Dick Armey, Sweating it Out  in Saipan

The Dallas garment industry has all but died, but critics say Plano-based J.C. Penney still has a connection to one of that sector's most notorious practices. The national department-store chain is one of four major retailers that has yet to settle class-action lawsuits alleging sweatshop conditions in factories owned by their contractors on the island of Saipan, a remote U.S. territory in the Pacific.

The two lawsuits paint a picture of desperate workers, mostly young rural Chinese women, lured to a remote island with promises of the good life. Reality, however, consists of paying exorbitant recruitment fees, then toiling long hours for little pay in what critics call a modern version of indentured servitude. The Department of Labor has documented filthy conditions in factory workers' barracks in Saipan.

Late last month, eight major retailers -- including Calvin Klein Inc.; Sears, Roebuck and Company; and Tommy Hilfiger USA Inc. -- followed other clothiers in agreeing to settle the federal suits by establishing an independent authority to monitor factories, which anti-sweatshop activists say is the first of its kind. An $8 million fund will also cover back pay for workers, a public education campaign, and fees for the lawyers who filed suit.

Medea Benjamin, director of Global Exchange, a San Francisco-based human-rights organization, praised the settlement because it puts some teeth in efforts to combat sweatshops in Saipan. "We think workers should be treated with dignity and paid fairly whether it's in Dallas or Saipan," she says.

That makes for 17 out of 21 companies sued last year that have agreed to reform their dealings with contractors on the tiny island near the Philippines, where foreign-run garment factories use loopholes in U.S. law to import an estimated 15,000 guest workers a year from China, Bangladesh, and other countries.

"To allow such squalid conditions to persist on American soil is both patently unlawful and morally reprehensible," said Al Meyerhoff, a lead attorney in the case, in filing the lawsuit in January 1999, an event that attracted national media attention. "Saipan is America's worst sweatshop." (Click Here to see Dick Armey, Our Man in Saipan)

But J.C. Penney, Target, The Gap, and Lane Bryant, a division of Limited Inc., are fighting the settlement. According to attorneys, they represent the bigger fish targeted by the suit, or nearly half of the island's $1 billion-a-year garment trade.

In a statement, J.C. Penney declined to speculate why other companies have cut deals. "We believe the lawsuits have no merit," said spokeswoman Rita Trevino-Flynn. "We also believe the [foreign-owned garment] companies are capable of running their Saipan factories in full compliance with the law."

Saipan factory owners also deny the existence of sweatshop conditions and blame media and government attention on "protectionist" U.S. trade unions.

Since 1976, the palm-shaded island, site of a major World War II battle and part of the Commonwealth of the Northern Marianas Islands, has had U.S. territorial status similar to Puerto Rico. Few native residents work in the garment factories.

Over the last two decades, the island has become an attractive offshore manufacturing haven to American clothiers because it is exempt from U.S. minimum-wage and immigration laws, as well as from trade-related tariffs and quotas. The Marianas were initially granted exemptions from labor laws (their minimum wage is about $3 an hour) so its economy could develop.

While one federal lawsuit filed in San Francisco charged foreign-owned garment contractors with failing to pay overtime and creating intolerable work and living conditions, the other federal suit, filed in Los Angeles, accused U.S. companies of engaging in a "racketeering conspiracy" with contractors by using illegal indentured labor. The lawsuits claim American companies are liable because their inspectors visited the factories and allegedly ignored abuses. "They pretended that it wasn't their business," says Global Exchange's Benjamin. "We're saying they ought to know."

What constitutes peonage in Saipan? Specifically, the suits allege, many workers agreed to pay back recruitment fees averaging $4,000 to get to the island. The fees were later deducted from the workers' slender paychecks, along with food and housing costs, which prevented many workers from pocketing much of their earnings.

In addition, attorneys and advocates say, the workers were forced to sign one-year "shadow contracts" that waived basic rights, including the freedom to date or marry, have children, and practice their religion. Questioning conditions or authority could lead to firing, deportation, and sometimes physical harm.

The workers, the lawsuits allege, endure workdays as long as 12 hours in crowded and sweltering factories; work unpaid overtime to meet high quotas; eat bug-infested food; and live in shanty-like barracks under tight supervision by guards.

A third lawsuit filed in California state court by labor and human-rights groups, including Global Exchange and the Union of Needletrades, Industrial and Textile Employees (UNITE), accuses the companies of deceptive advertising. Since some Saipan goods bear "Made in the USA" labels, the groups argue that companies are misleading consumers who believe the goods are made under compliance with U.S. labor laws.

J.C. Penney told ABC's 20/20 in early 1998 that it was removing "Made in the USA" labels from Saipan-made clothing. The company points to its "Supplier Legal Compliance Program" for 4,200 outside contractors worldwide as proof of its good business practices. "[W]e will not knowingly allow the importation into the United States of merchandise that...was manufactured with convict, forced, or indentured labor," states the brochure, which also says the company severs ties to labor law violators.

While the company says the government can handle transgressors, Meyerhoff points out that the U.S. Department of Labor logged 1,000 violations of Occupational Safety and Health Administration (OSHA) standards in Saipan garment factories from 1994 to 1999. "We found locked fire exits, the sort of thing that's reminiscent of the Triangle shirt factory disaster," Frank Strasheim, an OSHA regional director, told 20/20.

His department filed court papers supporting the lawsuits, while the Interior Department has also issued several critical reports. One report cited a "heavy and unhealthy dependence upon an indentured alien worker program and on trade loopholes to expand its economy."

But the federal government, short-staffed in its distant possessions, has left much of the heavy lifting to law firms and nonprofits. Perhaps another reason for a lack of federal involvement is that two top GOP leaders, Majority Leader Dick Armey and Majority Whip Tom DeLay, both Texas congressmen, have embraced Saipan's model of low-wage serfdom as a "free-market success"

Will J.C. Penney become a target for anti-sweatshop protests? As word of the suits circulates, even Dallas activists are talking about possible Penney pickets. But it's more likely that fellow settlement hold-out The Gap, with 3,000 stores worldwide, will reap the most attention. The trendy chain is becoming this year's chic protest target; activists protesting the World Trade Organization in Seattle set a pair of Gap pants on fire outside a Gap store.

The chain, which points to rising sales as proof that the protests haven't had any effect, also has more memorable slogans to mock than Penney's. For example, ubiquitous Gap ads call for "Everyone in Cords!" or "Everyone in Khakis!" The snappy "Everyone in Sweatshops!" may prove more appropriate.

See Dick Armey,"Our Man in Saipan"