California Apparel News

Apparel manufacturers and retailers have to navigate a maze of labor laws to keep their operations above-board and profitable.

And it’s not easy. In California, the rules and regulations are more complicated than elsewhere because the state’s laws often are vastly different and stricter than their federal counterparts.

To decipher some of the ins and outs of labor laws, the California Fashion Association, headed by Executive Director Ilse Metchek, held a two-hour seminar on June 17 at the California Market Center. Stanley Levy of Manatt, Phelps & Phillips LLP; Laura Worsinger of Buchalter, Nemer, Fields & Younger; and Mark Brutzkus of Ezra Brutzkus & Gubner LLP spoke about dealing with contractors, hourly wages and discrimination.

About 75 people attended the seminar—including representatives from True Religion Apparel Inc., The Warnaco Group Inc., the Kellwood Co., Karen Kane, Wrapper, Pacific Sunwear of California Inc. and BCBG Max Azria—according to the CFA.

One of the most troubling issues for manufacturers has been AB633, the state Assembly bill passed Jan. 1, 2000, that stipulates that any party working with a garment contractor is responsible for that contractor’s labor violations.

Some manufacturers wonder how much of a responsibility they have to bear. Others wonder if they need to be held responsible at all.

“There are some people who hold themselves up as retailers, but they, in fact, are garment manufacturers,” said Levy, pointing out that Gap Inc. could be considered a manufacturer because sometimes the retailer hires contractors to produce goods for its chain stores. “The moment a retailer puts trim on a garment or fixes a garment that wasn’t done right, they become subject to all the manufacturing laws.”

Here are some common facts that California manufacturers need to know:

bull; If a manufacturer or retailer is acting with a contractor as a joint employer, the manufacturer is liable for the wages earned by the contractor’s employees.

bull; If a manufacturer or retailer works with a contractor and neither of them is registered as a business, the manufacturer or retailer is considered an employer of the contractor’s employees and is jointly liable for back minimum wages or overtime pay.

bull; If the manufacturer and the contractor are both registered, the manufacturer is only liable for its share of the back minimum wages or overtime owed the contractor’s employees.

Overtime issues

Another sticky area for many manufacturers and retailers is whether employees are to be paid as managers with an established salary or as hourly workers who get paid overtime after 40 hours of labor each week.

Recently, the Longs Drug Stores Corp. in Walnut Creek, Calif., agreed to pay $11 million to settle two class-action lawsuits that maintained the company failed to pay overtime to store managers who were allegedly improperly classified as exempt. Longs Drugs argued that the managers performed the same duties as nonexempt employees and therefore should be classified as such.

In California, state laws are slightly different from federal laws defining who is a manager (exempt status) and who is an hourly worker (nonexempt).

Worsinger pointed out there are two tests for figuring out how to classify an employee: a salary test and a duties test.

In California, to be an exempt full-time employee, you must earn at least $540 a week or $28,080 a year.

More complicated is the duties test. In California, employees must spend at least 50 percent of their time engaged in exempt duties, which include interviewing, selecting and training employees; setting and adjusting pay rates and work hours; supervising two or more employees; keeping production records; evaluating and disciplining employees; and planning work.

Nonexempt duties include maintenance work, clerical duties, production work or performing the same work as subordinates.

A designer doing creative work would be considered a salaried employee. An assistant designer or patternmaker redrawing designs or patterns would be considered an hourly worker qualified for overtime pay.

Classification of sales people is another tricky area. Outside sales people who spend more than 50 percent of their time outside the workplace are exempt from overtime pay. Inside sales people working for a retail establishment may not qualify for overtime pay if their pay is more than 11/2 times the minimum wage and more than half their pay represents sales commissions.

“If you have to show an employee is exempt, then you have to evaluate what that employee does on a daily basis,” Worsinger said. “We have these $25 million and $50 million settlement judgments against retailers and manufacturers just over misclassification.”

Addressing harassment

On the topic of discrimination, Brutzkus noted that having a written policy against harassment or discrimination is not enough.

In McGinest v. GTE Service Corp., George McGinest, an African-American employee, claimed that management was aware of a hostile work environment created around him because of his race and did not remedy the situation.

In this case, the U.S. 9th Circuit Court of Appeals noted that it was not enough for a company to respond on an event-by-event basis; companies need to respond as a whole to harassment in the workplace, the court found.

“It is important for employers to treat all complaints seriously,” Brutzkus said, noting that discrimination occurs in areas concerning age, sex, medical condition, marital status, national origin, race and religion.