The University of Wisconsin-Madison canceled its licensing agreement with Nike Inc. on Friday, becoming the first university to take that step over concerns about the company's treatment of workers in Honduras.
Chancellor Biddy Martin said Nike hasn't done enough to help workers at two factories that abruptly closed last year to collect severance payments they are owed.
"Nike has not developed, and does not intend to develop, meaningful ways of addressing the plight of displaced workers and their families in Honduras," Martin said. "It has not presented clear long-range plans to prevent or respond to similar problems in the future. For this combination of reasons, we have decided to end our relationship for now."
Nike expressed disappointment with the university's decision in a statement released Friday evening, while noting the factories were operated by subcontractors. Under Nike policy, subcontractors are responsible for compensation of their employees.
UW-Madison's code of conduct requires the 500 companies that make products bearing its name or logos to take responsibility for the subcontractors' actions. Its contract with Nike generated $49,000 in royalty income for the university last year.
Nike said no Wisconsin-branded products were made at the two Honduras factories.
"We have been engaged with the University of Wisconsin-Madison over the past few months while working with stakeholders in Honduras to better understand the particular issues facing the former workers," Nike's statement said.
Anti-sweatshop activists said they hoped Wisconsin's decision would resonate at several other universities across the country where students are pushing for similar actions and put pressure on Nike to fix the Honduras situation.
"It's a major, major victory nationally," said Jonah Zinn, 19, a University of Wisconsin-Madison sophomore who was part of a student campaign urging Martin to cancel the contract. "We're hoping that our victory here really propels them forward and pushes those universities to make the right decision."
Nike hired the factories, located in Choloma and San Pedro Sula, as suppliers to produce apparel. They closed without notice in January 2009 with the workers being owed $2.6 million in severance payments required under Honduran law.
Nike has offered to provide job training and give workers priority for jobs at nearby factories. But the Worker Rights Consortium, a labor rights watchdog, told college leaders in a report last month the company's response has been insufficient.
The consortium says roughly 1,800 workers are still owed $2.2 million, most of them are still without jobs and many are in need of food and money. It alleged the factory owners also had stopped paying into Honduras' national health care system and pocketed the deductions instead, which cost workers their health insurance.
"This all happened on Nike's watch and Nike has failed to take any meaningful corrective action after it was exposed," said Scott Nova, executive director of the group. "There is no question Nike failed to protect the rights of the workers at these two factories and in so doing violated university labor standards."
Martin had written to Nike in November asking for a plan to remedy the situation, and then in December gave the company 120 days to make progress. Discussions continued, but she said they reached an impasse.
The university's Labor Licensing Policy Committee had recommended Martin end the contract. The Student Labor Action Coalition also had been pressuring her to cut ties, rallying outside her office Thursday as the 120-day window expired.
Nova said UW-Madison has long been a leader on labor rights issues. The university canceled its relationship with Russell Athletic last year over concerns about the treatment of workers in Honduras, and in 2008 cut ties with New Era Cap Co. over allegations of discrimination and anti-union activity at a factory.
University official Dawn Crim said both companies have since improved their labor practices, and were in the process of being reinstated as licensees.
UW-Madison is the first university to ever cut ties with Nike over labor rights issues, according to United Students Against Sweatshops.
In 2007, though, UW-Madison declined to cut its $1.2 million-per-year contract with Adidas AG after a subcontractor closed a factory in El Salvador without giving $825,000 in severance pay to laid-off workers. In that instance, then-Chancellor John Wiley said it was better to pressure the company to try to remedy the situation.
Crim rejected comparisons between the Nike and Adidas cases Friday, saying Adidas had done more to help the workers.
"It's not about the money. If it was about the money, why would we end this contract?" she said. "We are just trying to do the right thing."
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