AGREEMENT REACHED IN FRUIT OF THE LOOM LABOR

UNCLAS SECTION 01 OF 03 TEGUCIGALPA 001211

SENSITIVE
SIPDIS

DEPARTMENT OF STATE FOR: SMORGAN
DEPARTMENT OF LABOR FOR: PAULA CHURCH

E.O. 12958: N/A
TAGS: EAID ELAB ETRD ECON BBSR EIND KDEM KTEX HO
SUBJECT: AGREEMENT REACHED IN FRUIT OF THE LOOM LABOR
DISPUTE

REF: TEGUCIGALPA 158


1. (SBU) Summary. An agreement was signed on November 14
between Fruit of the Loom's Russell Corporation (FOTL/RC) and
the SITRAJERZEESH union (SU) over the January closure of the
Jerzees de Honduras (JDH) factory in Choloma, Department of
Cortes. The agreement includes the rehiring of displaced
workers and reopening of the factory in January 2010. Both
sides of the negotiation expressed confidence that the
landmark agreement will be implemented fully and expressed
appreciation for the Embassy's support and assistance. The
union expressed concern over the issue of its registration
with the Ministry of Labor, however it appears that FOTL/RC
has agreed to work with the union despite delays in its
registration with authorities. End Summary.

The Negotiations
--------------


2. (SBU) Gladys Cisneros of the Solidarity Center in
Washington, DC told Poloff that a settlement agreement was
signed on November 14 to resolve the dispute between workers
FOTL/RC over the closure of JDH factory in Choloma,
Department of Cortes in January (ref A). Cisneros was at the
negotiating table with FOTL/RC representatives and union
representatives of SITRAJERZEESH Union (SU) and their parent
organization, General Workers Confederation (CGT). Cisneros
told Poloff that the agreement will lead to the reopening of
the factory under the name, Jerzees Nuevo Dia, and that
FOTL/RC agreed to rehire the workers that lost their job due
to the factory closure.


3. (SBU) Cisneros described the agreement as historic because
it recognized that JDH workers had lost their livelihood for
standing up for the right to organize guaranteed under local
and international laws. Cisneros congratulated both sides in
the negotiation for their willingness to take a step back and
see the needs of the other. Cisneros told Poloff specific
credit is due to FOTL/RC Vice President for Marketing Rick
Medlin and Evangelina Argueta of the CGT. Cisneros described
the successful agreement as a combination of good will on the
part of negotiators, but also consumer demands that products
be made in factories that respect the rights of workers to
organize. From the point of view of Cisneros, she believed
Medlin was "absolutely committed to the image of the
company," and for that reason took to heart what workers were
saying at the negotiating table.


4. (SBU) Poloff talked to Evangelina Argueta of the CGT on
November 18 regarding the negotiation of the agreement.
Argueta said that the CGT was very pleased with the outcome
and that she believed there was good faith on both sides
about the implementation of the agreement. Argueta expressed
appreciation to the Embassy for its assistance and support
since the JDH factory was closed.

The Details of the Agreement
--------------


5. (U) Cisneros told Poloff on November 23 that the text of
the agreement will not be released to the public, but that
one item she felt indicated the good will of FOTL/RC was the
condition that the immediate clean-up and work to reopen the
factory would be completed by fifty of the displaced workers.
Cisneros felt this indicated the willingness on both sides
to "pitch in together" in order to make the new factory
successful.


6. (U) The sides released a public document that outlines in
general terms the agreement. The points include the

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following:

--FOTL/RC agreed to establish a unionized apparel factory of
substantial size in Choloma, Honduras called "Jerzees Nuevo
Dia," which will employ former Jerzees de Honduras employees.
The SITRAJERZEESH Union (SU) will be the exclusive
representative of the workers at the new factory. The
company and union have also agreed to a process of good faith
collective bargaining.

--The company and union have agreed to cooperate on the
hiring of the former Jerzees de Honduras employees at the new
factory and at the company's other Honduran facilities. All
former JDH employees will be extended an offer and it is the
company's intent to complete this process within one year.

--The company and union have established a framework for
ensuring respect of the worker's freedom of association
rights in all company factories, including provisions
addressing training of workers through a join union-company
training program and union access to facilities.

--An oversight process has been developed to ensure the
success of the new relationship that includes an ombudsman to
monitor day to day issues and mediation where needed.

--The company has agreed to establish a workers welfare fund
to provide assistance to displaced workers and will
contribute a substantial amount to this fund. The money will
be distributed to workers by the Worker Rights Consortium,
the General Confederation of Workers, and the American Center
for International Labor Solidarity.

Challenges
--------------


7. (SBU) Cisneros told Poloff on November 23 that she
believed the biggest challenge for the implementation of the
agreement is the name change of the factory and that this
could impact the labor union's registration with the Ministry
of Labor. She said that FOTL/RC had agreed to recognize and
continue to negotiate with SU even if they were not formally
registered with the Ministry of Labor. She requested Embassy
assistance for the expeditious registration of the labor
union under the new factory name. Poloff explained the
Embassy's no contact policy due to the coup d'etat but said
that we would be willing to help as much as possible within
those guidelines.

Reaction by Fruit of the Loom/Russell Corporation
-------------- --------------


8. (SBU) Tony Belaski, Senior Vice President of Human
Resources for FOTL, Edward Vardales, Director of Human
Resources for Central America and Mexico, and Werner
Oberholzer, local plant manager in Choloma, discussed FOTL's
stance on the agreement with EconOff in a November 25
telephone call. Belaski, who was part of the negotiating
team, said that Fruit of the Loom was very pleased with the
outcome and sees it as a landmark agreement for
labor-management relations. Oberholzer added that other
firms operating in Honduras view this as a new model for
labor relations and may implement some of the measures if
they see them as providing long-term positive benefits for
Fruit of the Loom.


9. (SBU) Oberholzer stated that the factory is slated to
begin operating on January 4, 2010 and hopefully to be at
optimal production within six months. Preparations are
already underway, including moving machinery to the new

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facility. The plant was previously located in a leased
building one block away from the new building owned by FOTL.
Belaski added that they have already begun hiring back
members of the previous workforce and that sixteen members
are already on the payroll and handling the move-in
preparations.


10. (SBU) According to Belaski, FOTL plans to rehire 750
workers out of the 1400 displaced. Verdales noted that 400
workers already found other jobs through their workers
displacement center. Belaski said that they were not
rehiring the full 1400 workers because the general demand for
their products is lower now than when the previous factory
closed. In addition to reduced demand, Belaski cited
retailers maintaining lower inventory levels and the loss of
some university licensing agreements as other reasons why
they would not initially need the same size workforce as
previously. He did note that since the agreement was signed,
Arizona State University began the due diligence process to
sign a new licensing agreement with Fruit of the Loom and
that they are in talks with some of the other universities
with whom they had licensing agreements.


11. (SBU) Fruit of the Loom is planning on sending a
delegation from its corporate headquarters, including
Belaski, to Honduras in the first quarter of 2010. At that
time, they intend to meet with the newly installed Minister
of Labor and have also requested to meet with Embassy
officers. Furthermore, Belaski extended an invitation for
Embassy officers to accompany the delegation when it inspects
and tours its new facility in Choloma.

Comment
--------------


12. (U) This landmark agreement is an important step forward
for workers rights in Honduras; we will support the
agreement's implementation in any way we can. The agreement
is not only the first of its kind, but also received a high
level of media attention in the United States following very
public pressure by anti-sweatshop student groups. The mutual
respect and confidence expressed by both sides shows that the
probability of success for this agreement is high.

LLORENS