• FTZGSEU Gen. Secy. Anton Marcus explains that legally, it is the Labour CG who decides whether a factory can be closed and if compensation should be paid, not the company

Early this month, Next Manufacturing Limited, a fully owned subsidiary of the United Kingdom-based retailer Next, shut down its garment factory in the Katunayake Free Trade Zone (FTZ). 

The closure was communicated to union representatives on 19 May, only after the factory had already been sealed earlier that morning. Nearly 2,000 employees – most of them women from rural areas – were notified of this, via WhatsApp, without any prior warning or proper consultation it is claimed. The company reportedly stated that the decision was due to high production costs in the FTZ, even though its other operations remained active. There are allegations that the process has sidestepped labour laws and ignored the terms of the existing collective agreement with the company, and the union (the FTZs and General Services Employees Union [FTZGSU]).

In an interview with The Daily Morning, FTZGSU General Secretary Anton Marcus discussed the closure of the factory, claiming that the presence of their Trade Union may have influenced the decision, and current challenges facing Sri Lanka’s apparel industry.

Following are excerpts from the interview:

What is the story behind this closure?

This factory has been in operation since 1979. But in 2021, many of its workers decided to join our union. This happened mainly because of some disputes that arose during the Covid-19 period. One of the key issues was the reduction of employee bonuses. After they joined our union, we stepped in to resolve these matters. Through discussions with the management, we were able to address most of the issues. 

Eventually, both parties – the company and our union – signed a collective agreement that same year. Since then, we have continued to work under that agreement. We have discussed and agreed on annual salary increments on multiple occasions. We have also resolved several other workplace-related issues over time. 

As recently as early this year, we reached a mutual agreement regarding the salary increase for this year. But then, in April, we noticed that machines were being removed from the factory and taken elsewhere. At the same time, some employees were being moved to different sections. We wrote to the management, asking why these changes were being made. In their response, they said that it was just part of their normal operational procedures. They explained that as a group of factories, they sometimes shift machines and staff between different locations, depending on the needs of the business. That explanation came in April. 

Around that time, we were also informed that the Managing Director (MD) of the company would be visiting Sri Lanka. The company got in touch with us and said that he wanted to meet me. We scheduled the meeting for 5 p.m. on 19 May at the company’s head office at the World Trade Centre in Colombo. Ahead of that meeting, I requested that a few more representatives from the union branch be allowed to attend, especially if the meeting was going to involve discussions about the factory. But, the company did not agree to that. They said that the meeting was to cover sensitive business-related matters and that only senior officials should attend. 

In the end, I went to the meeting with two others – our union President and another representative. At around 5.35 p.m., some of the company’s staff came in and said that they had a regrettable announcement. They told us that the company had decided to shut down the factory. They handed us a letter, in English, that had been prepared for the workers. This was the first time that we were officially informed of the closure. We told them immediately that we could not accept their decision. The reasons that they gave us were not acceptable. 

More importantly, there is a process outlined in the collective agreement between the company and our union that should be followed in a situation like this. That process was completely ignored. There are also procedures under the labour laws that must be followed when closing down a workplace. For instance, the Commissioner General (CG) of Labour must be notified in advance, and proper approval must be obtained. None of that was done. We pointed out all of this to the company during the meeting. But, by then, it was clear that the decision had already been made. 

In fact, they had already closed and sealed the factory before even meeting us. Earlier that very day, our branch representatives had asked the Human Resource (HR) Manager if the factory was shutting down. He had said no – that there was no such plan. In the evening, the workers were notified about the closure through a message on WhatsApp. The company claimed that the main reason for the shutdown was that operating costs at the factory, which is located inside the FTZ, were too high.

There are allegations that the union was responsible for the closure. What is your response?

That is not true at all. There is a small group within the factory – some recently hired employees and a few managers – who have been working against the union from the very beginning. It is these individuals who have been spreading the idea that the union is to blame. I brought this up directly with the MD during the meeting on 19 May. I asked him clearly as to whether the union had anything to do with the factory being shut down. He said no. He assured us that the union was not a reason for the closure. 

In fact, if the company had any issue with the union, they would not have entered into a collective agreement with us in 2021. They would not have renewed and revised it in 2023 either. Since that time, we have had open communication with the management. I have been allowed to visit the factory regularly and speak with the workers. These claims that the union caused the factory to close are nothing more than rumours. They are being spread by a few individuals who have always opposed the union. We challenge anyone making these claims to show us even a single factory that was closed because of our union's involvement.

Was there a recent three-day strike at the factory? Did it have anything to do with your union?

There was no recent strike. The only strike that took place was in 2022, and even then, it was not organised by our union. What happened was that a group of supervisors – who were not members of our union – had an issue regarding their salaries. They started a strike. A few of our union members also joined them. As soon as we found out about it, we went to the factory and told the management that we were not involved in that action and that we did not support it. But, when the strike went on for a few days, we realised that we had a responsibility to step in. So, we contacted the management and informed them that we were willing to help resolve the situation. 

With their agreement, I met the group of workers who were protesting near the factory gate. I explained to them that the issues that they were facing could be resolved through dialogue, as outlined in our collective agreement. The workers listened, and they returned to work the same day. Later, the company even sent us a letter thanking us for our role in resolving the matter. Other than that incident in 2022, our union has not carried out any strike or protest action at this factory.

How many workers were employed at the factory before it closed?

According to our records, there were more than 2,000 workers at the time that the factory was shut down. That number includes both regular employees and staff members. Most of the machine operators, roughly 60-70% of the total workforce, were women. Many of them came from rural areas and were staying in boarding houses or hostels nearby.

What types of workers were there in terms of their employment status?

There was a time when the factory hired manpower workers through external agencies. But, as orders decreased over time, the company stopped employing manpower workers altogether. By the time the factory was closed, everyone working there was a permanent employee. There were no casual or manpower workers.

How were employee grievances usually handled within the factory?

According to our collective agreement, if an employee has an issue, the first step is to discuss it with the head of their department and try to resolve it there. If that does not work, it moves up to the management level. If it is still not resolved, the matter is referred to our union branch, which then engages with the HR Department to work toward a solution. If all of that fails, the issue is taken to the union’s main branch, which discusses it with the company’s head office. Many problems have been settled through this process. We have never had to strike or hold protests. We have always worked to resolve issues through discussion. Some problems were not resolved, but we did not take union action over them.

There is talk that the company warned the employees not to approach the Labour Department if they want compensation. Is that true?

Yes, they did. The first message was sent via WhatsApp, saying that the factory would be closing and that the employees would be compensated based on the standard formula. They also mentioned that an additional allowance would be paid depending on the years of service. But when the employees met at our office on 20 May, they decided that they did not want compensation. They wanted to keep their jobs. They also agreed to take the matter to the Labour CG. After that, another written message was received from the company, saying that if the Labour Commissioner got involved, the extra allowance would be withdrawn. That is completely illegal. Workers have the right to seek help from the Labour Department, and threatening to withhold benefits because they exercise that right is unacceptable.

Deputy Minister of Labour Mahinda Jayasinghe said that the company is willing to offer jobs for employees at other factories. What is your response to that?

Yes, he said that the company was willing to offer employment at other factories. But, we are not sure how realistic that is, especially when other factories are also downsizing. Some workers even said that when they tried to apply elsewhere, they were turned away because they had worked at the ‘Next’. That is the situation that they are facing. We told Jayasinghe that the issue is not about finding jobs elsewhere, we want the factory reopened. If someone wants to resign and accept compensation after that, that is their personal choice. But, the factory should not be shut down with compensation forced on everyone. Legally, it is the Labour CG who decides whether a factory can be closed and if compensation should be paid, not the company. The company skipped that process and made that decision themselves.

If compensation was to be paid, what is the process that you would recommend?

We are not even talking about compensation right now. We don’t accept the reasons given by the company for shutting down the factory. They claim that the production cost is too high in the FTZ, but, if that is true, how are the other 40 or so factories still running? If production costs are a problem, the solution is not to close up the factory. They should have spoken to the Government and asked for support. If that also did not work, the next step would have been to go to the Labour CG and explain the situation. But, that is not what happened here. The company acted on its own. And, it is not even a full closure. Some parts of the factory are still running. This is not a shutdown; it is a layoff.

How do you view the current state of the garment industry, especially in terms of costs and competitiveness?

Compared to countries like Vietnam, Bangladesh, China, and India, we are falling behind. There are many reasons. Fashion is fast-moving. What is in style this week might be out next week. So, when we get an order, we need to be able to finish it quickly and move on to the next. In countries like Vietnam or China, that is possible because all the materials such as buttons, zippers, and threads are made locally. In Sri Lanka, we still import those things. When such countries finish orders in two weeks, we take around three months. We have been urging governments to build up the garment industry locally, especially by encouraging the local production of essentials. That would create jobs and reduce costs.

What we do have is a skilled workforce. Our workers are smart and pick things up quickly. And, Sri Lanka has signed several International Labour Organisation (ILO) conventions, which is great. But, signing them is not enough. We need laws to enforce them. We should also shift towards producing garments under the 'clean clothes' model, where workers' rights are protected and they are included in decision-making. When workers feel involved, they work better. That kind of model can help us stay competitive, even if we face other disadvantages.

Are other factories in similar trouble, inside or outside the FTZs?

Many factory owners complain about high electricity bills and production costs. After the United States raised tariffs, some of them said that they might have to layoff large numbers of workers. We have already heard that some factories informed staff that they will not get bonuses in December and some other benefits. If that is the case, it should be addressed openly, with the Government and all the stakeholders. Factory owners have associations; they should raise these issues through those channels. Some owners say that things are fine, but we know that that is not true. They should not wait until factories start shutting down to act. A proactive approach is needed. As for the ‘Next’ closure, it feels like an excuse they pointed to rising costs. It does not seem to be the true story.

Some say trade unions (TUs) are a problem for the sector. What is your view?

The problem is that workers have no role in making decisions. TUs are how workers can participate in that process. Globally, unions play an important role in voicing workers’ concerns and pushing for better standards. That should be encouraged, not suppressed. The Industrial Disputes Act outlines how to deal with workplace issues. Right now, many workers cannot even use the dispute resolution mechanisms properly because of various restrictions. That needs to change. The right to bargain is a basic right. You can’t tell workers not to ask for anything. What is needed is a system that listens and responds properly.

What are the other long-standing issues in the apparel sector?

Most of the workforce in this sector is women, and workplace violence is a big issue. In many cases, the production targets set for them are unrealistic. These targets are decided without consulting the workers. When they fail to meet them, they are verbally abused and threatened. That is a form of violence. There are also more serious concerns, like sexual harassment. We need strong systems to prevent this and proper support when it does happen.

What is your view regarding the labour law reforms proposed by the former Government?

Most unions, including ours, opposed those reforms. The Inter-Company Employees' Federation affiliated to the Janatha Vimukthi Peramuna was also part of it. We filed complaints with the ILO and also went to the Supreme Court. After the Government changed, we assumed that those reforms were off the table. But now, we have learned that the current Labour Minister has said that a committee is reviewing them. That means that those proposals could come back in some form.

What kind of labour reforms are actually needed right now?

The ILO has already proposed reforms through a tripartite committee. It was represented by the Government, the employers, and the TUs. But, nothing has been implemented yet. We believe that any reforms should come through a joint agreement between all the parties, not just one group pushing its own agenda. If the current Government is ready to implement those reforms, we will be willing to support it. 

Attempts to contact the 'Next' factory's management including the MD proved futile.