Penn State University has reinstated its contract with Adidas after the sportswear giant reached an agreement on severance pay owed to Indonesian workers by a former subcontractor.

The university suspended its contract with Adidas in March, to protest at the fact US$1.8m in severance pay was still unpaid after PT Kizone shut down unexpectedly in April 2011, leaving 2,800 workers put of work.

Throughout the dispute, some 17 US universities and colleges ended their contracts with Adidas, the United States Against Sweatshops (USAS) organisation claimed.

On 26 April, Adidas agreed to pay a "substantial sum" to settle the claims.

"We are pleased that Adidas has recognised the former workers' plight, heard our concerns, and the concerns of others," said Penn State president Rodney Erickson.

"Adidas has resolved the issues associated with the factory closure and its impact on the affected workers.

"Though Penn State's influence in the global garment industry is admittedly limited, we will continue to work together, as a university community, to help ensure that the workers who produce apparel in our name do so under fair conditions and with fair compensation."