“Apple could be asked to share details of its investigation with the labour authorities/court,” said one of the persons cited above, adding that a series of connected Supreme Court and high court rulings upheld that the primary employer’s responsibility.
Legal experts said the state government can ask Apple to join the investigations.
“According to the Contract Labour (Regulation and Abolition) Act, 1970, the contractor is responsible for payment of wages and the principal employer is ultimately responsible for it,” said one of them. This implies that the authorities can seek explanations from both Apple and Wistron.
Wistron has admitted to lapses in some of its payment obligations, sacked a senior executive and is taking steps to ensure such incidents are not repeated. Apple and Wistron didn’t respond to queries.
Pause on Orders
Apple said Saturday it had placed Wistron on probation and the contract maker would not get any new business until it took corrective action. “Apple employees, along with independent auditors, will monitor their progress,” it added.
This probation could impact Wistron’s ability to meet its production linked incentive (PLI) targets. Under the scheme, overseas companies have to produce smartphones worth Rs 4,000 crore over the base year’s production along with investment of Rs 250 crore through the first year, a target that Wistron is likely to miss, said industry executives. The incentives add up to 4-6% of such additional sales.
“Specifically, this is a big setback for Wistron, which is one of the largest suppliers to Apple,” said Navkendar Singh, research director at International Data Corporation (IDC), adding that it was unlikely to meet the PLI target for the year.
Wistron would not likely have recourse to the force majeure clause of the scheme. Clause 8.9 allows the empowered committee, which is an inter-ministerial body with the revenue and IT secretary as its members, to revise the incentive rates, targets and other criteria during the tenure of the scheme. In case of a force majeure event, it also has powers to amend, modify and withdraw any clauses under the scheme.“The epidemic and vandalism at the Wistron unit could have qualified for the force majeure clause but the fact that Apple has suspended further orders doesn’t qualify as a reason for relaxation under the PLI scheme, hence it might not be possible for the government to consider a relaxation for the iPhone manufacturer,” said one of the persons cited above.
According to filings by the companies with the government, so far, the Taiwanese contract manufacturer is the only company to have surpassed the annual PLI investment target of Rs 250 crore in just four months. Others such as Foxconn and Samsung have until March end to do so.