L.A.’S LABOR PAINS

Byline: Kristi Ellis

LOS ANGELES — It had been touted as the best solution: a joint crackdown between state and federal agencies on the seemingly insurmountable problem of sweatshops and labor abuses in California’s apparel industry.
But four years after the formation of the industry’s first multigovernment-agency task force, after 1,617 garment inspections, $13.4 million in penalties assessed and $6.4 million in back wages recovered (all figures are through 1995), the question of whether investigators have made a significant dent in the apparel industry’s underground remains unanswered.
The situation is complicated by the question of how much responsibility manufacturers must bear, and even about practices of companies outside their control. Only last week, Maurice Marciano, chief executive of Guess Inc., could be found defending his company’s policies at a Labor Department conference. And Guess not only has an in-house monitoring program, but is on the Labor Department’s Trendsetter list of brands that produce under sweatshop-free conditions.
One thing is certain. The subject has stirred the attention of California contractors, manufacturers and retailers. Awareness has increased, both publicly and privately, and manufacturers are implementing monitoring programs. True reform, however, requires more time, according to many observers.
The conditions at El Monte put sweatshops under a national spotlight. On Aug. 2, 1995, officials announced that 72 Thai workers were being held in slave-like conditions and forced to pay off smuggling debts by sewing for a number of local manufacturers. Seven El Monte operators were convicted and jailed on charges ranging from harboring illegal aliens to kidnapping.
It not only sparked national attention and heightened awareness of poor working conditions and other labor abuses, it also became a catalyst for the proliferation of monitoring services and programs.
“El Monte represented a level of sweatshop exploitation that was so bad that nobody could ignore it anymore,” said David Young, director of UNITE’s Los Angeles organizing project. “It takes slavery, it seems, to wake up people.”
The subject stayed in the public eye with the discovery of Kathie Lee Gifford brand clothes in sweatshops in the Honduras and in Manhattan. Gifford has since become the U.S. Department of Labor’s poster child against sweatshops. Under the direction of Labor Secretary Robert Reich, the federal government has also launched a massive effort to stamp out sweatshops with a new presidential commission and a Trendsetter list, aimed at recognizing firms that avoid doing business with sweatshops.
Labor officials acknowledge that monitoring is not the total solution, but they claim compliance levels have improved in Southern California, which has the largest concentration of contractors and manufacturers in the state. It has especially improved in monitored contracting shops.
Government officials, industry organizations and manufacturers said that, despite shortcomings, the Targeted Industries Partnership Program and monitoring efforts have been effective. TIPP is the multigovernment-agency task force that was started in 1992 to help police the industry.
“Manufacturers are more willing to monitor,” said Bill Buhl, Labor’s wage and hour regional administrator in San Francisco. According to a recent survey, 40 percent of manufacturers have some level of monitoring in place. “We went from zero to 40 percent” since 1992, he said.
The survey, which was conducted last March and April by state and federal investigators in Southern California, showed minimum wage violations dropped to 43 percent from 61 percent compared with two years ago, while overtime law violations dropped to 55 percent from 78 percent. There were other improvements, but there were also some troubling areas, including a rise in the failure to provide California registration, from 11 percent to 33 percent, and a cash payment violation rate of 33 percent.
Buhl claimed the statistics prove that firms that monitor have a much lower rate of violations in their contracting shops than those that don’t.
“The average number of violations in monitored shops is almost half of that found in nonmonitored shops,” said Richard Reinis, executive director of Compliance Alliance, which represents 13 manufacturers with combined sales of $1 billion. Additionally, the survey said overtime violations are less than half the number of violations in nonmonitored shops.
“Since El Monte, the number and scope of violations in monitored shops has dramatically dropped,” Reinis said.
On Tuseday, the government released similar results of another survey, conducted last month, of 40 Los Angeles sewing shops. Of the 40 shops, 18 were being monitored, and at these 18, wage violations were found 18 percent of the time, compared to 47 percent of the time at the 22 unmonitored shops.
Additionally, back wages owed workers averaged $2,619 per monitored shop, compared to $6,580 at unmonitored contractors.
The downside is that thousands of small and medium manufacturers still have not adopted monitoring programs, Reinis added.
To date, 48 California manufacturers have signed the Labor Department’s agreement to set up a mandatory monitoring program. There are approximately 1,500 manufacturers and 6,000 contractors in California.
“We have those who have spotless records, those who are not educated and those who don’t care,” said Roberta Mendonca, the state’s labor commissioner.
The state Department of Industrial Relations, which received an additional $2.8 million in funding, has added 24 new investigators, bringing the total to 33 in Los Angeles County. Mendonca said their main focus will be on the garment industry.
Jose Millan, who resigned Aug. 30 as a California deputy labor commissioner and who was a leader in the El Monte raid and a TIPP enforcer for three years, pointed out that increased monitoring has not translated into true reform. But a cottage industry of private monitoring firms sprang up after El Monte, alongside government and in-house monitoring programs.
He said, however, that the quality of monitoring is “all over the place.”
“People are more interested in covering their butts than making real progress towards compliance,” Millan contended. “If they can get away with it, why not? At least they get the government off their backs.”
Millan said the main challenge as a result of El Monte has been how to make the consumer aware that goods are made in compliance with state and federal laws.
“We need to have a way to identify goods made in compliance and a way to reward good employers,” he said.
Although Secretary Reich’s Trendsetter list offered one solution, some companies on it have had further violations, which has brought the credibility of the roster into question.
“What was the criteria used to identify the good guys on the list?” asked Millan. “The Labor Department never asked the state for a history of violations for the companies on that list.”
Recent complaints against Guess have prompted federal authorities to conduct a “thorough review” of the company, due to alleged sweatshop ties.
“We feel they are supposed to be the models for the industry, and if a perception exists that they are getting away with something, we need to address that,” Buhl said.
Guess reflects the complexities involved in monitoring contractors and brings into question how far a manufacturer’s responsibility extends.
The Labor Department named Guess to its Trendsetter list last December, but the company has since become the target of protests by UNITE and a lawsuit filed by former workers at its contracting shops, who charge that the firm uses sweatshops.
Guess attorneys, who have filed a countersuit charging defamation, claimed the union is manipulating the situation and using it to pressure the company into signing a union pact. Company executives have maintained that if they find any violations at contractors, they take immediate action.
Over the past three years, Guess has terminated more than 15 contractors who violated the compliance program and has brought others into compliance with state and federal laws.
Commissioner Mendonca also came to Guess’s defense in August, saying she had no evidence the company had any knowledge of the charges of illegal homework activities against certain of its contractors.
“We were the first company in the country to establish a monitoring program in 1992, and we were and are still the model for the industry,” insisted Stan Levy, former counsel for Guess and now a consultant to the company.
Levy said Guess, which uses about 50 to 60 Southern California contractors, has four in-house compliance executives who do surprise audits of every contractor at least twice a month and random investigations on weekends.
“What is most important is that we are reacting to violations,” said Marciano, Guess’s ceo. “We want this industry to have a clean name.”
He emphasized that most major Southern California manufacturers are serious about cracking down on contractors in violation.
Buhl acknowledged that some manufacturers are talking about monitoring, but he said his department is focusing on contacting retailers, which “scares the hell out of the manufacturers.”
Manufacturers who have taken steps to comply, as well as trade group executives, also argue that retailers must be more involved in the monitoring of their vendors and contractors if enforcement is to work in the long run.
Lonnie Kane, president of Karen Kane Co., said retailers should be held to the same level of responsibility because so many do private label.
Kane uses about 35 contractors. To monitor them, he hired a private compliance service in February at a start-up cost of $40,000.
He also pointed to price pressures at the budget and moderate levels, noting that retailers do not pay prices that allow “manufacturers to make their goods in the U.S. legitimately.”
Another problem is that monitoring costs are passed on to the contractors. Kane said he does not pass on the initial cost, but if contractors are found in violation, he will pass on the cost for another audit.
“We have created an industry of new millionaires in the compliance companies who are out for profit and not the betterment of the industry,” said Joe Rodriguez, executive director of the Garment Contractors Association in Southern California, which has 200 members. He said many contractors are charged by manufacturers for the monitoring, and the costs are “killing contractors.” He added that GCA is negotiating with the Labor Department to set up its own monitoring program to alleviate the situation.
Robert Walter, plant manager of Frank Walter Sportswear Contractors Inc. here, and a member of the GCA, said there hasn’t been much improvement. He said many manufacturers don’t even ask for the high-end contracting quote, which means they aren’t looking for the legitimate price anymore, but are still looking for illegitimate or semi-legal contractors.
Walter said he refuses to pay monitoring costs, but that could destroy his 20-year-old business.
“I believe many of us are bleeding to death due to the low prices,” he said. “The retailers are going to have to raise the prices. Wal-Mart can’t have it both ways.”
His business has changed over the past 10 years as well. He said he has to plan for smaller volume, shorter runs and less consistent styles.
“Profitability is nonexistent,” he said.
Millan argued that independent monitoring firms need to be evaluated.
“I hope it comes to a standardization of monitoring and that there are differences between monitoring companies,” he said. “They should all use uniform criteria, and those reports should be made public.”
Another threat of increased enforcement is job flight. Although the shift in production is based more on cost/price issues, many warn that more jobs could be lost if the industry doesn’t take immediate steps to curb violations.
For example, Clothes Connection, which makes clothes for Wal-Mart, announced plans earlier this year to shift production to Mexico after two years of labor and immigration problems. The company employed 2,000 in its Santa Ana, Calif., plant at its peak, but decided to relocate to Tijuana, Mexico.
Reinis of the Compliance Alliance warned that the industry could lose thousands of jobs in the next two years and face third-party interference in management if it does not take drastic steps to curb sweatshops.
Reinis contended that there is already a significant shift of production to Mexico and to factories abroad.
“We are likely to see more unless the industry becomes more modernized,” he said, calling for local, state and federal funds to help bring that about.
“The industry is large enough to warrant funding to support the modernization,” Reinis said, “and the excellent side effect would be improved working conditions.”

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