Taking a Second Bite at the Apple: Foreign Suppliers Abuse Workers

While California employment lawyers fight over minutes granted or denied to employees for rest and meal breaks, foreign suppliers to some of these same U.S. companies go unchecked by U.S. law while violating minimum standards of human decency. Unsafe or unsanitary working conditions, unlimited working hours per day, and “barely survival” pay, are commonplace for third world manufacturing employees. To the extent the American consumer unquestioningly buys cheaper products based labor approaching conditions of slavery, the consumer economically supports the practice. 


FoxConn is the Chinese factory where our iPads and iPhones are assembled. The Apple logo on the back of our Apple product is hand-carved, and that the employee doing that work may never see the final shipped item. Recently, ABC News exposed the treatment of workers at the FoxConn factory. Many workers were underage, “warehoused” in overcrowded dorms, and forced to work most of their waking hours, day after day. For a summary of those conditions, go to http://mashable.com/2012/02/22/apple-foxconn-nightline-video/. 


The overworked FoxConn employees were killing themselves in such numbers that suicide nets were placed below the windows of the FoxConn dormitories. 


There are both legal and economic solutions to these abuses. It may be that the most immediate and effective solution is economic—that is, that U.S. consumers unite to state their outrage that Apple (or other U.S. based company using their foreign sources) allows such inhumane conditions. Often, U.S. companies will be concerned that their sales may drop by a boycott of their products, or a tarnishing of their brand, if their passivity is exposed. That is, these companies may not have a legal obligation to improve working conditions of foreign workers hired by an “independent” supplier, but there is not doubt the U.S. corporation has the economic leverage to improve conditions. The ethical argument is that the U.S. company should use this economic leverage not only to obtain the best price, but the best price consistent with the basic human dignity of the supplier’s workers. 


The short form of the legal issue is this: What degree of control and co-ownership does the U.S. Company have over the foreign supplier? A related question is: Does a U.S. Company have an independent duty of truthful advertising to the American consumer that it supports fair and decent working conditions of the foreign workers hired by its suppliers? 


In Doe v. Wal-Mart, a code of ethics merely stated that Wal-Mart reserved the right to control or direct the activities of its suppliers, but did not promise to do so. This lack of promise was enough for the Ninth Circuit to hold there was not false advertising that would give U.S. consumers a direct “false advertising” claim against Wal-Mart. The Court also held that Wal-Mart’s “control” over the supplier was too slight to make it a “joint employer.” 


One case is positive potentially for California consumers seeking to redress inhumane working conditions of foreign workers: in Nike v. Kasky (2002) 27 Cal.4th 939, 949, Nike issued widely published rebuttals to charges that it engaged in widespread abuse of its suppliers’ foreign workers. A California resident, Kasky, sued under Bus. & Prof. Code Sec. 17200. He alleged that Nike that Nike was engaged in false and misleading advertising. Since Kasky was decided, California enacted Proposition 64 required a litigant to demonstrate actual economic harm to have standing to sue. Kasky could not bring his case today as a result UNLESS he showed that he (and others like him) would not have completed a purchase of the particular product but for the false and misleading publicity statements. See generally, Klein v. Chevron USA Inc. 2012.Ca.0000564.


Thus, if a California consumer were to bring a “false and misleading advertising” case successfully, one element of pleading and proof would be that the consumer himself was induced to make the purchase based on the “advertising” and that “but for” the advertising, would have refrained from the purchase. This would of course also be a matter of individual proof for each consumer, and would be one factor contrary to class certification. Even without class status, a group of like employees could proceed independently, and seek consolidation of their cases, assuming their primary motive was to achieve a principled outcome rather than a mega-judgment. 


Plaintiffs' counsel could seek recovery of fees based on the “private attorney general” theory. C.C.P. Sec. 1021.5. However, the real financial incentive will be the threshold certification issue: Do individual issues of intention and purchase decision override the other common issues of fact and law? 


Will consumers stop buying the latest versions of the iPad or refuse to shop at Wal-Mart? Apple has intervened in the FoxConn scandal not because of a drop in sales, although that could happen depending on how Apple publicly responded. No, Apple has intervened because it cares about the “luster” of its brand and its corporate reputation. Over the long haul, such intangibles can have tangible results, especially if an upstart competitor enters the market. The risk of loss, when weighed against the short term increased costs, indicated that Apple would act to influence its suppliers. 


In conclusion, while legal avenues are still open to attack a U.S. corporation that is complicit in creating inhuman working conditions for foreign workers, economic leverage and public exposure are probably the best immediate tactics. 


Note: This article is derived in part from an article by Anne K. Richardson, Hadsell Stormer LLP, published in the Daily Journal May 9, 2012.