GOVT. TO EASE UP ON RETAILERS

Byline: Kristi Ellis

WASHINGTON — Retailers can relax — the Department of Labor’s pressure on garment industry sweatshops hasn’t weakened, but the spotlight put on merchants in the Nineties is being put on a dimmer in the Bush administration.
Labor Secretary Elaine Chao has made it clear she does not plan to “strong arm” retailers, and her new Wage & Hour administrator Tammy McCutchen isn’t making retailer scrutiny a top priority, either. That’s a far cry from the days of former Labor Secretary Robert Reich’s high-profile, anti-sweatshop campaign during the Clinton years.
Reich made headlines and ruffled feathers when he used the office as a bully pulpit and pressured retailers through publicity and a Labor trendsetter list to take more responsibility over working conditions and wages at home. When Alexis Herman succeeded Reich in 1997, the agency’s anti-sweatshop efforts became low-key. But she did not deter from consulting with retailers and creating more of a cooperative partnership with the apparel industry.
Today, the agency is placing emphasis on compliance assistance and enforcement at the contracting and manufacturing levels, where training and education are key components in the strategy. McCutchen, who has only been at the helm for three months, said she hasn’t ruled out going after retailers altogether, though she will look at things on a case-by-case basis.
“I don’t have any current plans [to publicize the names of culpable retailers], but that’s not to say we won’t do anything,” she said, adding that inspectors will always go after “bad actors.”
This shift in focus troubles labor, human rights and advocacy groups.
“It is still early in this administration, but there is some sense that [Labor is] not likely to go after retailers,” said Susan Cowell, a vice president of UNITE. “We would view that as stepping away from their responsibility.”
Cowell emphasized the long-standing argument made by watchdog groups that retailers control the purse strings and therefore must be held accountable when contractors and manufacturers are charged with labor-law violations ranging from minimum wage and overtime infractions to the use of child labor.
“Without retailer responsibility, there is no way to improve working conditions in a substantive way,” she claimed. “All the education in the world will not change the behavior of contractors who live in an environment where they have to cut standards to survive.”
Former Labor Secretary Reich, who is currently running for governor of Massachusetts, said in a phone interview that he put consumer pressure on big retailers and manufacturers at a time when conditions in the garment industry were worsening, particularly on the heels of El Monte — one of the nation’s most notorious and egregious sweatshop cases, in which Thai seamstresses were found to be held in virtual servitude.
“We certainly pulled out all of the stops,” Reich said. “Had we not, I suspect conditions would have worsened to an even greater extent.”
He noted that the agency has a limited number of inspectors and resources, which is one reason he had to rely on consumer pressure. He was quick to note that voluntary compliance is “always better than the club of enforcement,” though he “suspects consumer pressure is still needed because those enforcement resources are still very limited.”
It is now up to the new regime to determine the best course of action.
McCutchen took the helm of the Wage & Hour division, which is charged with enforcing minimum wage, overtime and child labor laws under the Fair Labor Standards Act, in December. She recently unveiled her new strategy — one that focuses on repeat offenders and compliance programs — in an interview in her office overlooking the Capitol.
An Illinois native, McCutchen hails from a corporate background where she was most recently senior counsel for Hershey Foods Corp., evidenced by the bowl of Hershey chocolates on her desk. While there, she provided counsel on labor and employment matters involving Hershey’s 15,000 employees at corporate offices and 22 manufacturing plants in the U.S., Canada and Mexico. In her capacity, she dealt with the Fair Labor Standards Act.
In her new role as traffic cop at Labor, she will control five regions with headquarters in Philadelphia, Atlanta, Dallas, Chicago and San Francisco, and some 975 inspectors. McCutchen admitted she is only “halfway up” the learning curve when it comes to garment issues. For instance, she wasn’t clear on whether the garment industry has many unions, but that’s likely to change rapidly.
As she gets up to speed, McCutchen is formulating a concise plan, one that maintains the same numbers of inspectors for compliance and enforcement. The entire Wage & Hour division, which investigates industries from agriculture to restaurants, employed about 950 to 975 inspectors in fiscal year 2002, which ends in September. McCutchen said she plans to maintain that level in fiscal 2003.
“I need to look overall at where our investigators are and make sure we have the right number with the workload,” said McCutchen.
She has also more than doubled the number of inspectors — from two to five — on the island of Saipan, which is part of the U.S. Commonwealth of the Northern Mariana Islands and has become synonymous with charges of garment-worker abuse. Of the five officials, three are permanent and two are on a two-year rotating assignment. There is also a new permanent investigator in nearby Guam.
Three lawsuits charging rampant worker abuses on behalf of thousands of current and former employees are pending against several major U.S. manufacturers and retailers who source in Saipan, as well as contractors on the island. Many top firms have settled the suits with multimillion-dollar payments to workers.
The Labor Department recently filed its own two lawsuits against two contractors, Mariana Fashions and Express Manufacturing Inc., in Saipan for violations that include failure to pay overtime. The agency is seeking a combined total of $1.5 million in back wages for about 600 employees at the two plants.
“It is important not to forget [about Saipan] when we focus so much on New York and California,” she said of the U.S.’s number-two and number-one apparel-manufacturing cities, respectively.
Meanwhile, Labor will start to track repeat violators in databases this year, she noted. McCutchen said she has four tools at her disposal: publicity, the increased use of Hot Goods laws, civil money penalties and litigation. Hot Goods is a Depression-era law that allows officials to block shipments made in suspected sweatshops until wages are paid. In the past, federal investigators did not go back a second time without a complaint, but McCutchen plans to change that policy.
“There is no excuse for repeat violators,” she said. “Once they’ve been told they are in violation and this is the law, we shouldn’t have to come back again. If you go back to repeat violators, that’s when you can use more aggressive tools like litigation and Hot Goods.”
The other key component of her strategy focuses on child labor in all industries, including garment making. She said Labor will roll out a public awareness campaign this spring regarding such abuses.
Among Labor’s key tools in tracking compliance in the apparel industry are quarterly garment reports and biannual surveys. The quarterly reports list the names of contractors and manufacturers who have been fined for violations in various regions, as well as the total amount of back wages collected in the period. The surveys are based on investigations in a region, such as San Francisco, and measure how many contractors or manufacturers have come into compliance with everything from minimum wage to cash pay laws against the previous survey.
Most industry trade groups, both national and regional, are breathing a sigh of relief as the Labor Department takes a more conciliatory approach. Randall Harris, executive director of San Francisco Fashion Industries, which represents some 200 manufacturers, said Reich’s strategy was flawed.
“Some tended to believe that higher-profile exposure was the key to turning around the problem,” he said, adding that the campaign to “expose weaknesses in the industry was successful, but the campaign to “turn those weaknesses around has been marginally successful.”
Compliance rates in Labor’s garment survey in Los Angeles in 2000, the most recent, were worse than those in 1998. Harris, like most other associations, welcomes sitting down with officials to find creative solutions to the problem as “opposed to taking punitive measures.”
“The Department of Labor has virtually given up on [the garment industry] because they couldn’t make a difference,” said Ilse Metchek, executive director of California Fashion Association, which represents about 200 contractors. “If you are working for five or six years [on one industry] and there is no change, then you either have to change the premise or change the people.”
Metchek faulted the agency’s policies under Reich’s reign, which she said were an outcome of El Monte. She said, “[Labor officials] have looked for another El Monte under every rock and they haven’t found one. They have not been able to affect a difference.” Metchek is a proponent of training programs and fix-it tickets whereby investigators give businesses a chance to correct violations before they fine them.
In his own defense, Reich claimed the situation in the garment industry improved “relative to where it was heading.”
“The situation was so bad we had to use every tool we could find and enlist every major retailer, manufacturer, consumer group and labor group,” he said. “It was a collaborative effort from the start.”
But Chris Tampio, director of labor policy at the International Mass Retail Association in Washington, said retailers were “afraid” to work with federal labor officials in the past because they took such an “adversarial” approach.
“Training and compliance assistance is where we would like to go,” Tampio said. “That approach works better than trying to play ‘I gotcha.”‘

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