communication and confusion,” as the WSJ summarized their position. Those local leaders suggested that despite Wistron’s admission of responsibility, some of the angry employees might simply have been confused about how the contract labor system worked and when they would be paid.

On the other hand, labor disputes appear to be on the rise in India and across Asia, with several protests of a much less violent nature occurring in India after the Wistron incident on December 12. 

In November, Apple suspended business with another supplier, Pegatron Corp. of Taiwan, for requiring student employees in China to work on nights and weekends contrary to Apple policy.

“The individuals at Pegatron responsible for the violations went to extraordinary lengths to evade our oversight mechanisms. Pegatron misclassified the student workers in their program and falsified paperwork to disguise violations of our code,” Apple said in November.

“Upon discovery of this non-compliant activity, we immediately took the student workers off production lines and worked with our customer and third party experts to make appropriate arrangements for them to return to their homes or schools with proper compensation alongside all necessary support and care,” Pegatron said in its defense.

Wistron said Monday it does not expect the Apple probation or government investigations of the Narasapura plant to have a major effect on the company. The company also stated that while violence against the plant inflicted several million dollars in damage, there was no major damage to the manufacturing equipment or warehouses, so normal operation could resume soon.

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