Lucky Brand has agreed to make a $500,000 “humanitarian contribution” to the former employees of Industrial Hana, a garment factory in Guatemala that produced goods for the denim-focused company until its abrupt closure in October 2023.
It’s a move that labor campaigners are hailing as a major win, not least because Industrial Hana’s relationship to big companies like Lucky Brand was less than clear-cut. As with American Eagle Outfitters and Puma, the facility was a subcontractor to one of Lucky Brand’s direct suppliers. None of the brands said they authorized—or even knew about—the outsourcing of their orders. Until recently, Sparc Group, the strategic partnership that includes Lucky Brand owner Authentic Brands, questioned the limits of its liability. Sparc Group and JCPenney have since merged to form Catalyst Brands.
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For Industrial Hana’s nearly 250 workers, however, their sudden unemployment had cast them into a reality they were wholly unprepared to confront. The single owner of the facility, Sun Kyou Lee, also known to them as Jesus Lee, had absconded without any forwarding information. Deprived of $1.5 million in severance that they were legally owed, workers found themselves unable to pay for school fees, food, rent, medical care or any debts they had incurred because of their low-wage work.
Last November, following months of engagement with the Worker Rights Consortium, the labor rights organization also known as WRC, both American Eagle Outfitters and Puma each arranged to cover a $500,000 share of the missing $1.5 million. In Puma’s case, it ensured that the supplier with which it had originally placed its orders took responsibility. With Lucky Brand’s contribution, workers say they have a fighting chance at starting over. Many of them are older women who are less likely to find a job at another garment factory because of their age.
“When you see announcements for factories that are hiring, they are asking for workers who are between the ages of 18 and 25,” said Karen, using a pseudonym, who had toiled over a heat transfer label machine making clothing labels for 13 years. Now 42, she singlehandedly raises her eight-year-old daughter and an equally young niece and is the sole caretaker of her diabetic 71-year-old mother. With little savings, Karen struggled to support those under her care. With the money, she hopes to start her own business selling snack foods. “I am going to be more at peace now,” she said.
A spokesperson for Catalyst Brands, which formed in January, said that the new conglomerate strives to “promote a culture of integrity and legal compliance.” It “expects our suppliers to share our values and ethical commitments,” the person said. “We respect and value the workers who support our business and are pleased to have a successful resolution for the workers in Guatemala.”
Tara Mathur, WRC’s field director for the Americas, said that “winds are shifting” on the way that brands are responding when a violation occurs in a subcontracted facility. Few laws lay out the extent of their accountability and certainly not in Guatemala. California’s Garment Worker Protection Act, signed into law in 2021, stands apart in holding so-called brand guarantors in the state jointly liable for unpaid compensation no matter how many layers of subcontracting might feasibly separate it from the offending manufacturer. The lack of broader regulation is why so many companies use unauthorized subcontracting to “dodge accountability,” she said, citing Nike as one example.
“When workers are denied what they have earned over many years, brands should abide by their own commitments to ensure payment of compensation is swift and in full,” Mathur said. “If codes of conduct exist to ensure justice for workers, compliance with legal standards is the very minimum action that brands should take to uphold those codes.”
The actions taken by American Eagle Outfitters, Puma and now Lucky Brand send an important message to other workers that “justice is possible,” she added. “What they have done by taking responsibility for this serious violation at their subcontracted supplier should be the industry norm.” Mathur compared the “utterly transformative” effect the compensation will have on Industrial Hana’s workers compared with their Cambodian counterparts at Violet Apparel factory, which shuttered in after a Covid-induced slump in orders and whose “pain is prolonged, and their only option is to fight, beg and plead to be treated with dignity.”
“This case builds on the growing precedent that no matter the how convoluted the ownership structure or layers of subcontracting, brands are ultimately responsible for the consequences of their purchasing practices,” said Kesi Foster, co-executive director at Partners for Dignity & Rights, a human rights advocacy group based in New York City. But more than that, the win is “another example of the power of international solidarity between workers in supply chains and advocates in consumer countries.”
“In the face of increased global uncertainty, it’s more critical than ever for working people across borders to unite against corporate impunity,” Foster said.
For Anna, also using a pseudonym, the cash infusion means she no longer has to worry about being evicted from the small room where she and her four children, aged between four and 14, live. They were already living hand to mouth before Industrial Hana permanently closed its gates, ending her decadelong tenure, she said. For two years, the 33-year-old sewing operator didn’t have enough money to fill her family’s bellies and fend off the debt collectors at the same time.
“I had to use the first payment we received [from American Eagle Outfitters and Puma] to pay off debts. Now I will have enough money to buy food for our family and pay for other expenses,” Elizabeth said. “I paid the down payment for my house and have continued to make payments, and one day our little house will belong to us. The truth is that I am very happy.”
