California Apparel News

Just as California apparel makers brace for increased offshore competition, the state labor department is preparing to help even the playing field at home.

The California Labor and Workforce Development Agency is increasing its investigations of illegal garment contactors. Assisting in the effort are two former labor commissioners brought in to beef up enforcement.

Late last year, Victoria Bradshaw was named the secretary of the California Labor and Workforce Development Agency, which was created in 2002 under Gov. Gray Davis’ administration, and Jose Millan was named deputy secretary earlier this year.

The two are concentrating their efforts on Southern California, home to approximately 4,000 of the state’s 5,110 garment registrants (garment contractors or any manufacturer that acts as a contractor). In addition, there are hundreds of unregistered and illegal contractors in the area flying below the radar.

It’s the illegal contractors that concern the state labor officials. “What I’m hearing from the Southern California area is that you have one base of legitimate manufacturers and contractors operating, and then there is a whole other tier not operating under the law,” Millan said.

State officials are amassing a hit list of clothing contractors, primarily in Southern California, that are violating various regulations— from underpaying their employees to not paying employee taxes—and going after them in force.

In addition, officials are zeroing in on Orange County garment contractors that are reselling their state-issued contractors’ licenses to non-licensed contractors that then portray themselves to manufacturers as legitimate entities.

“We’re stepping up enforcement,” said Rick Rice, assistant secretary of the California Labor and Workforce Development Agency. “We are not going to shotgun it but do it the smart way. A lot of agencies have different information on these companies. So we are sharing information between the agencies.

“Let’s say one company doesn’t register with the labor commissioner. They are probably not paying their EDD [Employment Development Department] taxes for people off-the-clock, or they don’t have workers’ compensation insurance. We’ll share information between the agencies and develop a focus list of potential violators. And then we will go after them.”

To beef up enforcement, state and federal officials are partnering with the Mexican Consulate and five Central American consulates in Los Angeles to educate Mexican and Central American citizens about workers’ rights. The joint venture program is called EMPLEO (Employment Education Outreach). The consulates and the state maintain a toll-free help line, (877) 552-9832, with assistance in Spanish for garment workers to report labor abuses.

Labor’s team

The stepped-up enforcement effort took its initial steps shortly after movie star–turned–politician Arnold Schwarzenegger was inaugurated in November. He soon named Bradshaw the new secretary of the state’s Labor and Workforce Development Agency. Until then, she had been the agency’s acting secretary.

Bradshaw has a long history as a labor watchdog. She was California’s labor commissioner when officials raided an El Monte, Calif., garment sweatshop in 1995 and uncovered 66 Thai immigrants who had been locked in a barbed wired–encircled factory.

Early this year, Millan was named the agency’s deputy secretary. Millan, a lawyer raised in East Los Angeles, was the state’s deputy labor commissioner under Bradshaw before being named state labor commissioner in the late 1990s. Millan and Bradshaw worked diligently during the Pete Wilson administration to enforce the state’s labor laws. They launched the Targeted Industries Partnership Program, which brought in federal and state agencies to maintain labor standards.

Recent efforts

Recently, state and federal officials investigated MiAngels Apparel Inc., a Los Angeles garment manufacturer that made athleticwear and women’s clothing. The state and the U.S. Department of Labor, which received an anonymous tip, found that the company’s 472 employees had not been paid for their work or given overtime pay between June 6 and July 16 this year. The California Department of Industrial Relations, Division of Labor Standards Enforcement, in early August distributed $724,600 in back wages owed the laborers. The wages were collected from the manufacturers that had contracted with MiAngels. Champion, the athleticwear division of the Sara Lee Corp., paid $514,468; Foothill Ranch, Calif.–based retailer The Wet Seal Inc. paid $181,150; and the Textile Unlimited Corp. in Hawthorne, Calif., paid $29,000. MiAngels has closed.

“What you saw with MiAngels is an example of what we can do,” Millan explained.

That example is being taken to Orange County, where a number of labor abuses are suspected in the garment industry.

Millan said his agency has formed a task force to crack down on illegal Orange County garment contractors.

“There are lots of wearing apparel which is being made in the home in Orange County, which is against state law. And there are lots of people who are profiting from the resale of garment licenses,” Millan said. To register as a garment contactor, one must take an exam on labor law and compliance. According to the labor department’s Rice, some licensed contractors will opt to sell their state registrations after they shutter their businesses. There’s a market for these second-hand licenses among contractors who haven’t taken the exam, don’t want to take the exam or can’t afford the fee, he said.

“We are looking at a small number of people. But once you begin an investigation, you don’t know how far the spider web spreads,” Millan said.

Tough Climate

The industry is hopeful that the labor department’s efforts will be successful and provide a boost for legitimate manufacturers who have been struggling in recent years to comply with California’s strict laws and the high cost of doing business in the state.

“That’s what they are supposed to do,” said Ilse Metchek, executive director of the California Fashion Association, a Los Angeles trade organization for the state’s apparel and textile industries. She noted that when the state increased the annual registration fee for garment contractors in 2000 from $250 to $750, the fees were to go into a fund to help police the industry.

Local companies have watched workers’ compensation insurance rates escalate in recent years. State lawmakers have been wrestling to reform the insurance laws in an effort to bring rates to a more manageable level.

Los Angeles has the benefit of being able to produce quick-turn trend-driven merchandise, but for apparel makers with longer lead times, there’s the threat of competition with manufacturers in China, India and other countries, where wages average between $70 and $100 a month for six-day work weeks. Overseas competition is likely to increase when quotas disappear on Jan. 1, 2005, among the 147 countries that belong to the World Trade Organization.

To add to the challenges are laws like Assembly Bill 633, which place an additional burden on many of the state’s manufacturers.

AB633 was drafted to ensure that companies throughout the supply chain take part in monitoring labor law compliance. And, according to many in the industry, compliance is the key.

In years past, enforcement has proved tricky because of the scores of garment contractors working underground. The labor department’s efforts are welcomed by the Garment Contractors Association of Southern California.

“We preach compliance with the laws,” said Joe Rodriguez, the association’s executive director.