California Apparel News

California Labor Commissioner Art Lujan and selected members of Southern California’s apparel industry met recently to discuss labor issues, recent legislation and other matters affecting the apparel and textile industry at an Apparel Summit hosted by the California Fashion Association and its executive director, Ilse Metchek, as well as by Manatt Phelps Phillips LLP.

The June 26 panel discussion, held at the California Market Center, featured attorney Stan Levy of Manatt Phelps Phillips, Lonnie Kane of Karen Kane and Carol Pender of CSCC Consulting Services Inc. Los Angeles County Economic Development Corp. (LAEDC) chief operating officer Barry Sedlik served as moderator for the discussion, in which panel members fielded questions from audience members on subjects ranging from the Customs Trade Partnership Against Terrorism Initiative to legal issues arising from labor violations.

California Apparel News, which also hosted the event, has compiled the following excerpts from the panel discussion.

Assessing the ImpactBarry SedlikChief Operating Officer LAEDC

If we go back to July of 1994, according to the Employment Development Department, which keeps track of the official employment status [in the state], they were able to inventory about 163,000 people working in apparel and textiles in California. Today there’s 153,000 combined in those two industries. Textiles has gone up a little bit, but apparel has come down by about 17,000.

That’s 10,000 fewer people that are paying taxes. That’s 10,000 fewer people for which employers are collecting withholding and paying for workers’ comp.

And according to Jack Kyser, who is chief economist at the LAEDC, every job in California is worth, on average, about $4,500 a year in terms of revenues that go to the state that are then disbursed through the general fundto a variety of sources.

That means today there’s $45 million per year less being collected by the state to be able to pay for all the things the state pays for and all the way down to the counties and to local governments. So that’s $45 million less that’s going to schools, to police, to labor enforcement.

This is an industr y over the last eight years that should have been growing, that because of the vitality that we have in this state we should have more employment today than we did eight years ago, but we don’t.

L.A. County today has about the same number of jobs that we had in 1992. But in [approximately] that same period—between the 1990 and the 2000 census— there are 656,000 more people living in L.A. County. So basically, in a decade, we’ve added no new net jobs, yet we have 656,000 more people that live [in the area who] require services.

Striking a Balance Art Lujan California Labor Commissioner

I want to make sure that the jobs stay in California, that employers stay in California, that wages, benefits and working conditions for the employees are such that they can raise their families, and I’ve seen the study that a lot of the wages that are paid in certain areas are very much livable wages. So my intent is not to destroy an industry but to try and work with the industry, to educate the industry on what’s required of them, so that we can go after the criminal element that is impacting on each and every one of your companies.

I’m working for a law enforcement agency. Our mission statement is to vigorously enforce the state labor laws. But it also says that we want to ensure that there’s a level playing field for those employers that abide by all of the state laws, that employers don’t gain an unfair advantage because they don’t obey the law, they don’t pay their taxes, and then provide unsafe working conditions.

We have to make sure that the people that work for the Department of Labor Standards Enforcement [DLSE], that they’re fair, that they’re equitable, that they treat people with respect, whether they’re somebody coming in to file a wage claim, or whether they’re dealing with an employer. We have to be consistent in the way we do things, both north and south. Sometimes that hasn’t happened in the past, but we have to provide from the top the direction and the guidance so that they begin to understand the big picture.

Stan Levy Partner Manatt, Phelps, Phillips LLP

The Secretary of Labor has [recently] announced that they are targeting small businesses to help small businesses be in compliance with a myriad of labor laws, and I think this is a very, very good opportunity for the industry to bring our contractors into this area and to make sure that we work closely in partnership with the federal government so that our factories are well aware of what their labor requirements are and cannot use as any excuse, “I didn’t know this.”

Investigating Apparel Apprenticeships

Andrea Kuhn Assistant Chief Deputy Director DLSE

One of the advantages of this new labor agency [comprised of the Agriculture Relations Board, the Workforce Investment Board, which is where the training funds come from, EDD, and the Department of Industrial Relations, of which DLSE is a part] is streamlining all the training facilities. I’d like to do a focus group because I know apprenticeship has been discussed in this industr y before but people haven’t been receptive. Maybe now with the changing economy what I’d like to do is have Henry [Nunn, chief of DAS] give an over view of how the apprenticeship works and bring in some of the key people that would be interested and see if it will work for this industry. [It] really takes the commitment of the industry. We’ve got the resources, but it really takes you, your industry, your knowledge and expertise, to see where it can apply from the technology as far as CAD to existing positions, training people within your companies, or hiring new hires, and that’s all stuf f that we’ll discuss at the roundtable and focus [group].

New Customs Regulations

Carol Pender President CSCC Consulting Services Inc.

[The Customs Trade Partnership Against Terrorism (C-TPAT) initiative] came about as a result of the Homeland Security Task Force, which is comprised of several large retailers. Their job was to consider how to explore gaps within the supply chain from point of origin all the way through to the door of the retailer. C-TPAT is evolving into a very, very large program. There’s been a lot of misunderstanding on what the program’s intent is.

[Participants in the initial program are] going to get a tremendous amount of goodwill publicity, [they are] going to have fast-lane shipping, all the way through. [Customs is] ensuring that you will have a very cost-effective reduction in being a C-TPAT participant.

I would say, representing so many retailers on the compliance end, they are anticipating and expecting long-term participation or at least due diligence similar to what they have to do. I think the reality is, as manufacturers, if you’re importing, the retailers are going to say, “You need to design your supply chain. Show us how you are controlling your security every step of the way.”

The long and short of it is we’ll probably all have to participate at some level, and you should at least know what the program is so if conversation does arise with your clients you at least are knowledgeable and you know the positives and the negatives.

Querying the Commissioner The California Fashion Association’s Apparel Summit on June 26 gave members of the apparel industry a chance to fire some tough questions at California Labor Commissioner Art Lujan. Lonnie Kane, president of Karen Kane Inc.

The Department [of Labor Standards Enforcement] hopefully is going to receive a windfall of money once we all start paying [the recently raised registration] fees. How are we in the industry going to benefit from these higher fees?

Art Lujan

We’re going to be able to process the claims in a timely fashion in the Bureau of Field Enforcement, which is our arm that goes out and conducts investigations. They are the ones that are looking at the underground economy. The more people that we can put on the streets, the more information that is supplied to us by the industr y of where the problems are, it’s going to make the operation that much more effective.

In your industry there’s no telling when people are working. They may not be working traditional hours. They may be working after hours. They may be working Saturdays and Sundays, which means that the more people that we can put out in the field conducting those types of investigations at off hours [the better]. That’s about the only way that we’re going to be able to get a handle on the underground economy that has impacted this industry so dramatically.

The Division is not going to grow, so everything that we’re looking at, I’m looking at to do more effectively and efficiently. We’re operating in cooperation with other law enforcement agencies so that we have a greater impact so that when we conduct certain types of operations, we work in tandem with EDD, with other taxing and licensing organizations, with law enforcement, with district attorneys, because we recognize that we’ll never have enough people out on the street, but if you combine different agencies, to provide additional eyes and ears, we can begin to address the underground economy and the concerns of respective industries.

Vera Campbell, owner of Knit Works/ Design Zone

[The California Fashion Association] has been in effect now for about eight years. From the beginning, our concern was always the underground economy. And instead of seeing a dwindling of activity in that area, what we’ve seen is that area has just exploded. And for many of us in the industry that compete in what we call the moderate market or the budget market, this underground economy has really had tremendous impact on our businesses. It is impossible for us to understand how they can sell a garment—that costs out at $4, if you’re doing it legitimately—for $4.25. And they are everywhere. We are in constant conflict with them on a competitive level. We often have no recourse but to work on margins that are substantially lower than what we should be working on, to try to get that order.

This is something we have brought to the table year after year, month after month. We have done so much as to walk some of your people through The Alley to show them where these goods are coming from, where they originate; yet instead of seeing some results, the only result we have seen is that that industry has just gotten bigger and bigger, and the legitimate industry and the legitimate makers in this segment of the market have gotten smaller and smaller. So we don’t really feel that the government has done anything to assist us with this conflict, in terms of how it is directly affecting our businesses and affecting our bottom lines.

Lujan

I hear what you’re saying, and it comes up in every single industry. In order for us to effectively address it, we need the cooperation of the industry. Because obviously we’re still not finding [the underground industry]. We’re just touching the tip of the iceberg because your industry does not have the visibility that other industries [have]—it’s very transient in nature. Half of the time, when we try to conduct a Bureau of Field Enforcement investigation, they’re shut down and out of business.

Your competition is destroying you, and they’re using criminal methods to do it. Those are the folks that are getting the unfair advantage. You can’t compete against that. I know you can’t. So I need and I require the assistance of the industry to point us in certain directions.

So if you’re prepared to walk down those alleys again and point out to myself, to me personally and to our staff, I’ll guarantee you that we’ll take the appropriate action against those.