California's highest court has ruled that sportswear giant Nike can be sued by a man who claims the company broke advertising laws with a campaign that defended wages and working conditions for overseas workers.

The case stems from a 1998 civil lawsuit which accused Nike of misleading the public about conditions in its factories in Vietnam, China and Indonesia.

The suit says public statements and letters to the editor in newspapers by the company amount to misleading advertising.

Nike argued that it can't be sued for false advertising because of free speech provisions.

The court disagreed and found Nike's ads defending its business practices in Asia were commercial and not subject to free speech protections.

"When a business enterprise, to promote and defend its sales and profits, makes factual representations about its own products or its own operations, it must speak truthfully," said the court in its decision.

Nike officials say they've come a long way in improving workers' conditions.

"Is a worker better off today than they were in 1998 when the suit was filed? The answer is yes," said spokesperson Vada Manager. "By no means do we think we have it all the way perfect. But over the last five years the situation has really improved."

Paid as low as $2 US a day

A new report by several human rights organizations, including Oxfam Canada, says Nike workers in Asia live in extreme poverty and get paid as little as $2 US a day.

The report says:

  • it is extremely difficult for workers to take legally mandated annual leave
  • respiratory illnesses associated with inhaling vapours from toxic chemicals are still occurring
  • at one factory, workers are still losing fingers in accidents involving cutting machines

The report did say Nike had made "commendable improvements" but they fall well short of allowing the workers to "live in dignity."

Nike lawyers say they will appeal the ruling to the United States Supreme Court. The company says the ruling sets a dangerous precedent which will deny businesses the right to defend themselves in public debate.

'Free speech is the loser here'
Nike has been the focus of several high profile campaigns which claim the company uses "sweatshops" to produce its athletic gear. Many of its factories in Asia employ young women who work long hours for little pay.

The California suit says the company knew its Asian workers endured dangerous working conditions and were unable to earn a "living wage" despite 14-hour workdays.

Nike fought the attacks through a publicity campaign portraying itself as a "model of corporate responsibility."

"This is a very important ruling," said Alan Caplan, one of the lawyers who filed the 1998 suit. "If a company is going to discuss about the labour conditions in their factories, they cannot be deceptive. It is an important precedent with implications well beyond Nike."

The American Civil Liberties Union argued on behalf of Nike.

"Free speech is the loser here," say the ACLU's lawyer Ann Brick. "The impact is that whenever a business speaks out...the statement is treated as commercial speech."

Brick says Nike has the right to defend itself on public issues.

"We're going to let the public decide who's right and who's wrong."