Clean Gloves, Dirty Practices: Debt Bondage in Malaysia’s Rubber Glove Industry

On October 1, the Malaysian rubber glove manufacturer WRP Asia Pacific had an incoming call from the Trump administration. Not a phone call, but a wake-up call: The U.S. Customs and Border Protection agency announced an import ban on WRP’s gloves due to “evidence of multiple indicators of forced labor.” Previous media investigations of WRP found migrant workers subjected to passport confiscations, illegal withholding of pay, restricted freedom of movement, and more.

The wake-up call prompted swift reactions in Malaysia. Its glove industry is the world’s biggest, supplying over half of the world’s annual demand of 300 billion rubber gloves, The United States is its biggest export market. Ministry officials immediately visited the U.S. Embassy seeking further information. Rubber glove industry stakeholders and government officials met at a town hall session in early October. Malaysian Minister of Human Resources Kula Segaran said the ministry would propose a new chapter on forced labor under the Employment Act. 

At other major glove manufacturers, workers have also been found at risk of forced labor due to indicators of debt bondage, alleged passport retention, deceptive recruitment, excessive overtime, and more. The Diplomat questioned major American corporate buyers – including Owens & Minor, Henry Schein, McKesson, and Medline Industries – if they knew about these allegations and how they monitor suppliers.

“The moment we arrived, my passport was taken from me”

For years, Malaysia’s economy has relied on cheap foreign labor from impoverished countries such as Bangladesh, Nepal, and Myanmar. The employment opportunities allow migrants to provide better for their families back home through remittances. Millions of migrants work in Malaysia, many in factories and plantations feeding global supply chains. In 2018, the remittance outflow from Malaysia was almost $10 billion. According to the World Bank, from 2006 to 2016 remittances experienced a 500 percent increase.

However, migrants often obtain high-rate loans to pay recruitment agents exorbitant fees for jobs in Malaysia. Many are deceived by recruiters or trapped in abusive conditions, unable to leave because of the need to repay debts or because of withheld passports. Zaid and Daif (not their real names) know all about that. They make disposable gloves for Central Medicare and live in a rural hostel 200 km from Malaysia’s capital, 3,000-4,000 km away from their families in Bangladesh and Nepal.

“The moment we arrived, my passport was taken from me,” said Zaid, who paid $4,700 to get the job. Passports are kept in a locker by the company. Workers must apply and get permission from managers to access them. If workers need to go home for an emergency, they must deposit around three months’ wages, Zaid said. “I could not attend my mother’s funeral because of that,” Daif said. 

At YTY Industries, Faaris (not his real name) has not seen his passport since he started working nine months ago. Some colleagues had passports returned after a year, but others said they have worked over two years with no free access to their passports. YTY Group published an extensive statement online, saying that it does “not hold the passports of any foreign workers other than for routine processing matters.”

Workers from both manufacturers spoke about debts due to high-rate loans to finance fees for agents to get the jobs, further binding workers. Some used savings or borrowed from family to pay. Bangladeshi workers at both glove manufacturers claim to have paid between $4,100 and $4,700 to recruitment agents in their home countries. Nepali workers paid $1,200-1,400. The monthly minimum wage in Malaysia is $265 (1,100RM). 

YTY said “we absorb 100% of any recruitment fees in Malaysia, as well as all processing fees, transport and insurances costs, and other ancillary fees that may be required to bring foreign workers into Malaysia, and onto our premises.”

However, all the interviewees said they had not been reimbursed for recruitment costs.

YTY also said it was tightening recruitment procedures as it is “aware that certain local and foreign agents charge unreasonable recruitment fees to foreign workers.”

Workers said 12-hour shifts were compulsory at both companies. Many work for weeks with no rest day to repay loans for recruitment fees, though one weekly rest day is allowed. Workers from both manufacturers spoke about being scolded and felt coerced to work when they wanted to call in sick. YTY Group said it does “not practice any forced overtime; all overtime that is legally permissible is arranged on a voluntary basis and compensated in accordance with the prevailing regulations.”

At Central Medicare, workers said they cannot reject deductions of 20 percent of their basic wage, the minimum wage, for meals and accommodation, which is legal in Malaysia. Workers are scolded in front of colleagues if they reject working 12 hours daily. “Daily overtime is compulsory. We cannot reject. We dare not,” Asad from Central Medicare said (not his real name).

Some workers wire 50-75 percent of their monthly payments to families back home, when they finish repaying loans after months or years, but not all can stomach the harsh conditions: “If I could, I would go home even though it means losing money and more debt. I can’t stand it anymore. But I can’t access my passport, and I am afraid of getting caught and beaten,” Asad said.

Central Medicare did not reply to multiple requests for clarification. 

 “Slaves work for free, but we pay money to work”

Migrants working for manufacturers in Kuala Lumpur’s outskirts share similar stories. Workers from Supermax and Hartalega NGC, two major glove exporters, mentioned fees up to $4,800 for agents and said it takes years to pay off money lenders’ high-rate loans.

“We feel it is worse than slavery. Slaves work for free, but we pay money to work. There is no choice,” said one Hartalega employee.

“When we came in 2017, we got our passports. But it changed, and now we don’t keep our passports anymore,” another Hartalega worker said in early October. Hartalega said in the middle of November that it previously had a centralized facility for passport lockers where workers had “full and free access to their passports 24/7 without any restriction. In recent months, we have phased out our centralized facility. Now, all workers keep their own passports at their personal lockable cabinets in their respective dorms.”

Workers from Supermax facilities in Sungai Buloh said that passport retention for years was the norm until October, when Supermax started returning passports to workers. They work 12 hours per day, for up to 30 days without a rest day, and have to apply if they want more than one monthly off day, or else face wage deductions, workers said.

At Hartalega, workers felt 12-hour workdays to be compulsory. Hartalega replied that workers do 12-hour shifts “purely on a voluntary basis and this is clearly communicated to workers during the recruitment process” and “if a worker does not wish to perform overtime, the worker can notify the Company in advance. We can then make alternative arrangements to ensure manufacturing operations are not disrupted.”

“We get penalized if we complain about working or hostel conditions or fall asleep at work,” said a Supermax worker. Colleagues gave examples of threats and penalties like wage deductions or suspensions for complaining, falling asleep, or using the toilet without permission during work. Workers spoke about nightly hostel curfews and penalties for staying out overnight without permission. 

Supermax said in a statement that “All of the Supermax Group’s manufacturing facilities operate strictly in accordance with Malaysian Labor Law.” It did not comment directly on working conditions in Sungai Buloh, but said about its facilities there that “the glove manufacturing plant at Lot 38 will be shutting down for upgrading works commencing around Q1 in 2020,” and that Lot 42 was “the smallest plant in our manufacturing group and has been shut now for some 2 years after a small fire.”

Recruitment by Debts and Deception

Many workers at Supermax, Hartalega, and YTY Industries spoke about broken promises from recruitment agencies in their home countries related to working hours, wage levels, and job types. 

“Forced labor is a real risk for migrant workers from poorer parts of the world, who incur substantial debts to pay to get a job abroad, many times on false promises by recruiters,” says Urmila Bhoola, the UN Special Rapporteur on Contemporary Slavery. “They become further dependent on the mercy of employers, who know workers paid fees worth months or years of salary, when their passports are taken away, and increasingly accept abusive conditions, threats, and punishments at workplaces.”

The International Labor Organization (ILO), the United Nations’ labor agency, lists 11 authoritative indicators of forced labor, including deceptive recruitment, passport retention, debt bondage, excessive overtime, and employers taking advantage of workers’ vulnerable positions by intimidation, threats, and more. 

Malaysian law allows employers to hold workers’ passports with their permissions, but according to the U.S. Department of State “it is difficult to determine if workers have freely given permission, and some employers retain the passports to prevent workers from changing jobs.” Several workers from the various factories said that they over the years had not felt in control of their passports, and some spoke positively about the recent returns.

However, returning workers’ passports does not liberate workers who are bound by recruitment fee-induced debts. “Thousands of workers pay fees often worth more than one year’s salary. They pay even more, when they borrow at exorbitant rates from money lenders to finance the fees. Debt creates an extreme vulnerability to exploitation and serves to bind workers and keep them at employers’ mercy as long as they pay high fees to get jobs,” said anti-trafficking lawyer Archana Kotecha, head of legal at Liberty Shared, an anti-trafficking organization. “This often also results in workers remaining in abusive working conditions as they cannot afford to walk away from an existing recruitment debt to pay for the next opportunity.”

Corporate Healthcare Buyers of Malaysian Gloves

Hartalega, Central Medicare, YTY Industries, and Supermax have numerous ties to the American healthcare industry, according to shipment data from Panjiva, the supply-chain research unit at S&P Global Market Intelligence.

Owens & Minor, a Fortune 500 company, is a major customer of Hartalega and also sources from YTY Industries and import-banned WRP Asia Pacific. Within the last year, its subsidiary O&M Halyard received around 50 percent of Central Medicare’s U.S. exports. It also sources from Hartalega and YTY Industries. 

McKesson, another Fortune 500 company, sourced gloves in 2018-19 through Cypress Medical Products from Hartalega, YTY Industries, and the two Supermax-owned facilities Maxter Glove and Supermax Glove. Henry Schein, yet another Fortune 500 company, sources from Hartalega and Central Medicare.

Medline Industries, one of the biggest privately held U.S. firms, is a customer of Hartalega. In 2018, it also received dozens of U.S. imports from YTY Industries, Central Medicare, and WRP Asia Pacific. 

McKesson, Henry Schein, and Medline said they expected suppliers to comply with all relevant obligations, but did not comment if they knew about conditions at their named Malaysian suppliers. Owens & Minor did not reply to requests for comment. Medline said that if “a supplier face[s] official allegations of misconduct, Medline requires supporting documents to outline compliance with all labor and social compliance processes and safeguards. We will not conduct business with any company not cleared of such allegations.” 

McKesson responded to a request for comment, stating that “suppliers must agree to McKesson Sustainable Supply Chain Principles” and “Adherence by suppliers to MSSP is not optional. If we determine a manufacturer is not in compliance with our standards and has not implemented the necessary improvements, we terminate our relationship.”

A Henry Schein spokesperson said, “We are committed to fair and ethical business practices in our supply chain, and we expect the same commitment from our suppliers. We audit our suppliers and take preventive and/or corrective action, where appropriate.”

None reported publicly about supplier due diligence audit findings; however, Medline’s European subsidiary said in its latest sustainability report that “370 audits were conducted between 2015 and 2018. Our auditors found no occurrences of slavery, human trafficking and forced labor in Medline’s supply chain.”

The Missing Link: Reliable Social Audits

Brands that outsource production to low-cost countries trust audit firms to check working conditions at suppliers. Public and private healthcare procurers trust the brands’ trust in the auditors. Hospitals trust the procurement organizations’ trust in the brands’ trust in the auditors.

Some of the Malaysian manufacturers spoke about recent accreditation and certificates. YTY Group said it received a BSCI rating of “A” in a 2019 audit, and that it also holds a gold-rated WRAP-accreditation. Hartalega said it became a Sedex member in August 2019 and that it has been social audited based on SMETA, BSCI, and SA8000 standards by reputable audit firms over the last three to four years. Supermax said it became a Sedex member following a SMETA audit by Accordia in October 2019.

In 2018, the world’s biggest disposable glove manufacturer, Top Glove, came under fire by a Guardian investigation into forced labor and debt bondage, despite 28 social audits that had been conducted in 2017-18 “by customers and 3rd party auditors, in accordance with internationally recognized standards which include SA8000, ICS, SMETA, SER, BSCI as well as our customers’ own high standards” according to a Top Glove statement.

Audit results are not usually made public, and requests are systematically turned down. Hartalega, YTY Industries, and Central Medicare declined to disclose audit reports and audit firms, or did not answer. Neither did Owens & Minor, Henry Schein, McKesson and Medline Industries disclose audit reports or audit firms, nor whether they had conducted on-site audits at these Malaysian suppliers at all. Only Supermax shared an audit report of its subsidiary Maxter Glove. Top Glove said it is “not at liberty to share these social audit reports, which will require our customers’ permission. However, we are pleased to inform that we have performed well in recent social audits, owing to the many improvements made throughout 2019 and our customers are satisfied with our progress.”

Audit firms such as Intertek, UL, and SGS, all multi-million dollar multinationals, are used to check workplace conditions among Malaysia’s glove manufacturers according to industry sources. Intertek and SGS did not reply to a request for comment, and UL said it doesn’t “have a big presence in Malaysia or in the disposable glove industry” when asked for insights on forced migrant labor risks. 

However the day before our deadline to the auditors, BSCI-owner Amfori made a statement about its “monitoring of the forced labor issues at Top Glove and more generally in Malaysia to date.” 

About Top Glove’s efforts following the Guardian’s investigation, it said that while “some positive progress has been made, there are significant improvements needed in the critical areas concerning excessive working hours and migrant workers recruitment issues.”

Professionals involved in social audits of glove manufacturers, requesting anonymity, said that huge debts due to recruitment fees is a well-known issue, but not considered a forced labor indicator traditionally. Industry sources also said that zero-cost recruitment, i.e. ensuring that workers are actually compensated, might be policy but not practice before 2019, overall speaking.

Social audits are increasingly scrutinized by civil society groups demanding transparency by, and liability of, corporate-controlled auditors. In September, a comprehensive analysis of over 200 instances of audit failures was published by Clean Clothes Campaign, an NGO. “Evidence clearly shows that the social audit paradigm has failed in protecting workers. Instead, it has protected the reputation of brands and their business models, while standing in the way of more effective models that include mandatory transparency and auditor liability,” said Ben Vanpeperstraete, one of the report authors.

The Power of Procurement: Carrot and Stick

Malaysia-made medical and surgical gloves permeate the American healthcare industry. Gloves from Owens & Minor, Henry Schein, McKesson, and Medline Industries can reach U.S. hospitals by direct sales as well as by Group Purchasing Organizations (GPOs), where hundreds of member hospitals use their collective purchasing power to negotiate better deals.

Disposable gloves from Malaysia and the rest of the world also reach healthcare institutions through federal procurement by the Department of Veteran Affairs, which has been delegated federal supply schedules for medical equipment and supplies by the General Services Administration (GSA) that oversees $66 billion procurement annually. A check on GSA’s website of the dozens of glove contractors’ thousands of items reveals brands by Henry Schein and Supermax. Gloves by Dynarex, a customer of YTY Industries, are also found, besides glove brands by Innovative Healthcare Corporation (IHC), which is a customer of Hartalega and import-banned WRP Asia Pacific and serves the healthcare system “via multiple national GPO contracts covering approximately 85% of US hospitals,” according to its website. Individual U.S. states also procure disposable gloves.

Healthcare procurers hold significant purchasing power to leverage for decent supply chains conditions. If import bans are the stick, procurers hold the carrot. Some of the biggest GPOs in the United States are Premier, Vizient, and HealthTrust. Premier unites around 3,900 U.S. hospitals and health systems. Vizient represents almost $100 billion in annual purchasing volume.

Premier, a multiple winner of “World’s Most Ethical Company” awards by the Ethisphere Institute, said that “Premier is fully aware of and monitoring the labor issues in Malaysia” and, like HealthTrust, shared information about its supplier due diligence policies. Vizient, also an award winner, engaged in dialogue and said it would contact its contracted suppliers, who are customers of the Malaysian manufacturers, “to learn more about the situation and their plans to address it” as a first step.

Elsewhere, procurers take other actions on challenging suppliers. In Sweden, 21 regional authorities cooperate on sustainable procurement and share a common code of conduct and contract clauses. In June 2019, they conducted comprehensive audits of three major Malaysian disposable glove manufacturers within the framework of their collaboration. Multiple forced labor risks were found. The audit results, anonymized, are even public available.

“We try to use our leverage proactively as public procurers,” said Emma Lewau from Region Östergötland in Sweden. “We categorize disposable gloves as a risk area due to potential abusive working conditions among Asian manufacturers. Our recent audits clearly indicate that improvements must take place. Now, we discuss next steps with our suppliers who source from these manufacturers.”

Fee-Free Recruitment: Becoming Reality?

Forced labor risks in Malaysia’s manufacturing industries have been documented for over a decade by media, NGOs, the ILO, UN and U.S. agencies. Debt bondage due to a mix of recruitment fees, passport confiscation, and deceptive recruitment continue to be highlighted. Within the last year, media investigations by the Guardian and ABC News, and watchdog investigations by Transparentem and DanWatch, documented forced labor in Malaysia’s disposable glove, apparel, and electronics industries supplying global brands.

Similar risks are widespread among lower-tier manufacturers, too. In September, local media outlet Malaysiakini documented forced labor at Tiong Tat, a major supplier of packaging materials to several glove manufacturers including Hartalega. Hartalega confirmed the trade relation and said it would engage Tiong Tat to ensure progress. The U.S. Customs and Border Protection (CBP) can issue detention orders due to forced labor concerns at American importers’ lower-tier suppliers, too.

Some manufacturers have recently begun to enforce zero-fee recruitment in practice, such as glove manufacturers Hartalega and Top Glove. Hartalega said: “To ensure that our migrant workers are no longer required to pay recruitment fees to agencies or third parties during the recruitment process, we implemented a Zero Recruitment Cost Policy in April 2019.” Top Glove said it “implemented a Zero Recruitment Fee Policy since January 2019, under which Top Glove bears all recruitment-related fees and costs associated with recruitment, for our foreign workers.”

Sources involved in the glove industry had difficulties naming manufacturers who before 2019 ensured that workers were compensated for recruitment-related costs. In the apparel industry, manufacturers such as Honsin Apparel, Whitex Garment, Knit Textile, and Perindustrian Shunhon reportedly compensated 2.500 workers nearly $1.8 million in recruitment fees recently.

“Workers should not pay to get a job. It’s good that some manufacturers are enacting and trying to implement zero-fee policies onwards, but the thousands of indebted migrant workers who already paid exorbitant fees should also be compensated,” said Andy Hall, a migrant worker rights specialist. “Abuses are still rampant in the unregulated recruitment industry, and workers remain too scared to speak out about abuses and fees and costs borne by them because of coercion, poverty and the risks of losing jobs and pre-paid fees.”

The zero-fee policies adopted by Hartalega and Top Glove in 2019 only cover newly recruited migrants. The rubber glove industry association Margma, representing 90 percent of local glove manufacturers, said in a recent press briefing that only newly-recruited foreign workers are in focus for its members pledge to ensure zero-fee recruitment, making skeptics worry that the systemic debt bondage risks will not disappear anytime soon.

“When workers leave South Asia to make a better living abroad, it does not mean that on arrival, they work in freedom rather than bondage because of their debts to pay recruiters,” said Professor Johannes Breman from Amsterdam University with decades of debt bondage research behind him. “Presumably knowingly, possibly deliberate ignorantly, local employers, global brands and shareholders have benefited from such systemic abuses for years.”