LOS ANGELES — The Department of Labor ramped up its crusade against apparel manufacturers that fail to pay workers fairly, levying $212,000 in back wages against a key supplier to Ross Stores and placing a stronger emphasis on the retail industry’s pricing structures.
The U.S. District Court for Central California in Los Angeles is requiring Vernon, Calif.-based YN Apparel to pay back wages to 270 people employed by its subcontractors. Investigators found wide-scale violations of the minimum wage and overtime requirements between September 2011 and August 2015 at 13 contract sewing shops located in Los Angeles and Garden Grove, Calif. The government said the companies paid less than the federal minimum wage of $7.25 an hour.
While the penalty isn’t the biggest imposed by the Department of Labor, David Weil, the top enforcer for remedying and preventing wage violations in the U.S., said the Wage and Hour Division is increasing its attention on the crucial role that retailers play in setting the prices that manufacturers must meet. He said, for instance, Ross would need to pay double the amount that it currently does for women’s tops to allow the factories to be in basic legal compliance.
“They need to be offering their manufacturers prices that in turn allow them to comply with the law,” Weil said in Los Angeles on Wednesday, as part of a visit to check on the major apparel and agricultural industries in the state. “The kinds of problems that we just find persisting in this industry all emanate from a supply chain that is broken and that ultimately leaves the workers bearing all of the risks and all of the costs of this system. And that is simply not acceptable.”
YN is also ordered to ensure that its subcontractors maintain valid garment registrations in California. It also must hire an independent, third-party monitor to check compliance with federal overtime, minimum wage and record-keeping provisions and to prevent it from entering into any contracts with those who do not.
Weil said his team presented the findings to Ross and tried to set up a meeting while he was traveling on the West Coast. However, the division can’t impose a consent judgment on Ross as it did on YN to order payments of back wages.
“We have limitations in terms of our statute about how far up a supply chain we can go,” he said. “But that doesn’t mean even if we don’t have statutory authority to take it to Ross as the ultimate responsible party, that doesn’t mean, number one, that they shouldn’t be sitting at the table, and, number two, that it would be unusual for them to be at the table.”
In response, a spokeswoman for the Dublin, Calif.-based off-price retailer, which operated 1,276 locations for its namesake chain and 172 units for dd’s Discounts as of November 2015, said: “Ross Stores takes labor issues very seriously and we require our suppliers to uphold our ethical standards. We also work very closely with the Department of Labor to make sure our vendors understand and comply with all applicable federal, state, local and international laws related to products we purchase and sell, and this is an ongoing and continuous effort.”
The crackdown continues a multiyear effort by the Labor Department. In the last five years, officials in Southern California have concluded over 1,000 investigations in the garment industry, resulting in more than $11.7 million in back wages. Since Weil started publicly highlighting the problems in November 2014, investigators have continued to find widespread minimum wage violations nearly 18 months later.
Government officials may face tougher challenges to keep cost-driven businesses bound to laws in the wake of Los Angeles politicians’ decision to increase the minimum wage for the city and unincorporated parts of the county to $15 an hour by 2020. The current hourly minimum wage in California is $10. The rate in Los Angeles is scheduled to increase to $10.50 on July 1.
Moreover, as e-commerce behemoth Amazon.com transforms into a fast-fashion garmento with its push into private label fashion and the retail market flounders on weak economics, factories could bend under further pressure to follow competitive, aggressive tactics when it comes to wages.
“Our point is you can’t have a business model premised on denying workers what the law requires. If that’s your business model, you’ve got problems,” Weil said. “We think that, as in many other parts of the economy, you can do right by paying your workers according to the law and you can also do well and be a profitable company and compete effectively.”