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April 25, 2022

Esquel Group cuts Sri Lanka production on US order lull

Hong Kong-based fashion giant the Esquel Group confirms with Just Style it has cut production in Sri Lanka due to “the loss of many US customers”.

By Hannah Abdulla

Esquel Group tells Just Style it has reduced production in Sri Lanka since late 2021.

The confirmation came as worker rights group Clean Clothes Campaign (CCC) alleged approximately 1,500 workers employed at two Esquel-owned factories in Sri Lanka face imminent closure of their workplaces and have received no assurance they will be reemployed.

“Many of these workers have been employed by Esquel for decades. Over the past one-and-a-half years, we have tried to negotiate in good faith for an agreement to ensure fair compensation and a re-employment plan with both Esquel and their buyers, who continued to profit while workers suffer,” says Anton Marcus, Joint Secretary, Free Trade Zones & General Services Employees Union.

According to CCC, the two Koggala factories ceased to operate on 15 March and Esquel had sought permission from the Commissioner-General of Labour to terminate the workers’ contracts. That ruling remains pending.

Under pressure from management, some of the workers agreed to sign “voluntary” resignation agreements with the understanding they would receive more than their legal entitlement as promised by the company in writing, but with no financial details provided to justify the closure.

Approximately 1,000 workers who agreed to resign have filed a legal case against the company with the labour authorities.

The approximately 300 workers who did not agree to resign are legally obliged to stay on the payroll until the Commissioner General of Labour rules on the termination of their employment contracts, but have had their annual bonuses cut, in violation of earlier agreements reached with the union, which CCC describes as a clear act of retaliation by Esquel.

The workers’ union FTZ & GSEU and its allies in the CCC global network are calling on Esquel and companies and brands that have or used to have a business relationship with Esquel Sri Lanka to ensure the workers receive their full legal compensation and are offered reemployment opportunities by the new owners, or with their other suppliers in Sri Lanka.

“Esquel is doing everything it can to close its facilities without paying workers in full, and to punish the unionised workers in the process. This process has been going on for over a year and a half, and now is the time for all the other actors engaged to step up and make sure an agreement is negotiated with the FTZ-GSEU,” says Ineke Zeldenrust, Clean Clothes Campaign International Coordinator.

Esquel doesn’t wish to be drawn into the speculation that the two factories are at risk of closure and tells Just Style it was forced to reduce production capacity due to developments over the past year that led to the loss of many of its US-based customers.

A spokesperson for the group tells Just Style it is following “or exceeding” all national labour laws “including paying legally required compensation as well as salaries and bonuses in full for all employees, and has never discriminated anyone because of their union identity.”

In July 2020, Esquel was one of the entities on The Department of Commerce’s Bureau of Industry and Security (BIS) list of companies allegedly implicated in human rights abuses in Xinjiang.

The Entity List is a tool used by BIS to restrict the export, re-export, and transfer (in-country) of items subject to the Export Administration Regulations (EAR) to persons (individuals, organisations, companies) reasonably believed to be involved, or to pose a significant risk of becoming involved, in activities contrary to the national security or foreign policy interests of the US. Additional license requirements apply to exports, re-exports, and transfers (in-country) of items subject to the EAR to listed entities, and the availability of most license exceptions is limited.

Esquel, which has a history of over 25 years in Xinjiang, hit back at the blacklisting of its company, adding: “We are an ethical company that has worked with local and global partners to protect the environment, empower women and provide high-paying jobs. Our record demonstrates that Esquel has been a long-time ally of the Uyghur people.”

A year later it moved to sue the US Government for damages associated with the blacklisting.

And in October, Esquel confirmed the move had forced it to shut two of its factories in Mauritius.

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