Employees work at a factory supplier of the H&M brand in Cambodia, December 12, 2018. REUTERS/Samrang Pring

Levi’s, H&M and Gap Inc. have backed a ruling that restricts the use of short-term contracts for garment workers in Cambodia, where critics say they are widely used to control staff and silence dissent.

The companies behind the three global fashion brands said they stood by an arbitration council’s ruling that a factory supplying them must give permanent contracts to 408 workers it employed on a short-term basis.

The ruling is significant because it could force hundreds of others to follow suit, ending what labour rights campaigners have condemned as the historic abuse of short-term contracts in the country’s $7 billion garment industry.

“We have made it clear that the factory must comply with the Arbitration Council ruling,” H&M spokeswoman Ulrika Isaksson told the Thomson Reuters Foundation.

The factory’s owner, Taiwan-based Roo Hsing Garment Co. Ltd, did not respond to a request for comment.

The company had indicated it would challenge the ruling, but the government has since made clear it backs the arbitration court’s interpretation of the law, meaning an appeal would have little chance of success.

The garment industry is a pillar of Cambodia’s economy, accounting for 40% of gross domestic product and employing more than 700,000 people, mostly women.

But it is rife with labour and human rights violations, according to labour rights groups.

In a survey of 464 factories, more than two-thirds of workers said bosses were illegally using short-term contracts, according to Better Factories Cambodia, a monitoring group overseen by the International Labour Organization.

Workers on short-term contracts are seen as less likely to be involved in unions, to report abuses, or to push back against bosses racing to meet rising production targets, for fear of losing their job.

Gap did not directly address the Roo Hsing dispute, but said it stood by the arbitrators’ decisions.

“We have communicated to all our suppliers in Cambodia our expectations that vendors adhere to rulings made by the Labour Arbitration Council,” spokeswoman Debbie Felix said.

Levi’s would take punitive action should the factory backtrack on a commitment to accept the ruling, spokesman Phil Zabriskie said.

“Roo Hsing has agreed to implement the ruling, pending additional clarification which is expected soon,” he said.

Under increased scrutiny as the world becomes informed of abuse faced by workers in fashion supply chains, Cambodia’s garment sector has been overhauled in recent years.

The minimum wage now stands at $182 per month – up from $61 in 2012.

But as salaries and standards rise, so do production targets, workers and advocates said, as factories look to offset increased costs.

“Threats of contract non-renewal are used to force workers into working regular overtime, meeting excessive production targets and from engaging in independent trade unionism,” said Moeun Tola, executive director of the Center for the Alliance of Labor and Human Rights.

Last week’s legal clarification settled a debate between workers and employers over how Article 67 of Cambodia’s Labour Law should be interpreted.

It made clear that, aside from an initial probationary period, those who have served for two years or more are entitled to contract upgrades, to permanent positions with bonuses and benefits.

“There’s really no excuse now. ‘Differing interpretations’ has always been the standard excuse for non-implementation of the law,” Tola said.