Byline: Kristi Ellis

LOS ANGELES — J. Crew Group is slugging it out with the California Department of Industrial Relations. The controversy is whether a retailer should be considered a manufacturer when it deals directly with a contractor.
The case is scheduled to go to trial today in state Superior Court in San Francisco. The New York-based Crew is appealing an administrative ruling by the state that it must obtain a manufacturing registration to do business in the state.
The suit stems from an inspection by state labor officials of a Los Angeles-based contractor — Willington USA — on May 2, where overtime violations were found, according to Jose Millan, acting state labor commissioner. Investigators also seized 31 J. Crew garments, charging that the catalog and store operation is, by definition, an unregistered manufacturer and must pay the $185 fee.
A state hearing officer concluded on June 27 that J. Crew is engaged in garment manufacturing, confirmed the confiscation and cited J. Crew for failing to register as a garment manufacturer.
“The fact of the matter is that if you come to California and bypass manufacturers to deal directly with contractors, you are acting as a garment manufacturer,” argued Millan in a telephone interview from his San Francisco office.
In the suit, filed at the end of June, J. Crew claimed that the state statute defining garment manufacturing was “not intended to apply to companies like J.Crew Inc., who merely contract for the manufacture of apparel items.”
“J. Crew does not sew, cut, make, process, repair, finish, assemble or prepare any garment or article of wearing apparel or accessories designed or intended to be worn by any individual,” the suit alleged.
Discussing the state’s contention, Marion Quesenbery, a San Francisco attorney representing J. Crew, said, “It’s overly aggressive and wrong-headed and is not what the legislators intended when they passed the laws. You have a good company dealing with a registered contractor, and this is an incredibly ridiculous action by the state.”
The company argued in the suit that the state defines a garment manufacturer as any person who actually performs the manufacturing and does not include a person who merely contracts for the apparel manufacturing.
The company also claimed that it has no real property, employees, offices, outlets, showrooms, stores, warehouses or other facilities in California.
In a company statement, J. Crew executives said: “J. Crew has worked with contractors in California for approximately seven years, but we have never done any manufacturing in the state.”
The trial’s outcome could have significant ramifications.
“The problem is that anyone who purchases [the services of a company to make] a garment in California now runs the risk of being required to register,” declared Quesenbery. “This could be a huge disincentive to use California manufacturers and contractors, and they are driving away business.”
Millan, though, said he believes the opposite.
“I predict that if we win the case we’ll get a flood of out-of-state applications from people who want to do business legally in California,” he said.

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