December 20, 2005
Verite Report Identifies Exploitation of Foreign Contract Laborers in Asia and the Middle East
by William Baue
The report uncovers placement fees that exceed legal limits, forced overtime, loans with interest
rates of up to 60 percent, and so-called runaway insurance deposits that are not refunded.
As you gift-shop this holiday season, imagine if labels said not only "Made in Taiwan" but also
added "by foreign contract workers who must take out loans with up to 60 percent interest rates and
work forced overtime to pay 'runaway' insurance and placement fees exceeding legal limits." A new
report from Verité, a Massachusetts-based watchdog that
monitors labor conditions globally, documents this dire plight of foreign contract laborers, or
those hired to work outside their homeland by third-party labor brokers promising great financial
"What our report confirms is that the promise of financial rewards is an
empty one," said Dan Viederman, executive director of Verité. "These workers are victimized
throughout the entire system: by the brokers that place them in jobs, by the factory managers who
don't provide them with adequate wages or safe working conditions, and by the legal systems that
discriminate against them."
The report, entitled Protecting Overseas Workers: Research
Findings and Strategic Perspectives on Labor Protections for Foreign Contract Workers in Asia and
the Middle East, draws on Verité's experiences from performing over 1,500 factory audits in
over 60 countries.
"Through these experiences, Verité has witnessed a clear pattern of
abuse and exploitation that correlates with such foreign contract labor status," the report states.
For the report itself, Verité conducted interviews between June and November 2004 with 150
foreign contract laborers (equal numbers of men and women) doing blue-collar work in countries such
as Taiwan, Malaysia, and Jordan. The interviews took place when they had returned to their home
countries of the Philippines, Indonesia, Thailand, and Vietnam after contracts of at least a year.
The report attempts to compensate for potential methodological weaknesses, including the
nonrandom selection process and the difficulty of validating self-reported information, by
consciously advancing a conservative analysis. It also triangulates findings with document
research and consultations with legal experts.
"Workers interviewed by Verité for this
project demonstrated a lack of awareness concerning, first, the terms of loans they entered into
before departure; second, the true conditions of their employment abroad--including type of work,
safety, overtime, living conditions, exchange rate, and freedom of movement; and third, 'runaway
insurance' withholdings," the report states. "This lack of understanding turns to shock and
surprise when workers arrive at their destination."
Specifically, the report finds that
"placement" (or "recruitment") fees charged by private labor brokers commonly exceed legal limits
and also account for a large portion of workers' earnings, thus representing a significant
financial burden. While laws in Thailand and the Philippines stipulate that such fees should not
exceed one month's salary, they amounted to 4.8 months of salary in Thailand and 4.4 months in the
To finance these excessively high placement fees, foreign contract laborer
candidates often must take out loans that are onerous in themselves, adding additional financial
burden. Verité interviewed workers who took out loans with interest rates as high as 60 percent in
Thailand, with payment periods as short as one month.
Furthermore, while the Philippines
outlaws "manpower pooling," or contracting workers before securing jobs for them, the report found
that it is commonly practiced there.
"Some Filipino workers interviewed also stated that
labor brokers required them to sign more than one work contract," the report states. "One contract
contained the actual job title and salary the worker agreed to, and another with better conditions
and provisions was submitted to the relevant government agency."
Ironically, labor brokers
allow themselves latitude to hire laborers without jobs for them yet, but do not allow laborers
similar latitude--they prohibit workers from shopping their services to multiple brokers in order
to secure the highest price for their labor. The report illustrates such phenomena with specific
"Rafiq, an Indonesian migrant worker, signed a contract with a recruitment
agency to work as an operator of waste management machines in Malaysia," the report reads. "When
he arrived in Malaysia, Rafiq discovered that both the type of work and the salary were different
than what was stated in his contract."
"He was also required to work overtime without
compensation," the report continues. "While Rafiq understood he was being exploited, he felt he
was without any other options."
Foreign contract laborer systematically disenfranchises
Rafiq and his peers, whose labor is literally exploited by constraining their workers' rights. For
example, brokers require laborers to pay surety bonds as an upfront deposit to prevent illegal
immigration, but this so-called "runaway insurance" also prevents them from leaving abusive jobs
for fear of forfeiting the deposit. Sadly, the report also finds that many brokers refuse to
return the deposit even when laborers fulfill their obligations.
workers, only nine percent of surveyed workers who reported surety bond deductions received a full
refund, with 21 percent receiving a portion and 35 percent receiving nothing at all," the report
The report concludes with a set of recommendations, including all countries (both
those sending and those receiving foreign contract laborers) to sign the UN Convention on Migrant Workers.
"Multinational corporations also have a role to play in requiring the full extension of Code of
Conduct provisions to foreign contract workers in their supply chains, and in working with
factories that use foreign contract workers to raise awareness about the particular vulnerabilities
of this worker population," the report concludes.