UW-Madison addresses adidas-Indonesia issues

The University of Wisconsin–Madison will enter into a period of mediation with adidas Group in an effort to resolve an ongoing dispute over the apparel firm’s obligations to former workers at a factory in Indonesia. The factory was owned by an adidas subcontractor.

Interim Chancellor David Ward announced his plans Tuesday, Feb. 14 through letters to adidas and the university’s Labor Licensing Policy Committee.

The issue relates to the owner of an Indonesian factory, called PT Kizone, who fled without paying more than 2,800 workers an estimated $3.2 million in severance. A small part of the factory production consisted of adidas apparel, including items bearing UW–Madison logos.

Brands such as Nike and the Dallas Cowboys have already contributed financially to relief for the workers. However, adidas, to date, has declined to do so. At present, workers are still owed $1.8 million.

“I’m committed to seeing redress for the impacted workers, and I believe mediation is the most efficient and practical method to reach this goal,” Ward says. “I look forward to a positive resolution to this matter as soon as possible.”

In December, the university’s Labor Licensing Policy Committee (LLPC) recommended that UW–Madison put adidas on notice that it must make severance payments to the displaced workers or it should initiate termination of both sponsorship and licensing agreements with adidas.

Ward gathered information on the issue from UW’s contracted independent monitoring organization, the Worker Rights Consortium and asked adidas for additional information before initiating mediation.

Mediation is contractually required to address disputes concerning interpretation of the sponsorship agreement’s terms. Specifically, the process will address the disputed issue of whether severance pay is required by the university’s Code of Conduct agreement with adidas. Mediation also provides a venue to resolve the substance of the issue.

Ward notes that this method provides the best opportunity to see funds reach the former workers of PT Kizone.

The mediation period is undefined in the agreement, but could last up to 60 days depending on the availability of an agreed-upon mediator.  The university reserves the right to initiate termination of both agreements should the talks break down.

As part of university standards, brands and suppliers are required to adhere to a code of conduct. The code addresses workers’ wages, working hours, overtime compensation, child labor, forced labor, health and safety, nondiscrimination, harassment or abuse, women’s rights, freedom of association and full public disclosure of factory locations.

If violations occur, a licensee has the opportunity to correct the problem or have its relationship with the university terminated. In past instances involving other brands, such as Nike and Russell Athletic, the university has actively engaged companies in an effort to find solutions that ultimately result in workers being fairly compensated.

In the coming days, both sides will agree to a mediator, submit briefs and set a date for the mediation conference.

UW-Madison has an exclusive contract with adidas to provide uniforms and athletic equipment, and the company is a university licensee.

The university’s current deal with adidas runs through June, 2016 and is worth approximately $2.5 million annually, in both royalties and equipment.

Additionally, licensing royalties paid by adidas to UW–Madison since 2004 have provided hundreds of thousands of dollars in need-based scholarship support to UW–Madison students outside of athletics.