Apple Claims Improvement In China Contract Worker Conditions

Apple Inc. (NASDAQ:AAPL), the most valuable technology company, said its year-old commitment to improving conditions for workers at Chinese contract manufacturers continues and has already seen results.

Still, the Cupertino, Calif., electronics developer said it has a way to go to stop excessive work hours, underage employment and ending falsification of documents and hiring materials.

In its annual “Apple Supplier Responsibility Progess Report,” Apple issued a report card that ranked nine categories of labor and human rights variables and gave its agents a 73 percent rating for overall compliance and a 77 percent rating for practices in compliance with standards set by the Fair Labor Association, an industry trade group Apple joined last year.

Once a manufacturer, Apple long ago shifted manufacturing and assembly to U.S. contractors like Sanmina Corp. (NASDAQ:SANM), before shipping all of its work to Asian contractors headed by Taiwan’s Hon Hai Precision Industries Inc. (TPE:2317), whose Foxconn plants employ more than 2 million workers in China.

Apple CEO Timothy Cook visited two Foxconn plants during his first China trip as CEO last March. Reports of worker suicides, accidents and unrest had spurred groups such as China Labor Watch, of New York, and labor unions, to demand a probe into alleged “slave labor” at plants where workers were paid poorly to make luxury items like the iPad and iPhone 5.

As well, Samsung Electronics Corp. (KRX:005930) and Sony Corp. (NYSE:SNE) also came under attack and set up their own investigations of worker conditions.

Apple, in its current report, said its worst performance is in protecting juvenile workers, with only 62 percent compliance, with only 52 percent of the management in compliance. The highest grade was for fair treatment of workers, with 96 percent of practices in compliance, with 91 percent of management in compliance.

The company wrote 63 factories didn’t provide free health care to “juvenile workers,” or those under 18, provided they don’t perform “work likely to jeopardize their health, safety or morals." At 29 plants, they were assigned to jobs “not suitable” such as heavy lifting.

Apple said 102 factories didn’t provide night-shift workers proper pay for legal holidays due to incorrect interpretation of local labor laws. At 21 units, overtime pay was incorrect, while at 15, base wages to calculate overtime were insufficient.

Some hiring agents were terminated after it was determined they’d provided false documentation about underage workers, the report said.

Another section of the report gave only a 70 percent grade to overall management compliance with health and safety, 72 percent to environmental regulations, and 69 percent for compliance with management systems required for proper overall audits.

Apple said its agents performed 28 “surprise audits” of plants but didn’t detail what they discovered.

For the second consecutive year, some Apple shareholders have proposed resolutions for the Feb. 27 annual meeting to establish a human rights committee of the board to deal with labor practices. Chairman Arthur Levinson urged them to once again reject it, saying the Fair Labor Association audits are sufficient.

Shares of Apple fell as much as 3 percent Friday, sliding again following Wednesday’s lower-than-expected forecast for current quarter earnings. They closed at $439.88, down $10.62 . Shares of Hon Hai rose 1 percent in Taipei trading.