More than £4bn in wages has been withheld from millions of garment workers making clothes for western clothing brands over the past 15 years, according to new estimates on severance “wage theft” in the global fashion industry.
The Worker Rights Consortium (WRC), a labour rights investigative organisation, says that garment workers have been denied billions of pounds of legally mandated severance pay, which they should have received after being sacked or losing their jobs due to brands cancelling orders or factory closures.
Severance pay is financial compensation that workers are legally entitled to if their employment is terminated or the business closes.
“It doesn’t grab headlines, but when workers lose their jobs and are then denied severance they spent years earning, it has devastating consequences for them and their families,” said Scott Nova, executive director at the WRC.
Nova said the issue of severance “theft” was a “hidden crime” in the global fashion industry that received little attention, while victimising millions of workers across the world.
Apparel brands have known about severance theft for years but have done nothing to stop it. Their voluntary labour standards have allowed them to ignore the problem with impunity,” Nova said.
The WRC highlighted an ongoing case involving workers at a factory making Disney products in El Salvador, which it claims owes 250 workers a total of £1.4m in severance pay. For some, their share of the total is the equivalent of more than two years’ wages.
The factory, Style Avenue, which made branded sportswear, ceased production in February 2023 and closed in May, making hundreds of workers unemployed.
Disney had granted a licence to Outerstuff, a US designer and manufacturer of licensed children’s sports clothing, to make Disney children’s clothing. The clothing was made at the factory and was co-branded with the logos of US National Football League (NFL) or National Basketball Association (NBA) teams.
The WRC says that one of the owners of the factory was temporarily jailed for failing to pay healthcare and pension contributions for employees. Instead of being paid what they were owed, the WRC says that Style Avenue employees were paid about £45 each, less than 1% of their legal entitlement.
The WRC claims that this failure so far to pay workers made Outerstuff an outlier in the industry and that as companies making clothes for certain brands, including for the NFL and the NBA, were subject to enforceable labour standards, that obliges them to repay stolen severance pay.
In response to the WRC’s claim, Outerstuff claims that the WRC’s analysis is factually inaccurate and denies that it is obliged to pay the severance money. However, after the Guardian approached Outerstuff for comment, the company confirmed it would pay nearly $1m.