Labor rights group accuses tech giant's suppliers of many violations

Apple Inc is again being accused of abusing labor rights at a key supplier in China following an undercover investigation by a New York-based human rights group into three mainland factories owned by Taiwan-based Pegatron Corp.

China Labor Watch claimed in a report on Monday that it found at least 86 violations at the Pegatron factories in Shanghai and neighboring Suzhou.

The organization, which says its mission is to pressure some of the world's largest corporations to stop labor abuses at their factories or those of their suppliers in China, issued two reports last year, launching similar accusations against Apple and Samsung Electronics Co Ltd.

Li Qiang, executive director of China Labor Watch, said the organization sent a team of investigators from March to July to work in the factories and interviewed about 200 workers outside the factories where 70,000 people make iPhones, Mac computers and iPad parts for Apple.

The violations discovered by the investigators included demanding employees work 66- to 69-hour weeks, beyond the legally required 49-hour maximum without overtime being paid.

Pegatron was also accused of using underage workers under the name of interns who worked the same long hours at the factories. The organization also claimed a pregnant woman was required to conduct the same workload as co-workers.

Li said the investigation was supposed to last longer but his investigators found workers who had been required to hand in their official identity cards to guarantee they would carry on working, which prompted him to release the report immediately.

"Without a valid ID, one can't even take trains in China," he said. "Pegatron was the first and only one we found that would withhold employees' IDs. We thought it was time to release the report."

Li said China Labor Watch sent the report to Apple Inc before releasing it publicly. The workers' ID cards were returned to them after Apple intervened. Pegatron said they collected the IDs to handle health insurance for the workers, but China Labor Watch said it was not necessary for health insurance.

In an Apple statement on Monday, the electronics giant said it had been in talks with China Labor Watch over recent months and investigated the issues it raised and took action, including requiring Pegatron to return the withheld IDs.

"Their latest report contains claims that are new to us and we will investigate them immediately," said the company, based in Cupertino, California, in a statement. It added audit teams will return to Pegatron, Ri-Teng Computer Accessory (Shanghai) Co Ltd and AVY Precision Technology for special inspections this week.

It added if the workers were found to be underpaid or denied compensation, it would ask Pegatron to reimburse them in full.

Pegatron President and CEO Jason Cheng said in a statement that his company will investigate the accusations. Charles Lin, its chief financial officer, was quoted by Bloomberg News as saying Pegatron has not hired any underage workers in China and workers averaged 45- to 50-hour weeks over the previous two to three months.

Apple, which outsources all its production to mainland factories owned by Taiwan-based electronics manufacturers including Foxconn and Pegatron to save on manufacturing costs, has been at the center of labor rights disputes and is a favorite target of them.

In 2010, 14 workers committed or tried to commit suicide at several Foxconn factories in China in less than 10 months, which led to a large-scale investigation by Apple, Foxconn and Chinese authorities and contributed to the improvement of workers' working and living conditions at Foxconn factories.

Since then, the US giant has reinforced audits on the social responsibility compliance of its manufacturers and established a code of conduct.

Kenneth L. Kraemer, a professor and associate director of the Center for Research on Information Technology and Organizations at the University of California, Irvine, said accusations such as this could hurt sales of Apple products in China, which is Apple's second-largest and fastest-growing market in the world.

"But I do not know whether the people who actually buy the products care about these issues. I also do not know whether Chinese consumers consider CLW to be an objective (non-political) source of information," said Kraemer.

That is the biggest concern for China Labor Watch's Li.

"I think Apple should carefully choose its suppliers and create a healthier and positive competitive market. Letting suppliers compete and choosing the cheapest one is not the correct way," he said.

Apple, facing increasing competition from companies including Samsung and investors' demands for sustained profits and more customers, has been reported to be preparing to launch a new and cheaper iPhone.

China Labor Watch investigators confirmed the report and said they were worried it could lead to another wave of cost cutting at Apple's manufacturers, which might in turn cause more abuses of labor rights.

Li said his organization has received no response from Chinese authorities.