Audit findings

Challenges. In Malaysia, foreign workers are hired directly or through labor agencies in Bangladesh, India, Indonesia, Myanmar, Nepal and Vietnam. These workers are more vulnerable to unfair treatment because they are unfamiliar with local laws and regulations. The media has reported instances of these workers being subjected to harsh conditions in Malaysia. Ensuring proper working conditions for all workers is a key focus of our audits.

HP's response. We focus our audits to minimize discrimination and bonded or forced labor. We aim to ensure that foreign workers are paid appropriately and treated fairly. This includes opening clear lines of communication to garner worker feedback and encouraging worker-company communication sessions to ensure language barriers are not an issue. We also check that foreign workers’ concerns are being considered by employers. Part of our country-specific EICC training was dedicated to educating our suppliers about forced or bonded labor.

Working hours

Challenges. As reported last year, mandatory overtime in Thailand continues to be an issue. HP’s code dictates a maximum 60-hour working week. However, Thai law permits an 84-hour week. Incidents of reprisal against workers refusing overtime continue to be reported.

While some factories still require workers to put in overtime, the economic crisis has led to several others decreasing their weekly hour requirements, so much so that some face idle days when workers are not required. Ensuring that workers are paid according to local requirements for these idle days is difficult. Moreover, some of our sub-tier suppliers use sub-contractor workers. As economic conditions deteriorate, these workers are generally the first to be laid off, with little or no compensation for their service.

HP's response. After we recognized this issue, we re-audited several factories in 2008 to check progress. At many, workers can now refuse overtime without reprisal at the end of a regular eight-hour workday. Several factories also implemented controls that ensure workers have one rest day per week.

The issue of payment for workers placed on short time due to the global economic downturn is difficult for HP to address. Where local regulations require payments to be made, we will engage with management and local government to protect workers’ rights.

Pregnancy testing

Challenges. In 2007, audits uncovered evidence that some factories carried out pregnancy tests prior to employment, believing that the manufacturing processes for hard-disk drives could harm pregnant women. These tests were often used as a reason not to hire women, rather than to ensure safe placement in an appropriate job.

HP's response. Following our efforts to address this issue, pregnancy testing has been removed from most pre-employment health checks. Some factories, however, insist on conducting pregnancy tests to ensure pregnant women are placed in the most appropriate job. These tests are only conducted after the workers have been employed.

Challenges. The shortage of labor and high turnover rate experienced by suppliers in the first half of 2008 meant that excessive working hours continued to be a challenge for suppliers in China. It is uncertain that the shortage of labor will continue to be a problem in 2009 as the global recession reduces demand.

HP's response. Through HP’s Focused Improvement Supplier Initiative (FISI), we have addressed overtime issues by helping suppliers communicate better with workers, become more productive and build capability in human resources management.

New labor contract law

Challenges. A new labor contract law was introduced in 2008, resulting in many workers being unclear about their new rights, particularly regarding contract terms such as probation periods, wages and enrollment in social insurance.

HP's response. We believe effective grievance procedures and worker training will help workers understand labor rights. HP has helped suppliers’ management develop these programs through our FISI training for several years. Additionally, in 2008 we carried out two pilot worker training programs with SACOM and its training partner, and the Labor Education Service Network.

Emergency preparedness

Challenges. Fire safety preparedness was lacking in several of our suppliers’ facilities. We believe that an increased focus on monitoring the environmental performance of suppliers, such as industrial waste handling and compliance with environmental requirements, has led to some suppliers neglecting safety issues.

HP's response. HP introduced fire safety criteria into our SER audit program in 2008. In 2009, we are launching a training initiative to equip suppliers with the professional and practical knowledge to implement fire prevention programs.

Challenges. Central European factories are hiring workers from Bulgaria, Mongolia, Romania, Slovakia, Ukraine and Vietnam, with the trend to fill these positions using labor agencies continuing.

HP's response. The language barriers and cultural differences resulting from labor migration discovered in previous years have been reduced through concerted action by suppliers. Many have already implemented programs to educate migrant workers about their rights and entitlement to benefits, and to monitor practices of the labor agencies that employ them.

Our engagement with the Danish Commerce and Companies Agency on Small Suppliers in Global Supply Chains and our focus on encouraging SER requirements throughout the supply chain helped suppliers tackle these challenges.

Challenges. As a result of fierce competition, the need for manufacturing flexibility, and the pressure to reduce cost and increase productivity, suppliers continue to use labor agencies to source workers on short-term contracts.

The chief challenge for 2009 will be reducing the impact of the global economic crisis affecting Mexico’s labor market.

HP's response. HP makes clear to its suppliers that during the economic downturn our requirements on labor and the environment remain in place.

HP’s work on ensuring adherence to the EICC continues to mitigate these challenges. Through our membership in CANIETI, we are working with CADELEC, a nonprofit private organization responsible for supply chain development, to implement a qualification process for all labor agencies that have business with the information and communications technology (ICT) sector. We work closely with NGOs to monitor workers’ rights and prevent any violations, sharing best practices and success stories among all organizations involved.