SAN FRANCISCO, Calif. — An unprecedented year-long collaboration between manufacturers, contractors and federal labor department officials here has yielded a “master contract agreement” that could serve as the model for the garment industry nationwide.
Containing terms that reduce the risk of wage and hour law violations prevalent in the apparel business, the three-part contract is also a working commercial agreement that resolves many of the thorny issues that often arise between manufacturers and contractors.
Schedule A of the pro forma contract requires contractors and manufacturers to spell out their terms, including an agreed-upon completion date, price per unit, type of contracted work, total number of contracted pieces, overtime ex-penses agreement and optional proportional progress payments.
Schedule B is the contractor’s certification of good faith compliance with wage and hour laws. The contractor also agrees in this section that all contracted work will be done on the contractor’s business premises.
The three-page agreement, which precedes both schedules, addresses 14 points, including the following:
The manufacturer and contractor relationship is not an implied or actual joint employer relationship.
A manufacturer must agree to pay a contractor the “reasonable value” for any work done without listed or agreed-upon terms.
A manufacturer must pay a contractor no later than 10 working days after the completion of contracted work.
Any disputes that arise must be submitted to final and binding arbitration by a three-person panel composed of a garment contractor representative, a manufacturer representative and a neutral arbitrator jointly selected by SFFI and the NCCGCA.
While the document won’t let manufacturers and contractors “off the hook” if a violation is found, the Labor Department’s Conte said he would “take a closer look” at cases where the contract is used. “I won’t be running to a federal judge for an injunction as quickly.”
Designer Jessica McClintock has publicly endorsed the agreement. Members of the San Francisco Fashion Industries (SFFI), a local manufacturers association, received copies of the agreement in late December. While they cannot be compelled to use it, SFFI executive director Randall Harris said he expects that most members will.
Representatives of The Northern California Chinese Garment Contractors Association and the Chinese Bay Area Garment Contractors Association, who played large roles in hammering out the agreement, said they felt the document would protect their members’ rights. It is being translated into Chinese.
The San Francisco chapter of the United Ladies Garment Workers Union has also applauded the agreement.
Ironically, U.S. Department of Labor Wage & Hour Division officials who approved the final agreement — but did not actively work on its language — inadvertently inspired the whole process. Last January, the Labor Department’s district director Frank Conte addressed over 100 SFFI members in a meeting regarding stepped-up measures by federal and state officials to enforce the “hot goods” provision of the labor code, which authorizes the government to seize goods produced in violation of wage and hour laws. Manufacturers are often held accountable for their contractors’ violations in these cases and must pay fines and restitution before they can ship the goods.
In addition, they are responsible for policing their contractors’ shops to make sure no further violations occur. “The whole concept for the agreement was to protect our members from the ‘hot goods’ injunction,” said SFFI’s Harris. “In order to have a good faith defense, you need more than a handshake.”
“The enforcement program seemed harsh and scary to manufacturers and contractors here,” said Paul Gill, SFFI president and chief financial officer of Mousefeathers, a manufacturer of children’s clothing in Berkeley, Calif. “And, even though the two groups have always been adversarial, we had a subsequent meeting with the Chinese Bay Area Contractors Association and addressed the fact that contracts can be better written.”
In April 1993, the Northern California Chinese Garment Contractors Association (NCCGCA), a group of 85 Bay Area contractors was founded. Headed by president Patrick Cheung, the group joined in on the talks.
“We figured that if we could self-police, it would be better than before, when we were at the mercy of manufacturers and the Department of Labor,” Cheung said. “The D.o.L. has been too unreasonable with us in the past. They would use surveillance tactics and raid shops. They treated you like a criminal from the start. Without due process, they would call manufacturers if they think they found a violation. Manufacturers would panic and pull out their goods. This causes shops a lot of problems.”
In addition, Cheung said, “A lot of manufacturers give you work without telling you ahead of time the price they’ll pay. You often end up losing money. You don’t have bargaining power. Most of the smaller contractors don’t say a word. That’s why there is [labor law] noncompliance.”
While he is working to get all apparel manufacturers and contractors in the Bay Area to use the contract, Conte doesn’t think its existence makes his job any easier. “It’s not just a matter of people putting their signatures on paper,” he said. “We have to make sure they live up to the agreement.” In the fiscal year ending Sept. 30, 1993, his department conducted four garment industry sweeps, which resulted in 110 investigations. Officials found $710,000 in owed back wages, of which $636,000 has been collected. There was a decrease in violations as the year progressed, Conte said, attributing the trend to more awareness of the law.
SFFI’s Harris said that the 75-year-old organization will hold seminars in the near future to educate its members about the agreement. In addition, he and Conte are talking to San Francisco City College’s Dean Chui Tsang about offering vocational classes for individuals interested in jobs in the garment industry.
“Contractors have to change the way they do business and the proposed course work will show them how to be better business people,” Harris said.
In Los Angeles, on the other hand, noncompliance shows no sign of slowing down.
Rolene Otero, the Department of Labor district director said she “would be thrilled” if Southern California companies, including Guess, Z. Cavaricci and Nina Piccolino — who have signed “long form” compliance agreements with the labor department — adopted the master agreement.
“The problem is that there is no counterpart to SFFI down here,” she explained. “We have over 600 manufacturers and 6,000 contractors. San Francisco is one-tenth of the size, and the main players there like Levi Strauss do over $1 billion in business a year. If those companies adopt the contract, they can make something stick. In L.A., nobody — not even Guess — is big enough to have enough clout to make everyone sign up.”
Otero said she will be approaching California Mart management about getting the model contract distributed there.
“This is something positive for the industry,” said Kat Walker, vice president of Jessica McClintock and an SFFI board member. “It will provide an atmosphere of cooperation with contractors that will encourage manufacturers to keep their businesses in the U.S. It’s very clear and takes away all questions.”
Questions have rallied former employees of McClintock subcontractor Lucky Sewing to boycott the dress company. Lucky went out of business a year ago, and its jobless employees, represented by Asian Immigrant Women Advocates, are pursuing back wage claims through the state labor commissioner’s office. Although the designer offered an unspecified “charitable contribution” to 12 former Lucky seamstresses in December 1993, she admitted no wrongdoing.
Walker said that McClintock stopped doing business with Lucky one year before it went under and that the designer was being used as a scapegoat. Observers say such problems can be avoided with use of the master agreement.