A labor rights group says pay stubs show Chinese iPhone assemblers make $1.82 an hour

Factory workers for a company that builds Apple's iPhones in China work excessively long hours for low pay, according to a new report by a labor rights group.

New York-based China Labor Watch accuses Pegatron of violating Apple promises and Chinese labor law at its 70,000-worker Shanghai plant, which it says is Apple's second-largest iPhone assembly plant. Specifically the report claims that:

• 71.1% of Pegatron workers work longer than 60-hour weeks during peak season in October. Apple limits supplier employee workweeks to "60 hours, except in unusual circumstances"
• Interviews with workers suggest that "hidden, unpaid overtime" is rampant, including two mandatory 15-minute meetings each day
• The average monthly wage for Pegatron workers is $756, which is significantly lower than the average income of Shanghai residents. That works out to an average hourly rate of $1.82.

China Labor Watch findings are from a data set of 1,261 pay stubs provided to the watchdog group by 18 current Pegatron Shanghai workers, who collected pay stubs from other workers. The vast majority of the paystubs are from September and October, which is the "busy season for iPhone production at Pegatron," according to the report.

Apple, which has taken steps to improve the transparency and the conditions among its suppliers in recent years, did not immediately respond to a request for comment.

"This report seriously questions Apple's sustainability reporting. CLW's findings suggest severe discrepancies between what Apple tells the public and its investors about the working hours of workers making its products and the reality on the production line," China Labor Watch wrote.

Overtime work has been a huge issue for Apple in its supply chain. Years ago, compliance with the 60-hour working time guideline was below 50%, according to the Financial Times, before it rose to 95% in 2013.

In 2014, the last year for which official statistics are available, Apple said that the portion of supplier employees working more than 60 hours a week was 8%.

iPhone sales have exploded in the past two years, which may mean that suppliers are struggling to keep up with demand.

Apple is improving

Apple has become much more open in terms supply chain transparency under CEO Tim Cook. For the past nine years, Apple has published an annual supplier responsibility report, usually in early February. This year's report, covering 2015, has not been published yet.

But Apple's general strategy of outsourcing manufacturing to Asian partners means that it works with a group of hundreds of suppliers, any of which could violate labor practices without Apple knowing.

For example, China Labor Watch has said that Pegatron managers sought to deceive Apple on whether its employees received the 24 hours of safety training required by Chinese law.

As a result, Apple's approach to supplier compliance and transparency has relied on third-party audits, both with Apple staff as well as through the Fair Labor Association, a Washington DC-based non-profit that bills itself as an organization devoted to "improving workers' lives worldwide."

In 2015, the Fair Labor Association published an audit of the same Pegatron facility in Shanghai. It found:

• From September through November 2014, 23% of workers worked more than 60 hours per week, although the facility had received a special dispensation from the local Chinese government for overtime work exceeding the legal limit
• 10% of workers during the same time period did not receive one day of rest per week
• "Several issues" with fire safety and emergency preparedness, including that some "emergency evacuation plans were obstructed."

When asked about the differences between the China Labor Watch findings and its report, a Fair Labor Association spokesperson said that the organization doesn't comment on other reports, but emphasized that the two studies occurred a year apart, with Fair Labor doing its assessment of conditions in late 2014, whereas China Labor Watch looked at pay stubs from 2015.

At Friday's annual Apple meeting for shareholders, a vote will be held on a proposal backed by Northstar Asset Management seeking to form a "board committee on human rights."

Apple's board has recommended that its shareholders vote against the proposal.