Apple (NASDAQ: AAPL) has put contractor Wistron on probation after the company's inability to pay workers resulted in a riot that damaged a factory. Investigations by Apple, Indian authorities, and the media have begun to paint a picture of a subcontractor plagued by poor planning, bad decisions, and terrible resource management.
The findings of Apple's preliminary investigation into the incident found that worker claims that Wistron had not been paying them properly were true. As previously documented by Passport to Wall Street, claims were that workers were promised one pay grade but had their pay steadily reduced over time as they worked for Wistron. After collecting its findings and coming to a preliminary conclusion, Apple put Wistron on probation.
"Wistron has taken disciplinary action and is restructuring their recruitment and payroll teams in Narasapura. We have placed Wistron on probation, and they will not receive any new business from Apple before they complete corrective actions. Apple employees, along with independent auditors, will monitor their progress." The company said in a statement.
Wistron, for its part, told The Wall Street Journal: "We deeply regret this and apologize to all of our workers".
What went wrong to cause so many workers to end up unpaid? According to findings, it was a botched attempt to expand the factory's workforce to keep pace with demand. Supposedly, the factory had gone from employing 2,000 workers to 9,000 by the time of the riots. Human Resources at Wistron was unable to keep pace, which resulted in the large number of unpaid employees. Administrative shortcomings also meant that labor laws were not adequately filed, with many staff working overtime without legal authorization.
If any lesson is to be learned from the Bengaluru factory riot, it's that major corporations need to keep closer tabs on their subcontractors. Proper communication with Apple likely could have prevented wages not being properly distributed to workers as well as Wistron's own probation, which has resulted in new orders for iPhones being suspended until the company can prove to Apple that it can manage its rapidly growing workforce.