NAFTA Flaws Exposed, Once Again

The need to change U.S. trade policy to strengthen rules to protect worker rights was underscored again when the U.S. Department of Labor’s Office of Trade and Labor Affairs (OTLA) issued an August 31, 2007 report on an October 2005 worker rights complaint filed by a Mexican trade union using procedures provided by the North American Free Trade Agreement (NAFTA). OTLA, formerly known as the NAO (National Administrative Office), is the arm of the U.S. government charged with enforcing labor clauses under trade agreements like NAFTA and CAFTA.

The complaint was filed by the FTVO union representing workers at a factory in Mexico owned by the U.S.-based Rubie’s Costume Company that at the time was producing Mattel-licensed apparel. USLEAP supported the FTVO workers and their struggle, which received wide-spread news coverage in 2005 in Mexico and the U.S. because of reports of the use of child labor.

The NAFTA complaint accused the company of collaborating with local labor authorities and a protection union to deny workers the right to form an independent union and negotiate a collective bargaining agreement. Protection contracts are widespread in Mexico and have been used effectively to squash the establishment of independent unions. The complaint, filed with the support of USLEAP and the Washington Office on Latin America, also accused the factory of violating child labor laws, failure to pay overtime, health and safety violations, and more.

In January 2006, OTLA announced it would accept the complaint for review and began its investigation. In addition to reviewing the complaint and its attachments, OTLA also met with the FTVO in February 2006, received additional submissions and testimony from the union and Mexican labor lawyers, sent questionnaires to the Mexican government, and went to Mexico to conduct field investigation in 2006. Jones Day, a major U.S. law firm retained by Rubie’s, also submitted an extensive array of materials (and was much more engaged in the complaint process than the Mexican government, which was the formal target of the FTVO complaint).

At the end of August 2007, nearly two years after the complaint had first been filed, OTLA issued its report.

Key Findings for Union Side

Among its key findings, the OTLA report found that the Mexican government hadn’t undertaken any labor inspections from 1998 until May 2005, after the factory became the subject of national and international attention. The absence of inspection reports made it impossible for OTLA to rely on government findings and difficult to confirm or deny some of the complaint’s accusations. The May 2005 on-site inspections also took place after union members were no longer in the factory, having been fired a month earlier. Despite the lack of real-time inspections, the report nevertheless found violations of overtime pay, child labor laws, and health and safety regulations, as well as pregnancy testing being used as part of the employment application process.

With respect to the central focus of the complaint, the right of workers to form an independent union and negotiate a contract, the report stated, in typical diplomatic language, that there were “several problematic aspects” with the handling of the union’s application process, citing unwarranted delays, a lack of transparency, and the use of technical grounds to deny union petitions. While the OTLA report states in a footnote that its investigation did not find any evidence to support the union’s allegation of “collusion” between the labor authorities and Rubie’s, it is precisely the “bureaucratic” obfuscations and delays identified by the report that are a major tool of protection contract unions in Mexico, effectively denying workers their right to form independent unions. In an indication that OTLA recognizes that “bureaucracy” is blocking the exercise of basic rights, OTLA’s report calls for consultations with its Mexican counterpart to discuss the issue.

OTLA Critical of Union

In addition to findings critical of the Mexican government and the company, the report has several criticisms of the union. The report takes the union to task for failing to follow proper legal procedures and failing to file formal complaints with local authorities with respect to alleged violations. It also states that OTLA found evidence contradicting some of the union’s public claims, e.g. OTLA found that workers were in fact aware of the presence of the pre-existing (i.e. protection) contract prior to filing its application for recognition as the FTVO union although the union stated otherwise. The report also states that the union failed to provide adequate documentation to substantiate a number of its charges, and in one statement goes so far to say that FTVO allegations that Rubie’s “illegally hired minors” were “unfounded.”

USLEAP Analysis

The FTVO union has not issued a response to the OTLA report as the report was only produced in English. The AFL-CIO’s Solidarity Center is translating the report into Spanish to give the FTVO union the opportunity to respond.

While USLEAP will look to the FTVO for its response to the OTLA report, USLEAP believes that the report essentially corroborates the central claims set forth by the FTVO union and reported by USLEAP during the campaign to support the Rubie’s workers.

Most fundamentally, the report makes clear that the actions of the company and Mexican labor authorities prevented the workers from forming an independent union and that a pre-existing collective bargaining agreement shows all the signs of a protection contract. Management used the pre-existing contract to keep out an independent union even as workers demonstrated that the union that signed the contract was failing to represent them or address their grievances. Many of these grievances were substantiated by the OTLA investigation even though it was hampered by the absence of labor inspections prior to May 2005 and was not conducted until nearly a year after the workers first began making their complaints known.

OTLA’s criticism of the union’s failure to fully follow due process in Mexico and its failure to file complaints to substantiate all the claims made in the NAFTA report and the press may be appropriate in an ideal world but the FTVO union and Rubie’s workers do not have the resources nor the confidence in the system to engage fully in a legal and administrative process and certainly not at the level that the company could. In addition to Mexican legal counsel, Rubie’s retained a mega-law firm in the U.S. to respond to the FTVO NAFTA complaint, pitting the vast resources of a global law firm with hundreds of lawyers against a small Mexican union that could barely provide in-house counsel (and against a small non-profit in Chicago that has been forced to expend significant time and energy responding to Jones Day’s engagement on this case).

Child labor issue

In the aftermath of the OTLA report, Rubie’s has ignored its central findings and focused almost solely on the issue of child labor, claiming its findings on child labor completely vindicate the company. On the contrary, OTLA reports that the May 2005 inspections determined that Rubie’s violated child labor laws with respect to hours and overtime of 14- and 15-year old workers, who are permitted to work but only with certain protections that Rubie’s violated. In part because of these violations, OTLA has also called for consultations with its Mexican counterpart on the issue of the enforcement of child labor laws.

Rubie’s claim of a clean bill of health on child labor apparently rests on the question of whether or not Rubie’s hired workers 13-years old or younger. OTLA did not find any evidence that the company did so, rejecting the one claim that was submitted by the FTVO regarding the employment of a 13-year old boy.

OTLA’s categorical statement that allegations of “illegal hiring” of child labor were “unfounded” must be tempered by its own qualification based on the fact that “from 1998 to May 2005, there were no inspections of any kind conducted at Rubie’s.” The OTLA Executive Summary states, “As a result, labor law violations may have gone unchecked for several years, as evidenced by violations that were found when four Extraordinary Inspections were conducted by Mexican authorities in May 2005.”

OTLA’s statements that it was not provided documentation to substantiate some of the FTVO’s complaints can be accepted as fair but its one statement buried at the end of the report that claims of illegal hiring of child labor are “unfounded” goes beyond what it can or cannot say based on its own qualifications. Lack of sufficient evidence does not render the FTVO’s claims false. In any case, OTLA does report findings that Rubie’s violated child labor laws, working 14- and 15-year old children beyond the hours permitted by law and failing to pay them according to the law.

Big Picture: NAFTA Flaws

For USLEAP, the more important findings of the report are it (1) provides plenty of evidence to corroborate the central charge that protection contracts are used by local authorities and companies to prevent the establishment of independent unions and (2) demonstrates the fundamental inability of the NAFTA labor chapter to address specific or systemic labor violations.

USLEAP did not support the filing of the complaint because the NAFTA complaint process is an effective tool to support workers in Mexico but, on the contrary, to demonstrate the virtual uselessness of the mechanism.

Perhaps most damaging to the internal integrity of the NAFTA labor complaint process itself, the report states that the Mexican government refused to cooperate with its investigation and reports that it has failed to follow-through on previous promises to address some of the systemic issues identified in prior NAFTA complaints.

While the report is useful in exposing systemic problems, it comes far too late to provide a remedy for the Rubie’s workers. Its call for more “consultations” with the Mexican government is not unwelcome but it hardly offers a useful remedy for the workers who were fired over two years earlier, whose factory closed nearly 18 months before the report was issued, and whose union is long since dead, another victim of Mexico’s protection contract system.

The report is to be posted on the Department of Labor website at http://www.dol.gov/ilab/media/reports/nao/public-reports-of-review.htm. It is also available on the USLEAP website.