Terms of Engagement Guidebook Revised 02-22-08.doc

Kohl s Terms of Engagement Guidebook Table of Contents KOHL S TERMS OF ENGAGEMENT GUIDEBOOK Provision 1 Wages and Benefits3 Critical Benchmarks3 Compliance Tips Wages and Benefits3 Indicators of Noncompliance3 Good Management Practices3 Provision 2 Working Hours3 Critical Benchmarks3 Compliance Tips Hours of Work3 Indicators of Noncompliance3 Good Management Practices3 Provision 3 Child Labor3 Critical Benchmarks3 Apprentice Programs3 Compliance Tips Child Labor3 Indicators of Noncompliance3 Good Management Practices3 Provision 4 Forced Labor3 Critical Benchmarks3 Compliance Tips Forced Labor3 Indicators of Noncompliance3 Good Management Practices3 Provision 5 Discrimination3 Critical Benchmarks3 Compliance Tips Nondiscrimination3 Indicators of Noncompliance3 Good Management Practices3 Provision 6 Free Association3 Critical Benchmarks3 Compliance Tips Freedom of Association3 Indicators of Noncompliance3 Good Management Practices3 Provision 7 Disciplinary Practices3 Critical Benchmarks3 Compliance Tips Harassment or Abuse3 Indicators of Noncompliance3 Good Management Practices3 Provision 8 Women s Rights3 Critical Benchmarks3 Compliance Tips Women s Rights3 Indicators of Noncompliance3 Provision 9 Health and Safety3 Critical Benchmarks3 Compliance Tips Health and Safety3 Indicators of Noncompliance3 Good Management Practices3 Provision 10 Laws and Regulations3 Critical Benchmarks3 Compliance Tips3 Indicators of Noncompliance3 Good Management Practices3 Provision 11 Ethical Standards3 Critical Benchmarks3 Quick Compliance Tips3 Good Management Practices3 Provision 12 Environmental Requirements3 Critical Benchmarks3 Provision 13 Communication3 Critical Benchmarks3 Compliance Tips3 Indicators of Noncompliance3 Good Management Practices3 Provision 14 Monitoring record Keeping3 Critical Benchmarks3 Indicators of Noncompliance3 Provision 15 Subcontracting3 Critical Benchmarks3 Indicators of Noncompliance3 Provision 16 Corrective Action3 Critical Benchmarks3 Appendix Environment Health and Safety Checklist3 P R O V I S I O N 1 W A G E S A N D B E N E F I T S Kohl s Business Partners must pay workers wages and legally mandated benefits that comply with the higher of a any applicable law or b to match the prevailing local manufacturing or industry practices In addition to their compensation for regular hours of work workers shall be compensated for overtime hours at such premium rates as are legally required or in those countries where such laws do not exist at least equal to their regular hourly wage Kohl s recognizes that wages are essential to meet workers basic needs Kohl s will seek and favor Business Partners who are committed to the betterment of wages and benefits within their facilities CRITICAL BENCHMARKS The above code provision governing wages and benefits to factory workers clearly stipulates that All workers are paid not less than the legal minimum wage applicable in the country of manufacture Where there are established wages that are higher than the minimum wages established by law factory workers should receive the higher industry wage In addition to wages for the standard workweek workers must be compensated for overtime hours at the legally mandated premium rates or where such rates do not exist payment for overtime hours must be equal to the regular hourly wage As well as properly compensating workers for all hours worked factory workers should receive all statuatory benefits mandated by law While we understand the difficulties in accurately assessing whether wage rates are adequate to meet worker s basic needs for food clothing shelter education utilities transportation child care health care and savings Kohl s believes that it is paramount for our business partners to work towards improving wages and the quality of benefits provided to ensure that they meet worker s basic needs COMPLIANCE TIPS WAGES AND BENEFITS Review a random sample of payroll records and look for the lowest pay totals to ensure all mandated pay and benefits are provided Review timesheets or other records to ensure that workers wages are being calculated accurately and if they have received compensation for leave taken Determine how workers time on the job is recorded and that it is recorded accurately i e working time clocks valid log in sheets production records Kohl s Terms of Engagement Guidebook2 Find out whether workers know how their pay is calculated and review evidence that workers are given information relating to wages in an understandable form Assess the impact of the production system on pay ensure that production targets don t drag workers below the legal minimum Determine if women workers are allowed to take maternity leave through interviews and payroll review Determine if workers are provided with required insurance s Determine if social security and other contributions have been made INDICATORS OF NONCOMPLIANCE Falsified pay records Nonpayment or late payment of wages Minimum wage and overtime violations Miscalculation of wages Miscalculation of benefits Illegal or unauthorized wage deductions Compensation not paid directly to workers Failure to provide employer employee mandated benefits Failure to pay employee mandated withholdings to the appropriate government agency No pay stubs provided to workers Incomplete payroll records GOOD MANAGEMENT PRACTICES The factory pays workers above the minimum wage prescribed by law The factory pays workers above the legally mandated premium rate for overtime hours The factory provides bonuses for good production All workers get a detailed pay slip detailing all components No deductions for benefits provided such as free meals Worker education programs are provided Workers are encouraged through surveys to suggest changes improvements in benefits All tools equipment and uniform required by the worker to perform their job must be provided to the worker at no charge Kohl s Terms of Engagement Guidebook3 P R O V I S I O N 2 W O R K I N G H O U R S Kohl s expects its Business Partners to operate based on prevailing local work hours Except in extraordinary circumstances Business Partners shall limit the number of hours that workers may work on a regularly scheduled basis to the legal limit on regular and overtime hours established by local laws and regulations in the jurisdiction in which they manufacture Subject to the requirements of local law a regularly scheduled workweek of no more than sixty 60 hours and one day off in every seven 7 day period is encouraged Partners will comply with applicable laws that entitle workers to vacation time leave periods and holidays Business Partners must regularly provide reasonable rest periods and one day off within a seven day period Any time worked over the norm for the area should be compensated as prescribed by the local labor laws Working hours must be recorded by an automated timekeeping system Whenever a worker is present in a facility the worker s time must be recorded and the worker properly compensated This applies to both regular and overtime working hours and any time used for work preparations or repairs CRITICAL BENCHMARKS The above code provision on working hours requires that all Kohl s business partners Not establish a regular weekly work schedule beyond the local legal limit on regular working hours Provide at least one 24 hour rest period each week and limit work beyond local legal limit or 7 days of work to situations where the additional hours are due to extraordinary circumstances Ensure that workers are given advance notice that overtime hours may be necessary Provide overtime compensation at the rate required by local law for all workers including piece rate workers COMPLIANCE TIPS HOURS OF WORK Review system for recording time worked to ensure that time is recorded accurately and completely Interview workers to determine if they are knowledgeable about the factory s overtime policies Kohl s Terms of Engagement Guidebook4 Review production records and capabilities to assess the factory s ability to avoid excessive overtime INDICATORS OF NONCOMPLIANCE Falsified time records Missing incomplete or no time records Non payment for actual time worked work done off the clock Excessive overtime on a regular basis in excess of law or code Not providing legally mandated rest day s holiday s and vacation day s Denial of mandated meal and rest breaks Termination or discipline of workers not willing to work overtime hours Broken time clock GOOD MANAGEMENT PRACTICES The factory maintains an accounting system that ensures that all workers are paid for overtime in accordance with the premium pay The factory ensures that piece rate workers in particular are aware of the requirement that they be paid a premium rate for overtime work The factory is conscious of capacity restraints therefore limiting overtime hours worked Employees are provided with pay slips that clearly indicate overtime hours and overtime compensation Kohl s Terms of Engagement Guidebook5 P R O V I S I O N 3 C H I L D L A B O R Use of child labor is strictly prohibited Business partners must observe all legal requirements for the work of authorized minors particularly those relating to hours of work wages minimum education and working conditions Kohl s supports the development of legitimate workplace apprentice programs and Business Partners will be expected to comply with all laws and regulations applicable to such apprenticeship programs Child is defined as a person who is younger than 15 or 14 where the law of that country permits or younger than the age for completing compulsory education in the country where such age is higher than 15 Kohl s will not utilize Business Partners who use or permit the use of child labor in any of their facilities CRITICAL BENCHMARKS The above code provision on child labor stipulates that business partners focus on three issues 1 Minimum working age of 15 or 14 if set by local law 2 Legal requirements on the nature and extent of work of those under 18 must be followed 3 Apprentice programs as permitted by law must follow all legal regulations Applicable local laws governing the minimum working age If set at 14 then no one under 14 is permitted to work If the country has no minimum working age then no one under 15 may work in the factory Legal restrictions placed on young workers Many exporting countries place legal restrictions on the number of hours those between 16 and 18 can work These restrictions include the number of overtime hours performed by young workers For instance in Vietnam workers between the ages of 15 and 18 can not work more than seven hours per day 42 hours per week and must have parental permission Young workers in many countries are also barred from performing certain types of work such as hazardous work night work and overtime work Kohl s Terms of Engagement Guidebook6 APPRENTICE PROGRAMS Apprentice programs are regulated by law in most countries with specific limits on number of hours worked duration of training period and number of times the same worker can be classified as a trainee In some cases for the period of training apprentice programs payment is legally below minimum wage Limits on duration of training period must be strictly followed and wages must be raised to normal pay rates at the end of the training period COMPLIANCE TIPS CHILD LABOR Know all local child labor laws and regulations and check against the Kohl s Terms of Engagement Check for reliable proof of age and ensure that a copy of the relevant document is kept on file Note that such information is often falsified by young people seeking work Inquire into hiring practices to see how age is verified before a worker is hired If applicable verify that workers who are minors are not performing work that is hazardous in nature Determine if workers who are minors are working the legally specified number of hours Determine whether the factory tracks the nature and volume of work performed by minors Know all local laws on trainees and apprentices and verify against the Kohl s Terms of Engagement on child labor Determine if workers are kept on trainee wages beyond legally specified durations INDICATORS OF NONCOMPLIANCE Use of workers below the legal age of employment or Kohl s Code Provision of 15 Missing proof of age documentation for young looking workers Children present in the factory but not working e g except in approved separated child care facilities Legal young workers not working within the appropriate conditions of employment e g working hours overtime hours working within school hours working under hazardous conditions etc Record review indicates Historical Child Labor e g workers hired prior to legal working age Incomplete or missing age documentation records verifying the age of all employees when workers appear to be of lawful age within the facility GOOD MANAGEMENT PRACTICES The age of each worker is verified prior to his or her employment The factory ensures that minors are not performing hazardous work The factory ensures that minors are working within the legally specified number of hours The factory creates production line s with young workers with limited hours and non hazardous duties The factory has a clear program for hiring training and promoting apprentices Kohl s Terms of Engagement Guidebook7 P R O V I S I O N 4 F O R C E D L A B O R Business partners will not use or permit the use of bonded labor indentured labor prison labor or forced labor in the manufacture or finishing of products ordered by Kohl s Nor will Kohl s knowingly purchase materials from a Business Partner utilizing bonded labor indentured labor prison labor or forced labor Forced labor is defined as any work or service which is extracted from any person under the threat of penalty for it s non performance and for which the worker does not offer himself voluntarily CRITICAL BENCHMARKS The above code provision bans forced labor in any form by business partners The code provision explicitly prohibits prison labor indentured labor and bonded labor Forced or prison labor Forced or prison workers are prohibited from employment in Kohl s vendor facility if they are forced to work by the state or the military as a requirement of the sentence and without compensation The issue of forced or prison labor occurs most often where the factory is using a government or military controlled or affiliated agency to provide or arrange for the hiring of workers Forced or prison labor may also be present in circumstances where the business partner is either controlled by or affiliated with the military or the government Indentured and bonded Labor Indentured labor refers to work by an employer who forbids workers from leaving employment at the worker s discretion Bonded labor refers to work for an employer not for compensation received by the worker but to pay off a debt which is often incurred by another person offering the worker s labor in exchange Still prevalent in parts of South Asia young children are also forced to take on the burden of repayment of debt through labor Other forms of forced labor Includes situations in which labor contracts create unreasonable legal or practical limitations on a worker s ability to leave his her employment Such instances include employers keeping worker identification documents payment of excessive fees upon entering employment or the requirement that workers pay a penalty upon termination of the contract Consistent excessive overtime is also considered forced labor in some cases If workers exceed normal working hours including overtime limits more than a quarter or one third of the time this could be considered forced labor Kohl s Terms of Engagement Guidebook8 COMPLIANCE TIPS FORCED LABOR Review hiring practices to determine the source of labor and terms of hiring including labor contracts Inquire into the existence of labor contracts that a hiring agent may use to limit the workers ability to voluntarily terminate their employment Ensure that the workers are free to leave the manufacturing site in off hours Verify that identification papers are not withheld from employees migrant workers are especially vulnerable in this regard Ensure that workers are aware of compensation practices and are being compensated directly Determine whether sub contractors take steps to ensure compliance with the ban on forced labor INDICATORS OF NONCOMPLIANCE Any type of prison bonded indentured or forced labor Excessive mandatory non voluntary overtime required Workers are prohibited from leaving the factory or dormitory during certain times Unreasonable restrictions on movement Unreasonable restrictions placed on basic liberties e g bathroom drinking water use of infirmary etc Withholding of government issued identification passports or work permits with or without employee consent Refusal to permit use of external medical facilities when on site infirmaries exist GOOD MANAGEMENT PRACTICES Factory hiring practices and those of any labor recruiters follow Kohl s Terms of Engagement prohibiting forced labor Management eliminates all unreasonable restrictions placed on basic liberties and on the movement of workers Labor contracts do not contain provisions that violate the ban on forced labor including unreasonable recruitment fees or penalties for terminating employment Factory establishes a written set of instructions for all subcontractors and labor recruiters establishing the prohibition of forced labor and actively verifies compliance Government issued identification passports or work permits are not withheld from the employee Kohl s Terms of Engagement Guidebook9 P R O V I S I O N 5 D I S C R I M I N A T I O N While Kohl s recognizes and respects cultural differences employment hiring wages benefits advancement termination and retirement shall be based on the worker s ability and not on personal characteristics Kohl s believes that workers should be employed on the basis of their ability to do th