Severance violation in private equity-owned Lucky Brand supply chain
July 30, 2024
Workers at Industrial Hana, a Guatemalan factory that produced garments for Lucky Brand, were left without a job or legally mandated severance pay when the factory suddenly shuttered in October 2023. Industrial Hana failed to pay$1.56 million in legally required severance and other terminal benefits to its 246 employees, according to analysis of calculations prepared by the Guatemalan Ministry of Labor.[1]
Lucky Brand subcontracted with Industrial Hana and, therefore, has a responsibility to ensure the workers in their supply chain are treated equitably.[2] Lucky Brand is owned by Authentic Brands Group[3] which is owned by a group of investors, including CVC Capital Partners, HPS Investment Partners, and Leonard Green & Partners.[4][5]
The private equity firms invested in Authentic Brands have a responsibility to resolve labor rights violations in their supply chain. Without suppliers like those at Industrial Hana, Authentic Brands would not have products to sell and would not be profitable to its investors.
The manufacturing and distribution of Lucky Brand and other Authentic Brands Group brands products is overseen by SPARC Group, which is also partially owned by Authentic Brands Group.[6]
Per the report issued by the Worker Rights Consortium (WRC), shortly after the factory’s closure, Solidarity Center, an international worker rights organization, contacted SPARC Group and Lucky Brand to notify them of the closure and the resulting severance theft violations. SPARC Group responded to Solidarity Center in November 2023 by acknowledging that Industrial Hana’s alleged conduct, if proven true, would not align with SPARC Group’s Code of Conduct for suppliers. SPARC Group informed Solidarity Center that it had launched an investigation of these violations and asked its vendor to provide an appropriate response. However, after that initial communication, Lucky Brand and SPARC Group have provided no additional information regarding what steps they will take to ensure the violations are remedied.
This is not the first time there has been a labor dispute regarding a CVC Capital-owned company. In 2016, Petco settled a class action lawsuit after a group of pet groomers alleged that the stores forced thousands of groomers to pay for grooming tools required for their jobs. Plaintiffs in the class-action lawsuit said that “due to the cost of purchasing and maintaining their equipment, their wages have, at various times during their employment, fallen below the minimum wage, in violation of the [Fair Labor Standards Act].”[7] CVC Capital Partners acquired Petco in 2015 in a joint venture with Canada Pension Plan Investment Board.[8]
Concerned investors should ensure that Lucky Brand and the SPARC Group are responsive to the Solidarity Center and that the violations at Industrial Hana are fully remedied.
[1]https://www.workersrights.org/commentary/guatemalan-factory-that-produced-lucky-brands-american-eaglehanesbrands-and-gillz-closed-owing-workers-1-4-million-in-severance/
[2]https://www.workersrights.org/factory-investigation/industrial-hana/
[3]https://www.cnbc.com/2020/08/14/simon-authentic-brands-to-buy-bankrupt-lucky-brand-for-140point1-million.html
[4]https://www.cvc.com/media/news/2021/2021-11-22-cvc-fund-viii-and-hps-investment-partners-to-acquire-stakes-in-authentic-brands-group/
[5]https://www.just-style.com/news/authentic-brands-group-sells-us12-7bn-stake-to-private-investment-firms/
[6]https://corporate.authentic.com/strategic-partners#:~:text=SPARC%20Group&text=SPARC%20is%20a%20strategic%20partnership,managing%2033%25%20of%20the%20operations.
[7]https://www.shavitzlaw.com/wp-content/uploads/2017/01/Petco-Groomers-Reach-Deal-In-Clipped-Wages-Suit-Law360.pdf
[8]https://corporate.petco.com/2015-11-23-CVC-Capital-Partners-and-Canada-Pension-Plan-Investment-Board-to-Acquire-Petco
