A Nike factory has agreed to pay $1m in unpaid overtime to Indonesian workers in a move that could force other suppliers of multinational companies to follow suit.
Nearly 4,500 employees at one of the sportswear group's suppliers, the PT Nikomas shoe plant in Banten province, will be compensated for close to 600,000 hours of overtime clocked up over the past two years.
The out-of-court settlement, reached after nearly a year of negotiations, set a precedent for other workers, said Bambang Wirahyoso, national chairman of the trade union Serikat Pekerja National.
"This has the potential to send shockwaves through the Indonesian labour movement," he said, adding that the victory had prepared the union to take on the fight for any workers who had been forced to work overtime without pay. "We have only just begun."
Other multinationals operating in Indonesia may be the next targets. Foreign companies, including Nike, Puma and Adidas, often use local factories to supply their products, where high turnover requirements and short time frames can mean that good labour practices are not always guaranteed, according to Oxfam Australia.
The union claims it is standard practice for Indonesian factory employees to work seven days a week without overtime or proper benefits.
"There are more than 100,000 factory workers in Serang, and those who are most prone to overwork are labourers for branded merchandise, since they have to achieve certain targets," Wirahyoso said.
Under the terms of the settlement, employees will be compensated by early February. The union has since set up a text-phone system to help workers register labour-related complaints.
Jim Keady, director of the Catholic NGO Education for Justice, who became involved in the case following complaints from union workers, said that employees at the shoe factory were prone to other work-place problems, such as being forced to pay bribes to gain employment and being verbally abused by supervisors.
Workers allegedly also said that they had worked overtime for the past 18 years without compensation, but Indonesian law allowed redress only for the past two years, Keady said.
Seattle-based Nike has been accused in the past of using child labour in its supply chain and in relation to working conditions in its 1,000 overseas supplier factories, which the company has taken steps to address.
Nike said it "commends the factory on their action plan and efforts to correct inadequacies in current policies designed to protect the rights of workers. Nike will continue to monitor and support their efforts to remediate the situation."
The multinational group said it would create a task force to address future grievances and offer training programmes to employees.
Monday's out-of-court settlement follows an agreement signed last year by Indonesian textile, clothing and footwear unions, major supplier factories and big-name sportswear brands including Nike, Adidas and Puma, guaranteeing freedom to form unions and bargain collectively.
The accord followed a two-year long campaign by Playfair 2008, which called for an end to low wages, violations of freedom of association and abuse of short-term contracts.
Indonesian-based sportswear factories have long been criticised for preventing workers from unionising, according to Oxfam Australia, which claims that nearly the entire union leadership of one factory supplying Adidas was fired after striking over wages.
• This article was amended on 12 January 2012. The original heading read: Nike to pay $1m to Indonesian workers for overtime. This and the first paragraph to make clear that the payment comes from a Nike factory.
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