HIALPESA, Peru

On June 11, 2019, the Fair Labor Association (FLA) received a Third Party Complaint from the union Sindicato de Trabajadores de la Hilandería de Algodón Peruano S.A. concerning issues arising at the factory Hilandería de Algodón Peruano S.A. (HIALPESA) located in Lima, Peru, and specifically with regard to the suspension of the employment contracts of 190 workers in the spinning and knitting areas.  The union requested that the FLA investigate allegations that the collective suspensions constituted noncompliance with the FLA Workplace Code of Conduct and relevant Compliance Benchmarks.  Two FLA Participating Companies, ’47 Brand LLC and Burton Snowboards, source from the HIALPESA factory. 

The FLA accepted the Complaint at Step 2 of the Third Party Complaint process, and in turn commissioned independent consultant Ena Núñez O’Brien to conduct an investigation concerning the allegations raised in the Complaint.  The Terms of Reference entered into with the independent consultant set out the primary objectives for the investigation as well as key issues to be examined; these are also summarized in the front section (“Context and scope of the investigation”) of the report prepared by the investigator.

The investigator conducted a field investigation in Lima between August 12 and 16, 2019 pursuant to the regular Third Party Complaint process.  The report that she subsequently prepared and submitted describes in detail the allegations raised by the union and the responses from the company, the applicable regulatory framework in Peru, and additional relevant background information, before then turning to a detailed analysis and set of findings focusing on whether in various respects HIALPESA’s actions complied with applicable Peruvian regulatory authority as well as specific FLA Workplace Compliance Benchmarks.  The investigator’s report reflects her careful examination of a series of challenging issues, even as the collective termination process was ongoing before Peru’s Administrative Labor Authority (AAT) – the body that is authorized to determine the legality of the closure of both of the referenced production areas.

The investigator’s report concludes with a set of fourteen Conclusions and, in turn, seventeen Recommendations.  These account for the ongoing process before the AAT while, at the same time, setting out a set of specific actions for HIALPESA to undertake in the wake of the earlier noncompliance findings.  Consistent with the objectives of this complaint investigation, these recommendations are not intended to be punitive in nature; rather they are designed to lay out a practical roadmap for the company to engage with the suspended workers and with union representatives and to address identified shortcomings in the process it utilized with regard to suspension of the employment contracts, as well as in broader company policies.

The FLA welcomes the active and highly constructive engagement throughout this Third Party Complaint process of the two Participating Companies that source from HIALPESA; this was especially noteworthy because neither company had engaged previously with the FLA in a Third Party Complaint investigation.  The FLA looks forward to continued close coordination with these member companies as this process now moves to a focus on the implementation of the report recommendations, and notes further that the investigator’s report includes specific recommendations directed at both the companies and the FLA concerning needed follow up actions.

UPDATE: In August 2023, FLA published a detailed Verification Report prepared by an independent third-party investigator. The report sets out findings, conclusions, and recommendations regarding actions taken by HIALPESA following the 2019 third party complaint investigation. This verification report notes that HIALPESA had made progress on implementing only one out of the nine recommendations from the 2019 investigation. The Verification Report provides a new set of recommendations for the factory to remediate the issues set out in the original investigator’s report.