WASHINGTON — Despite decades of enforcement, the plague of sweatshops still exists in America.
As the Made in USA trend continues to gain momentum — and President-elect Donald Trump has centered his incoming administration’s focus on boosting U.S. manufacturing — government investigations continue to uncover illegal working practices in apparel factories, particularly in California.
The irony is that the Made in America movement might be fueling the use of sweatshops, according to government officials.
The Department of Labor’s Wage and Hour Administrator David Weil said after years of research, investigators have found that the root of the problem lies squarely with the pricing structure dictated by retailers and officials are addressing it by holding meetings with retailers to show them their findings.
“If you are simply seeking the lowest cost production, you [as a retailer or brand] would have left the U.S. a decade ago,” Weil said. “The industry that still resides in the U.S. is here because it provides just in time production capacity to retailers and those retailers need domestic sources for doing quick turnarounds.
“The problem is those same retailers are paying prices for that close-sourced domestic production that simply does not provide a basis for those contractors to both comply with our basic labor standards and make a return sufficient to comply with the laws,” Weil said.
He noted that the studies showed that contractors are only receiving about 73 percent in prices for orders of what they would need to comply with basic minimum wage and overtime requirements.
It’s been more than 20 years since authorities raided an apartment complex in El Monte, Calif., in August 1995 and found 72 Thai workers living in virtual slavery making clothing for brands and retailers. It resulted in President Bill Clinton forming an apparel industry Sweatshop Task Force and a “No Sweatshop” pledge from many industry participants.
Since that time, companies continued to move production to factories abroad, but there has also been something of a resurgence in U.S. manufacturing and increased demand for just-in-time production and quick turnarounds that has cast a fresh spotlight on U.S. factories.
While officials are not finding the same level of egregious violations that were found in El Monte or to a lesser degree in New York — where Kathie Lee Gifford infamously handed out checks to workers after they were found to have been underpaid in a shop making goods for her line — they are finding widespread minimum wage, overtime and record-keeping violations, depriving thousands of workers of fundamental pay, essentially making them modern-day sweatshops, according to Weil.
Of the 77 cases investigated between November 2015 and April 2016 in Los Angeles, Orange and San Bernardino counties, the government disclosed on Nov. 16 that officials had found violations in 85 percent of them, calculating more than $1.3 million owed to workers in back wages. In California, the hourly minimum wage increased to $10 from $9 last January.
In addition, more than $65,000 in civil penalties were levied against repeat or willful violators. The factories that violated laws regulating minimum wage, overtime and record-keeping made clothes for retailers including Ross Stores, T.J. Maxx, Forever 21, Bealls, Charlotte Russe, Burlington, Windsor, Nordstrom, Macy’s and Dillard’s.
“The sad reality is for workers in this industry there are still incredible problems and workers in this industry are subjected to inexcusable levels of violations of our basic labor standards,” Weil said in an interview. “That 85 percent number is the important number to understand. For a typical worker in this industry…[that means] they are being deprived of four to five weeks of their payroll because they are simply not being paid what the law requires them to be paid. That is outrageous.”
On average about $1,500 in back wages is owed to the workers.
Asked how he defines sweatshops and how the concept of a sweatshop has evolved over the past 20 years, Weil said: “It’s always a matter of degree.”
“The situation in El Monte was the most alarming one where there was indentured servitude. We did not find anything like that in these investigations.
“To me a sweatshop is about being treated in a way where, number one, your status is being taken advantage of in some ways. These folks are often in fear of retaliation because of their immigration status and the fact that they might not speak English…so there is fear of reprisal,” Weil said.
While there is no technical definition of a sweatshop, he added, “The kind of wage deprivation that we are seeing here to me is something [more than] non-compliance. That is too nice of a word. It goes to an extent beyond that.”
Combining the wage and hour violations with the kinds of health and safety problems that are found by investigators outside of his jurisdiction “speaks to me of what we call sweatshops.”
Over the last two years, the number of investigations and amount of unpaid wages owed to workers in Southern California’s garment industry has increased. The Department of Labor’s Wage and Hour Division investigated 257 cases involving 2,362 workers in the fiscal year ended Sept. 30, up from 225 cases and 1,558 workers in the same period in 2014. The amount of unpaid wages owed to the workers by the factories increased to $3.6 million in 2016 from $3 million in 2014.
Between fiscal year 2014 and 2016, the Wage and Hour Division conducted 668 investigations of employers in the garment industry, the majority of which were in the Los Angeles metropolitan area, and found $8.1 million in unpaid wages owed to 5,158 workers, the agency said.
Weil said the industry is smaller than it was 20 years ago, employing about 50,000 sewing operators in the country, primarily concentrated in Southern California.
“What drove El Monte 20 years ago is the same dynamic today — of pricing continuing to undermine compliance,” Weil said.
The California Fashion Association, a Los Angeles non-profit organization that promotes the state’s apparel and textile industry, noted that many retailers are going directly to contractors that are willing to work for the cost pre-determined by the suggested retail price. In response to the Labor Department’s recent investigations, Ilse Metchek, the association’s executive director, said, “None of the retailers mentioned…have used the services of California monitoring companies, and, to be fair, may not be aware of the appropriate laws they must follow.”
She also asserted that the illegal operations do not represent a typical garment factory.
“The majority of California’s apparel makers make no use of ‘underground’ factories where workers are not treated fairly in accordance with current labor law,” Metchek said. “The legitimate manufacturers and contractors repudiate these illegal operations as unfair competition.”
On the contrary, Ruben Rosalez, a regional administrator in the DOL’s Wage and Hour Division, said the companies cited in the investigation are registered with the state.
“We randomly selected from the registry,” he said. “These are folks that are supposed to be above ground.”
From recent meetings held with Ross Stores, Forever 21 and T.J. Maxx — the three retailers that had garments found most frequently in factories with wage violations — Rosalez said the companies recognize there is a problem, which they don’t condone at all. While the three monitor their overseas factories, only T.J. Maxx has a system that checks on its domestic vendors, he said.
“Our goal is to have them take ownership of the problem and start a formal monitoring program [in the U.S.],” Rosalez said. “The consumer pressure internationally has forced them to have a program overseas. It’s consumer-driven. I don’t think consumers are aware that we even have these kinds of shops located in the U.S.”
Among the retailers cited in the investigations that the Department of Labor disclosed on Nov. 16, Macy’s, Dillard’s, Ross, Charlotte Russe, Forever 21, T.J. Maxx and Nordstrom publish guidelines on their web sites that their partners are expected to follow.
A spokeswoman for Ross said the Dublin, Calif.-based retailer works with DOL to ensure its vendors understand and comply with all applicable laws on the local, state, federal and international level.
Los Angeles-based Forever 21 said it has met with DOL officials and is cooperating.
“Forever 21 applauds the department’s survey targeting the alleged business practices of third-party vendors, and their selected independent contractors, as well as the order that provides restitution to the affected workers,” a spokeswoman said. “While Forever 21 does not own or operate any of the third-party vendors or contractors involved, it is our policy and practice to not purchase merchandise from any companies who violate the law. In any case where we have learned that a third-party vendor may have violated the law, we take appropriate action available to us to encourage the vendor to help resolve issues and to improve compliance, in order to promote appropriate working conditions for employees of that vendor.”
At T.J. Maxx, based in Framingham, Mass., its code of conduct “requires that each of our vendors act in accordance with all applicable laws and regulations when manufacturing products to be sold,” said a spokeswoman. “Our code also expressly requires our vendors to pay the legally prescribed minimum wage or the prevailing industry wage — whichever is higher — and our vendors must ensure that all subcontractors they use comply with these same requirements.”
A spokeswoman for Nordstrom in Seattle said the company has reached out to DOL to learn more about its findings.
“We take claims like this seriously and have partnership guidelines in place that outline our expectations around working with vendors who, like us, are committed to creating a safe and fair workplace, including complying with all wage and hour laws,” she said.
Charlotte Russe, Dillard’s and Macy’s did not respond to requests for comment.
Avedis Seferian, president and chief executive officer at Worldwide Responsible Accredited Production, or WRAP, said: “The fact that we still have violations even in the U.S. is not going to be something that I can claim is surprising. The sad truth is that we have bad actors all over the world.”
He said companies often take a risk-based approach on monitoring and allocating resources for it.
“Clearly, you will consider the U.S. to be a more law-abiding nation than perhaps some others,” he said. “You might place risk lower there. That doesn’t mean you do nothing. That’s the point here. Whereas you might deploy greater resources to territories where you think the risk is higher, lower-risk territories ought not to be completely ignored.”
But he did note that based on his experience in the field over the last couple of decades there has been real improvement in working conditions in garment factories.
“We have raised the bar, although small violations anger us and justifiably so,” he said.
Nate Herman, senior vice president of supply chain at the American Apparel & Footwear Association, said companies do have monitoring programs for U.S. production and often use in-house teams.
“They recognize they need to have the same monitoring in place regardless of where they are sourcing their products, even if it is in the United States,” Herman said. “The main difference is they use their own internal auditors versus third parties. Obviously because they are in the U.S. sometimes it’s easier to use their own staff to do audits. I think it is better when you have your own people to see it firsthand. There is not a concern, for example, that anything will be lost in translation.”
In working with contract factories, designers and retailers must be vigilant.
“We run them through the gamut — the quality, the price, the cleanliness of the factory, the paperwork,” said Rob Paik, cofounder of Los Angeles-based Marybelle, which hires local factories in Los Angeles to sew its plus-size women’s line retailing for between $50 and $120. While he acknowledged that “there’s no 100 percent way to make sure” the contractors follow all the laws, “the pricing is really one of the best indicators.”
For instance, a U.S. factory that charges $8 to make one T-shirt is likely to be a company that is complying with the laws, he said.
“A price with a legit factory, it’ll be 150 or even 200 percent more than a non-legit factory,” he said. “If people aren’t following labor laws, they’re getting employees that aren’t highly skilled and trained.”
Apparel manufacturers and retailers can learn from the agricultural industry, where employers are “setting their rates high enough so the workers make minimum wage even with piece rates,” according to Rosalez. “Which part of the industry made that happen? It was the retailers,” he said. “Because the retailers are demanding it, these growers are making sure it happens.”
Weil said the meetings with retailers are in the early stages, but believes officials are changing the nature of the discussion by documenting the underlying issue of pricing.
“I think the larger competitive environment says that many of these industries are concerned about their brand image and I am hopeful that it will ultimately result in fruitful discussions that get us to a different place,” he said. “I also feel quite confident that one can continue to have domestic sourcing of this production in a world where you are both complying with the law and also doing well by your consumers and investors. I think we can get there. That’s the message we are trying to take to the retailers and all of the parts of the supply chain.”