EXCLUSIVE Dyson Drops Malaysian Supplier ATA Due to Labor Issues

KUALA LUMPUR, Nov. 25 (Reuters) – High-tech home appliance maker Dyson Ltd told Reuters it severed ties with supplier ATA IMS Bhd (ATAI.KL) following an audit of Malaysian company labor practices and a whistleblower’s allegations, sending ATA shares plunging.

ATA, which is already the subject of an investigation by the United States into allegations of forced labor, has confirmed that Dyson has terminated its contracts and that it is in discussions with its client about the findings of the audit . He had previously denied the allegations of work abuse.

Shares of ATA, which makes parts for Dyson vacuum cleaners and air purifiers, fell 30% to their lowest level since April 2020 after the Reuters report. According to ATA, Dyson accounts for nearly 80% of its revenue.

The termination is also a blow to Malaysia, a major electronics manufacturing hub that has come under scrutiny this year over allegations of migrant workers being subjected to abusive working and living conditions.

Dyson, privately owned by British billionaire James Dyson, said it received the results of an audit of working conditions at ATA in early October. He said he also learned in September of a whistleblower’s allegations of “unacceptable actions” by ATA staff and tasked a law firm to investigate the allegations.

“Despite intense engagement over the past six weeks, we haven’t seen enough progress and have already phased out some production lines,” Singapore-based Dyson said in response to questions from Reuters.

“We have now ended our relationship on six months’ contractual notice. We hope this will give ATA the momentum to improve and allow for an orderly exit in the interests of the workers they employ.”

Dyson’s comments came after he was contacted by Reuters about complaints from workers, including a whistleblower, about working conditions at ATA.

In interviews with Reuters, seven current and former ATA employees said they worked overtime beyond the limits provided by Malaysian law and paid recruitment fees in their home countries to brokers. work, a practice that activists have criticized as a form of debt bondage.

Employees also worked on holidays at the ATA factory and what were supposed to be days off, according to workers and payslips reviewed by Reuters.

Malaysian law allows up to 104 hours of overtime per month. A payslip examined by Reuters showed that a worker had worked 126 hours in May.

Dhan Kumar Limbu, a former ATA employee, told Reuters that ATA officials took him to a police station in June where he was questioned about sharing information about conditions in the factory with militants, then beaten by the police.

Limbu, a Nepalese citizen, fled Malaysia after the incident, fearing further reprisals, he said. He told Reuters he recounted his experience of being taken to the police station during an interview with Dyson’s lawyers.

ATA has denied all of the workers’ allegations and declined to comment. Malaysian police did not respond to questions from Reuters.

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ATA, in a statement to the national stock exchange on Thursday, said it took steps to engage Dyson and his advisers after being made aware of the labor audit summary. He said he would review the findings.

The company also said it will continue to manufacture and supply for Dyson until June 1, 2022, and that its board of directors is reviewing the validity of Dyson’s termination notice.

ATA manufactures bin bases, battery covers, brush bars, propellers, harness covers and other parts for Dyson vacuums, as well as parts for Dyson hot and cold air purifiers, according to a May-June production schedule seen by Reuters and photos of the factory interior.

In May, ATA denied allegations of forced labor at its factories after a prominent human rights activist said U.S. authorities would review the company’s labor practices.

The activist, Andy Hall, shared a letter that U.S. Customs and Border Protection (CBP) sent him informing them that they had agreed to investigate an ATA unit after reporting complaints received of workers.

CBP has banned six Malaysian companies in the past two years from selling their products in the United States after finding evidence of forced labor.

In July, the US State Department put Malaysia on a list with more than a dozen countries, including China and North Korea, saying it had not made progress in eliminating trafficking. workers.

Foreigners constitute a significant part of the Malaysian workforce. Most migrant workers in Malaysia come from Bangladesh and Nepal and are employed in factories, plantations and construction sites.

More than half of ATA’s 8,032 employees are foreigners, according to the company’s latest annual report.

ATA posted record revenue and profits for the fiscal year ended March 2021, as lockdowns induced by COVID-19 boosted demand for home appliances such as Dyson’s upright vacuum.

Dyson had dismissed allegations earlier this year regarding excessive hours and cramped living conditions for ATA workers, citing several previous audits that he said had found no issues involved in his supply chain.

Activist Hall said Dyson’s decision to end the relationship would have huge implications for the thousands of workers employed at ATA and that Dyson should remedy the ATA workers.

The Malaysian government must also take some responsibility, Hall added, saying he has filed several complaints with the government over the past year about the ATA.

Malaysia’s labor department did not immediately respond to a request for comment.

Social audits – the primary form of due diligence conducted by the world’s biggest brands – are meant to monitor labor and other ethical standards in the supply chain. But they’re not always effective at identifying work-related risks and can even mask them, more than two dozen auditors, watchdogs, factory workers and advocacy groups told Reuters. labor rights. Read more

Dyson said the recent audit results he received in October were from a “full” audit that interviewed more than 2,000 ATA staff.

He did not disclose the findings of the audit.

Reporting by A. Ananthalakshmi; additional reports from Liz Lee; Editing by Lincoln Feast, Christopher Cushing and Raju Gopalakrishnan

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