Workers who sewed for Lucky Brand at the Industrial Hana factory in Guatemala before it closed in 2023

“Lucky You” is the slogan sewn into the fly of Lucky Brand jeans. But the approximately 250 people who sewed Lucky Brand clothes at the Industrial Hana factory in Guatemala probably don’t feel so lucky. In October of 2023, the factory shuttered without paying these workers the severance pay to which they are legally entitled. Two brands linked to the factory have paid a share of the money owed to the workers who but, to date, Lucky Brand has refused to pay up.

Lucky Brand logo

This week marks one year since the initial findings of the independent monitoring group Worker Rights Consortium’s (WRC) investigation into the case were published – and none of the brands, including Lucky Brand, has disputed the facts put forward. So, what is Lucky Brand waiting for?

A Tangled Web of Ownership, Clear Responsibility

As is so often the case in the international apparel industry, following the money from factory to the brand at the top is a long, convoluted process. Workers at the plant knew that their factory was owned by a Korean businessman named Sun Kyou Lee (who the workers called “Jesus Lee”), and that they’d seen the labels and tags of several famous brands cross their sewing stations. An investigation by the WRC traced the ownership structure of the factory and documented that it was producing subcontracted orders placed with other local firms by U.S.-based brands including American Eagle Outfitters, Lucky Brand, Puma, and others.

Both American Eagle and Puma responded to initial outreach by noting that Industrial Hana was not one of their known suppliers. However, the WRC’s investigation tied the Industrial Hana factory to the brands’ known suppliers, with evidence that production had been further contracted out. Unauthorized subcontracting of the apparel manufacturing process to other production sites is well-documented as a significant human rights risk as it is often a way to cut costs, meet rushed production deadlines with excess overtime, or otherwise accommodate a brand’s purchasing practices. When asked to pay the $1.5 million in severance pay that workers were legally owed under Guatemalan law, the businessman Sun Kyou Lee was nowhere to be found – another risk of unauthorized subcontracting. 

After it became apparent that the factory owner was not going to fulfill his obligations, American Eagle and Puma each eventually contributed $500,000 towards the severance pay that workers are owed. The UN Guiding Principles on Business and Human Rights make clear that this is the proper course of action, as businesses have the responsibility to respect human rights and address any “adverse impacts” of their business.

Private Equity-owned Lucky Brand Continues to Evade Responsibility

Lucky Brand continues to evade responsibility for their fair share of the severance owed to workers. And, just as advocates were initially dragged into a hunt for the disappearing factory owner, they are now forced to trace the convoluted trail of global capital to secure the remaining $500,000 workers are owed.

In 2020, Lucky Brand was purchased out of bankruptcy by Authentic Brands Group (ABG) and SPARC Group. Authentic Brands Group is a private equity-controlled group which owns a long list of fashion and sports brands and the licensing rights to a range of living and dead celebrities from Marilyn Monroe to Shaq. Authentic Brands Group draws on cash from a range of investors including Blackrock, their largest shareholder, to buy companies such as Lucky Brand. At the time that the Industrial Hana factory was producing for Lucky Brand, SPARC Group was a joint venture between ABG; ultra-fast fashion giant Shein (who was one-third owner as of August 2023); and Simon Property Group, the biggest mall owner in the U.S. In the fast-moving world of private equity dealings, this ownership has shifted in multiple high-dollar deals in the time period that workers have been waiting to be paid. 

But despite the billions of dollars of assets held and traded by Lucky Brand’s owners, they continue to evade their obligations to their supply chain workers. 

SPARC Group has taken no noticeable action to ensure payments to workers despite telling the Solidarity Center (an international worker advocacy organization) in November 2023 that Industrial Hana’s alleged conduct, if proven true, would not align with SPARC Group’s Code of Conduct for suppliers.” Per the Private Equity Stakeholder Project, “SPARC Group informed Solidarity Center that it had launched an investigation of these violations and asked its vendor to provide an appropriate response.” However, since then, neither Lucky Brand nor SPARC Group have provided any additional information about whether they actually intend to ensure the violations of their code of conduct are remedied and that workers are paid the severance that they are legally owed. A year later, in November 2024, SPARC Group told Sourcing Journal: “We have a robust manufacturer code of conduct that—along with a host of other mandates—requires vendors to ensure that employee wages and benefits are paid in accordance with local laws. Allegations of unpaid employee wages are of significant concern to us, and we take them very seriously.” But no payment from SPARC Group or Lucky Brand appears to be forthcoming.

Pay Your Workers – A Binding Agreement to Solve the Severance Problem

The workers, 65% of whom are women, who used to work for Industrial Hana have faced considerable hardships since the factory closed and they have been unable to collect their full legally-required severance pay. In Guatemala, as in many garment-producing countries, there is no unemployment insurance as there is in the U.S. Instead, workers rely on legally-mandated severance payments, which are calculated based on seniority at the time of job loss. 

Workers reported dire financial situations to the WRC in interviews: 

Workers are unable to pay for vital health services, rent, and groceries…Some workers report that they have had to withdraw their children from school because they cannot afford even modest, required school fees. Many of the workers affected by the closure also have had to take out loans from banks or street lenders at high interest rates in order to pay for their most basic necessities. All of the workers interviewed by the WRC reported that their financial situations are dire, and the continuing nonpayment of severance is having devastating consequences for them and their children.

Unfortunately, this state of affairs is not unprecedented. From natural disasters to the global COVID-19 pandemic, workers at the bottom of the supply chain too often bear the brunt of catastrophe and change. The Pay Your Workers – Respect Labour Rights proposal was developed to create a severance guarantee fund, as well as organizing protections for workers in garment supply chains. The framework of this binding, enforceable agreement is aligned with the relevant ILO Conventions and the obligations outlined for businesses under both the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Due Diligence Guidance for Responsible Business Conduct. 

While factory owners are, of course, responsible for paying their workers all legally owed wages and terminal benefits, the reality is that, for decades, brands and retailers have been the primary profit-makers and de facto employers in these supply chains, dictating both prices and production circumstances. When factory owners are unable or unavailable to pay workers, the UNGPs are unequivocal that businesses are responsible for the supply chain consequences of their purchasing practices, including providing appropriate remedy. 

Thus, the proposed Pay Your Workers Agreement would provide a proactive, rights-respecting path forward to ensure that garment workers don’t bear the brunt of the fashion industry – and it wouldn’t have to take a global advocacy effort for workers such as those who worked at Industrial Hana to recoup their legally owed severance pay. 

Lucky Brands, Authentic Brands Group, SPARC Group, and Shein – Time to Pay Workers

The bottom line is that the workers who sewed for Lucky Brand at the Industrial Hana factory in Guatemala have been waiting almost a year and a half to be paid the full severance they are owed. The remaining $500,000 represents a significant amount of money for the workers and their families – yet it would be just a miniscule fraction of the billions held and traded by the private equity firms that own Lucky Brand. 

This week marks one year since the investigation was first published and over a year that Lucky Brand and their ownership have had to conduct the investigation that SPARC Group committed to. The workers can’t wait any longer.