AN ARTICLE IN FRIDAY'S EDITIONS INCORRECTLY REPORTED THE NUMBER OF SILICON VALLEY COMPANIES THAT A SAN JOSE MERCURY NEWS INVESTIGATION FOUND WERE CONTRACTING OUT PIECEWORK. THE NEWSPAPER SAID IT HAD CONFIRMED THAT 14 COMPANIES ENGAGED IN THIS PRACTICE. (PUBLISHED 07/05/99)

The number of Silicon Valley workers who are licensed to do manufacturing piecework at home is exactly zero. The number of Silicon Valley companies that have state approval to subcontract such work is equally zip.

It came as something of a shock, then, when a two-part series this week by the San Jose Mercury News disclosed that low-income families all over this high-tech wonderland were assembling electronic circuitry at their kitchen tables. Inspired by the newspaper, the California Department of Labor is launching an investigation, joined by the federal Department of Labor and officials of the Occupational Safety and Health Administration.

The pieceworkers, who are often Vietnamese immigrants, were hired by subcontractors, who were working in turn for some of the biggest names here, including Hewlett-Packard Co., Sun Microsystems Inc. and Cisco Systems Inc.

Calls to the three companies yesterday for comment were not returned.

One family profiled by the paper was working on 10 circuit boards to be used for testing integrated circuits. Seven of the boards needed 1,500 transistors each, the remaining three 2,380 each. The family was paid for its two days of work a total of $176.40 -- about a penny a transistor.

"We need to get an idea first of just how deep this runs," said California Labor Commissioner Marcy Saunders. "We were only made aware of this by the article itself. In the last 10 to 13 years we have not received any complaints dealing with this underground industry."

The Mercury News said as many as 300 companies were paying for piecework, which is supposed to be subject to minimum wage and overtime laws.

One company, Top Line Electronics Inc., told the paper the company sends work home only when necessary. But paying by the piece is "how you motivate them," Senior Vice President Paul Khauv said.

"People work twice as fast as when they're working hourly," he said.

A former production manager for another firm was quoted as saying: "Sometimes when the job is so hot . . . even if you add [factory overtime] you can't make the schedule. [So] we give the workers 100 [circuit] boards and the next day they have to bring back 100 boards. Maybe at home they do it faster if they have brothers or sisters helping them."

Tom Rankin, president of the California Labor Federation, said yesterday, "We've always known there are really two worlds of Silicon Valley -- the bright shiny one and the underbelly, which isn't so pretty. Despite that, it was somewhat surprising to learn these companies were engaged in this kind of labor-law violation."