Author: GT. Lalitha Kumari, Sastra Deemed University

The case study focuses on the labor infractions uncovered at Pegatron Corporation, a significant supplier to Apple located in China. It delves into the various aspects of human rights violations connected to the recruitment of students as workers, violations of overtime regulations, and concerns over safety in the workplace, as well as the scrutiny of Apple's corporate oversight. The case underscores not only the difficulties faced by multinational companies in maintaining compliance with labor standards across borders but also the general questioning of the concepts of accountability, corporate social responsibility, and adherence to international human rights standards. The study intends to evaluate the efficiency and effectiveness of Apple's corporate policies and monitoring systems in place for preventing labor rights violations at Pegatron, and the subsequent drawing of wider implications for the responsible management of the supply chain.

Keywords

Labour Violations, Supply Chain, Human Rights, Corporate Oversight, Pegatron, Student Workers

Pegatron Corporation is a Taiwanese company that makes electronics and assembles Apple products such as iPhones. In 2020, a number of media outlets and NGOs opened up their investigations revealing that Pegatron's factories in China were plagued with systemic labour violations such as student workers being illegally deployed in full-time production roles, long working hours, inadequate health and safety measures, and falsification of records to cover up these abuses. Such disclosures led to Apple putting a halt on the new business with Pegatron for a time and starting their own investigations into what was going on in the suppliers' practices. The disagreement brings to the forefront the issues about the limitations of corporate codes of conduct in controlling the labor conditions in the complex, subcontracted manufacturing processes in the global south that are becoming a growing concern.

1. In the year 2020, reports came out that Pegatron had students among their workers who were actually unpaid interns that were forced to work long hours breaking the law. 

2. Workers at the factory said that they had been working more than 11 hours a day and that forced overtime was going on for six or seven days a week, which was a direct violation of Chinese labor laws and Apple’s Supplier Code of Conduct. 

3. When the investigations were conducted, one of the findings was the existence of manipulations in the employment records and safety violations that included poor emergency exits and not enough protective gear.

 4. Among the violations, Apple was the one to publicly admit it, thus, placing Pegatron under probation, stopping new contracts, and promising to conduct more audits and take corrective actions for its part. 

5. Investigation of the situation painted a picture of the same kind of violations happening over and over again even with the presence of Apple’s oversight mechanisms, thus, revealing the deep-rooted problems of supply chain governance and enforcement.

1. Chinese Labour Law (1994) and associated regulations set clear limits on working hours, mandate written employment contracts, prohibit forced labour, and require safe working conditions.​

2. The Apple Supplier Code of Conduct, based on international labour standards including ILO Conventions, mandates compliance with local laws, bans child and forced labour, restricts overtime, and requires health and safety compliance.​

3. UN Guiding Principles on Business and Human Rights (UNGPs) provide an overarching framework obligating companies to respect human rights throughout their operations and supply chains, encompassing due diligence and remediation.​

4. International Labour Organization (ILO) standards relevant here include Conventions No. 138 (minimum age), No. 1 (working hours), and No. 155 (occupational safety and health)

1. It is still unclear whether Pegatron did break the laws in China and the international standards concerning child labor, working hours and workplace safety. 

2. The corporate oversight mechanisms of Apple including the monitoring, due diligence and supplier compliance enforcement were adequate and effective.

3.  The expected duties of multinational corporations concerning the labour rights violation prevention and remedy in the global supply chains. 

4. Challenges in the detection, reporting, and addressing of concealed violations like false records and the use of forced student labor. 

5. Wider ramifications for the corporate social responsibility and human rights due diligence issues in the electronics manufacturing sectors.

After the world's media and NGOs carried out their investigations, Apple decided to put a freeze on any new business contact with Pegatron, waiting for the outcome of a comprehensive audit in November 2020. Apple’s internal investigations corroborated numerous violations of their Supplier Code of Conduct, especially regarding the abuse of student labor and the imposition of long shifts. The company subjected Pegatron to a probation period, required the implementation of corrective action plans, increased the number of factory audits, and rolled out improved supplier monitoring initiatives.

There have been no reports of Pegatron being involved in any formal legal proceedings in courts, but the case has caused a great deal of regulatory and reputational damage to Apple. Apple's public statements and gradual audit transparency reports have signaled its commitments to continuous improvement and supplier accountability. However, third-party audits and observer reports suggest that it is still hard to establish sustainable compliance mechanisms in highly subcontracted and competitive manufacturing areas

The Pegatron labor violations case is a vivid illustration of the never-ending battle that the major global companies have to fight in controlling their extensive and intricate supply chains. Apple, with its Supplier Code of Conduct that is hard to break, still faced a high-profile issue of violations in its labs, and a still-active criticism that the compliance-based strategy was wrong as it was based on the supplier’s self-reporting and factory visits.

 Apple's downside of Pegatron and the public disclosure of it are quite significant in the case of so-called "three" and "two" but prohibit the gaps of structural governance to be enacted. The existence of student labor abuse and overtime violations is indicative of business pressure being applied systematically that translates into incentivizing cutting costs and illegality at supplier factories.

 This case is a strong argument for human rights-based business practices to be integrated into the models, as it asks for an entire system change not just auditing, but also that worker empowerment, grievance mechanism and the like play a major role in this. Besides, it also indicates that domestic law enforcement in the supplier countries is to be used as a corporate effort complement.

The Pegatron case has had a huge impact on the public opinion concerning corporate responsibility within global suppliers and the comparison between the voluntary codes and binding regulations. It has also made Apple and other tech companies reconsider their accountability measures for suppliers, thus investing in new tech solutions and forming partnerships to discover exploitation practices.

 Moreover, the case gave rise to the awareness of the consumers and investors concerning the working conditions associated with the most popular electronics. As a result, it affected the criteria of socially responsible investment as well as consumer protests. In terms of policy, it reinforces human rights due diligence legislation in the jurisdictions such as the European Union and the United States. The case demonstrates the difficulties of striking a balance between competitive manufacturing and responsible business practices in globalized industries.

Apple's supplier Pegatron is a case of labor violations that uncover human rights risks in the electronics supply chain and corporate control limitations that depend on audits and voluntary compliance. Apple's reactive measures like supplier probation and more thorough audits show that the company is committed to changing the situation, but systemic pressures and governance gaps keep the risk of labor abuses alive especially in the case of vulnerable youth and excessive overtime. 

Worker protection that makes a difference is possible only through joint efforts of all the stakeholders combining corporate due diligence with active domestic enforcement, worker participation, transparent reporting and binding regulatory frameworks. The Pegatron case has been a very important lesson for multinational companies and government regulators who want to make sure that they have ethical supply chains in a globalized economy

1. CNN, BBC, Reuters, Business & Human Rights reports on Pegatron labour violations (2020)

2. Apple Supplier Code of Conduct

3. Chinese Labour Law

4. UN Guiding Principles on Business and Human Rights

5. Relevant ILO conventions

6. NGO reports such as China Labor Watch and Electronics Watch

7. News articles from CNBC, The New York Times, and others cited above)