On January 11, 2012, a Nike, Inc. factory in Indonesia agreed to pay its workers more than $1 million in unpaid overtime. The factory workers claimed that Nike required them to work an hour of overtime each day for which they were not paid. The matter was settled prior to a lawsuit being filed following almost a year of negotiations. The settlement will affect nearly 4,500 factory workers.
Under Indonesian law, a company must pay workers overtime for any hours worked beyond the standard 8 hour work day. According to the trade union representing the factory workers, Nike had failed to pay the factory workers overtime for the past 18 years. However, Indonesian law only permits employees to recover unpaid overtime for the previous two years.
In addition to the monetary settlement, Nike has agreed to training programs for local managers that includes “cultural sensitivity, respectful supervisory skills, team leadership and human resource management” training. Moreover, Nike has agreed to hire a third party advocacy group to monitor workplace conditions.
While Indonesian factory workers are not subject to the overtime requirements of the Fair Labor Standards Act, U.S. companies should be careful to rectify any wage and hour violations that may be occurring overseas. Indeed, Karishma Vawani, a BBC correspondent in Indonesia, states that “The fact that Nike’s Indonesia factory has opted to hand over this million dollars and an apparent admission of some wrong doing at their Indonesia plant, may serve as a warning to other companies here to be more mindful of what happens at their Indonesia subsidiary.” Not surprisingly, trade unions are threatening to target Adidas and Puma, who both have large factories in Indonesia, for similar overtime violations.
The bottom line is that, as surprising as it may sound, other countries have wage hour laws and believe in the concept of “overtime.” Nike learned this the hard way, but other companies can benefit from this lesson.