More than 200 workers from Delta Smooth Limited (金顺台艺品厂) in Shenzhen, a supplier of Costco in China have launched a series of street protests since 6 May, as the owner refused to pay their wages, social insurance and economic compensation after the factory closure. They marched to the township and district government offices to demand investigation into the issue but received no response. Delta Smooth’s biggest client is Costco– the second largest retailer in US and the seventh largest retailer in the world. While Costco is renowned for its family atmosphere for employees, SACOM urges Costco’s intervention into the matter to fulfill its corporate social responsibility, by enjoining Zheng Rongwenthe owner of Delta Smooth, to meet his legal liability and settle the defaulted wages and compensations of work injuries and occupational diseases with the workers as soon as possible.

The factory, located in Songgang, Bao’an District of Shenzhen (深圳宝安区松岗), is owned by Zheng Rongwen from Taiwan, who is the former Chairman of Taiwan Merchant Association Shenzhen, now as theSecretary-General of The Association of Taiwan Investment Enterprises on the Mainland (ATIEM) and a member of Guangdong Chinese People’s Political Consultative Conference (CPPCC), the Chinese government’s top political advisory body.

Since this February there have been rumours that Delta Smooth would either be shut down or restructured. On around 20 April, the workers noticed the upper management were packing and transporting all the furniture away from the factory in secret, so they blocked the cars from leaving. That was the last time when Zheng appeared in the factory. When the workers raised their case to the sub-district office and other government departments, Zheng never showed up but sent his lawyer to negotiate with the workers. On 7 May, the lawyer once promised the workers economic compensations which would be calculated by their length of service from 2008, but later reneged on 10 May. On 13 May, the basic-level government delivered a letter from Delta Smooth to the workers to revoke the appointment of his lawyer from compensation negotiations. The workers saw Zheng had no intention to resolve the issues and communicate with the workers.

The workers have started a series of protests to voice out their demand; however, the protests are very much obstructed by local police. Police has sent out cars to take the workers back to the factory every time they tried to file the case in different government departments and offices. At the same time, different levels of the government offices shirk their legal responsibilities and ignore the fact that Zheng is deliberately evading his legal obligations. Instead, the government offices persuade the workers to claim their compensation by filing arbitrations individually which would take at least 2 to 3 years with uncertain results.

Most of the workers have worked for Delta Smooth from 10 to 20 years. According to China Labour Contract Law, the factory owner should pay economic compensation to its employees when the factory closes. The compensation formula is coined as “N+1”, meaning the total salary of worker’s year of service plus one month’s salary. However, not only the compensation has not been paid but also the workers’ April salary and the social insurance contributions this March and April. The workers were shocked to discover that the factory did not make social insurance contributions for them while deducted the amount of money from their salary. No one can tell where the money has gone.

Aside from wages arrears, many employees from Delta Smooth are suffering from benzene poisoning (i.e. preleukemia) due to prolonged exposure to chemicals such as thinner, paint, varnish, surface cleaners and acetone. Our investigation shows that Delta Smooth had been refusing to provide its workers with protective gears until last year, when many workers were found having occupational health problems after a series of medical examinations. Among the 248 workers who are now fighting for their rights, there is 1 worker who suffers from occupational diseases and there are 3 workers suffering from work injuries. According to China’s Regulation on Work-Related Injury Insurances, these workers are entitled to get one-off disability compensation from Delta Smooth before its closure.

To support the workers who bravely speak up, SACOM urges:

1. Costco to quickly intervene the matter and enjoin the factory owner Zheng Rongwen into negotiations with his ex-employees in person and return the defaulted wages and work injuries compensation as soon as possible;

2. Zheng Rongwen to fulfil his legal liability by providing all Delta Smooth workers free health examinations.Those who are found with symptoms of occupational diseases should be supported with proper treatments and compensation by Zheng.

3. Costco to accept the finished products remained in Delta Smooth Limited (approximate value: US$150,000) and pay the workers directly as a reward for their long time contribution.

[LINK 1]      Open Letter of Workers to the Brands (English Translation)

[LINK 2 &3] Open Letter Signatures [1] [2]

[LINK 4]      Timeline for Delta Smooth Workers’ Actions against Wages/ Compensation Arrears

1. As of July 2012. Costco chain covers the United States, the United Kingdom, South Korea and Taiwan etc. It is also the largest membership warehouse club chain in the United States.