Field research by Students and Scholars against Corporate Misbehavior (SACOM) shows that Wal-Mart – China’s eighth largest trading partner – consistently fails to catch and stop serious labor violations in its Chinese supplier factories, despite recent reforms to its monitoring system. Indeed, the working conditions in WalMart’s Chinese supplier factories are increasingly falling below the International Labor Organization’s defined minimum standard for socially acceptable work.

Interviews conducted between June 2005 and December 2006 with eighty-two workers at five Wal-Mart toy supplier factories in the industrial zones of Shenzhen and Zhuhai in Guangdong province uncovered widespread illegal and unethical labor practices that previously eluded Wal-Mart auditors.

During off-site interviews, workers at the five Wal-Mart toy factories gave SACOM researchers detailed accounts concerning wage and hour violations, unsafe working conditions, unsanitary worker housing, hash punishments and heavy fines, deprivation of labor contract protection, non-provision of social security, illegal firings and suppression by factory management. For example:

  • Excessive and Forced Overtime – All five factories impose a “6-day workweek” and a minimal 11-hour workday on production workers – making for a 66 to 78 hour workweek. The most serious case among the five factories occurred at Zhuhai-based Kam Long. Kam Long workers report that on average they work as many as 28 days per month and up to 30 days when filling rush orders. In one month their working hours reached a record high of 336 hours. They also complain that they are not allowed to refuse overtime – even when they have a bad cold or headache. According to Article 3 of State Council Rules on Working Hours, working hours should not exceed 8 hours a day and 40 hours a week – Wal-Mart’s own Standard for Suppliers calls for a 60 hour workweek.
  • Wage Violations – All five factories fail to provide workers with legally mandated minimum wage. In general workers earn only between RMB 600 and 800 per month, despite excessive overtime work throughout the entire month. Overtime hourly wages are arbitrarily set by the management but not paid at least 150% the normal hourly wages on weekdays, 200% on weekends and 300% on statutory holidays, a serious violation of Article 44 of the Chinese Labor Law. At Kam Long, many workers report being cheated out of wages. When one worker attempted to check his wage records for miscalculations with his supervisor, he was denied. Both piece-rate and time-rate workers complain about unfair treatment. The management is found paying its hourly production workers only RMB 2.04, some 50 percent less than the current level at RMB 4.12!
  • Unsafe Working Conditions – Workers in several factories are exposed to a number of health hazards. For instance, a 22-year-old Tai Qiang male worker’s left leg was pressed by a heavy machine, bone fractured, and delayed medical treatment. He testified that all his co-workers were not given any protection gear. For another instance, workers in the blow molding department at Kam Long report that the knives they use are very sharp and they have to work quickly to keep up with the production pace. As a result, a lot of workers cut their fingers. One worker even cut down to the bone but afterwards just wrapped it up, because the factory would not allow him to go to the hospital. These workplace practices are in serious violations of the Chinese Labor Law, the Production Safety Law, and the Code of Occupational Disease Prevention. Inspectors from Wal-Mart rarely paid any attention to worker safety but product quality, said most of the workers interviewed.
  • Deplorable Worker Housing and Unacceptable Canteen Food – Workers report unsanitary housing conditions at all five factories. For example, one worker at Tai Hsing said the company dormitory is “not suitable for human beings to live in!” Twelve male adults are squeezed into one dormitory room. There is virtually no private or personal space and the communal bathrooms are dirty. Worse still, workers report waiting for one hour on average to get into the shower. Workers also report a strong dissatisfaction with foods served in factory canteens. For example, at Kam Long, a worker said, “We have to eat vegetables almost every day – it is disgusting. We eat fried egg and bitter melon and the food is often burnt. The bitter melon does not even have the flavor of bitter melon. These dishes usually have something in them that is difficult to choke down so we just swallow it all in one gulp.”
  • Punishments and Fines – Rules are for breaking at all five factories. Workers at Tai Qiang, for instance, are fined 10 yuan for failure to put on a work cap, 10 yuan for loss of staff card, 50 yuan for “misconduct” from the viewpoint of management, and 80 yuan for “serious offenses.” For another instance, workers at Kam Long, a Wal-Mart “approved factory,” are deducted 3 days’ wages and bonuses if they miss a day of work.
  • Workers Without a contract – Wal-Mart claims to be committed to an ethical sourcing policy, in which suppliers sign labor contracts with workers to protect their fundamental rights. In reality, 4 of the 5 surveyed factories sign contracts only with older workers, and information of the 5th case is not available.
  • Non-Provision of Social Security – All 5 factories do not provide their workers with any medical insurance or pensions, an infringement of the Social Security Regulations. The few older workers who have enrolled in the industrial injury insurance schemes comment critically that their management does this with an intention to deal with audits from factory’s customers, but not for the wellbeing of workers.

Scripts, Threats and Hidden Workers 

Testimony and evidence collected from factory workers also sheds new light on why Wal-Mart’s supplier code of ethics and top-down monitoring program consistently fails to stop serious labor violations.

Many supplier factories have gotten better at concealing labor abuses, so as to survive in the “race to the bottom” global economy. At the Tai Hsing toy factory in Shenzhen, managers conducted “training sessions” with workers on how to answer questions from Wal-Mart’s auditors in preparation for pre-announced inspections. At these trainings, managers warned workers, “If you answer auditors’ questions incorrectly, we get to lose orders and you get to lose your job.” Management at the Tai Hsing factory also instructed workers that if they answered Wal-Mart’s questions “correctly,” they would earn a RMB 50 bonus, otherwise they would be dismissed.

At the Kam Long toy factory in Zhuhai, managers resorted to fraudulent tactics by preparing a set of scripts for frequently asked questions, forced workers to commit a standardized answer key to memory in dealing with an upcoming Wal-Mart audit. On the day of the audit, all the workers without labor contracts, workers without social insurance, and novice workers were required to take a day off to avoid detection.

Failing Standards for Suppliers, Suppression of Union Rights

Wal-Mart, in its 2005 “Standards for Suppliers,” claims to be committed workers’ rights to “freedom of association” but workers argue the opposite. When Tai Qiang workers petitioned to the Wal-Mart corporate responsibility department in April 2005 to set up a worker-run union in accordance with the local law, they did not receive any reply. Wal-Mart turned a blind eye to their sufferings when the worker leaders were retaliated and laid off by the factory management.

At Kam Long, in one worker’s words, “We all are forced to keep our resentment to ourselves, there is nowhere to register complaints… and we are afraid if we do complain, we will be fired or receive wage deductions.”

The Wal-Mart Squeeze

Widespread accounts of labor violations in Wal-Mart’s supplier factories indicate that Wal-Mart’s attempt to improve working conditions in China and other countries is failing. Wal-Mart’s low-cost sourcing strategy coupled with its inadequate monitoring system encourages suppliers to violate even the most basic laws and ethical standards.

In light of these first-hand findings, SACOM calls on Wal-Mart to collaborate with civil society groups to provide workers with labor rights training programs, to support democratic elections run by workers for the establishment of worker representation mechanisms, and to engage workers in monitoring corporate responsibility for the long term.


The full report can be downloaded here: The Story of Toys Made in China for Wal-Mart