AB633 Regulations: Industry Reaction

An enacted piece of legislation aimed at extending compliance liability across the apparel industry has undergone yet another revision. The Labor Department’s Division of Labor Standards and Enforcement (DLSE) recently sent a revised set of regulations concerning the application of Assembly Bill 633, which was passed in 1999 but has yet to be enacted. The DLSE said it considered the industry’s concerns and suggestions before sending the new set of more “industry-friendly” regulations to about 6,000 manufacturers and contractors in California.

Among the new regulations: a requirement that contractors list on each employee’s pay stub the labels worked on during the pay period; a requirement that manufacturers and contractors submit personal information such as social security numbers and driver’s license numbers to the DLSE (although the regulations stipulate that this information will be kept private); and an increase in registration fees to $750 per year for new companies.

California Apparel News manufacturing editor Claudia Figueroa recently spoke with several industry leaders for their opinions of the new regulations.

Paul Gill, apparel industry consultant, San Francisco

I believe the revised proposed regulations in support of AB633 are still flawed. The minimum fee for a startup or micro-business manufacturer is set at $750 per year, which is triple the statutory minimum. I am certain that neither the Department of Industrial Relations nor the governor’s office have had any intention of hurting business in California. I believe these flaws are the result of staff inadvertently creating policy while attempting to strengthen regulations. I have urged those with oversight of this process to re-examine these proposed regulations and I expect that will happen.

Randall Harris, executive director, San Francisco Fashion Industries

The new requirement that the residence addresses, driver’s licenses and social security numbers of certain employers’ hourly and mid-level management workers be submitted to the DLSE is entirely unreasonable and without any clear purpose. While it is true that, like any well-run company, manufacturers may empower some of their higher-level employees to make decisions concerning wages of lower-level employees, these mid-level managers are not business owners. They are wage-earning employees and as such cannot be held ultimately liable for labor law violations by the DLSE.

Additionally, a $750 fee for a startup company or even a small existing company is unfair and without justification. In all of the meetings that I attended, I never recall an initial fee of this amount being discussed. It is totally unreasonable to ask a manufacturer who is just starting out to pay this kind of fee. There are hundreds of firms with just one or two employees that will be forced to pay this amount simply because they contract out some very modest amount of sample production. Meanwhile, the sewing contractors—the players in our industry that, according to DLSE, actually break the laws and defy the compliance regulations—are only required to pay a $250 entry fee. Why is it any more affordable for a small designer/manufacturer who has never been identified as the problem than a contractor? The fee as it is proposed will present a serious barrier to law-abiding individuals interested in starting and growing a company in California’s apparel industry.

Kimie Lee, executive director, Garment Worker Center, Los Angeles

It’s outrageous that it has taken over two years to implement AB633, a law written to protect garment workers from exploitation. The state has lost millions of dollars in increased registration fees that could have been used for better labor law enforcement. Meanwhile, garment workers continue to suffer under sweatshop conditions for sub-minimum wage.

Ilse Metchek, executive director, California Fashion Association, Los Angeles

Regulations don’t “work for our industry”hellip;people do. [The newly revised regulations’ success in California’s apparel industry] depends on the methodology used to implement the regulations. These new regulations will not make a difference unless an effort is made to inform those who are just now joining the state’s apparel industry about these laws [and how they work] and, perhaps, re-educate the manufacturers and contractors who have spent years working under another system. It is interesting to note that this bill was written at the end of 1999 to be implemented as of January 2000. Here we are in April 2002, still working on the regulations and revisions. If a business project took this long to come to fruition, either the project would be dropped or the management would change direction. But it’s not business—it’s government regulation.

Bob Reed, owner, Stitches Inc., a sewing contractor, Los Angeles

No matter how well-intentioned this legislation is, it will, like many past legislations, result in more scrutiny of the visible members of the contracting community. My company has been operating for nearly 18 years without any citations from the DLSE. This could be attributed to good luck or the fact that I, like many other well-intentioned and law-abiding contractors, have chosen to comply with the laws of the state’s Labor Department in spite of the increasing hardships they have brought on us.

Bill Dombrowski, president, California Retailers Association, Sacramento

My association and other apparel industry parties worked on the regulations with the DLSE and put forth various drafts that went into that process. On the unfortunate side, at one point there was some language that would have made it clear that a retailer had a safe harbor by working with registered garment manufacturers. Unfortunately, that is not included in the final regulations. What you do have is basically a status quo on the definition of garment manufacturer. The newly revised regulations don’t expand on the definition [of the retailers’ role] to include private label. For years, we have been fighting this battle against sweatshops that produce apparel for our retailers, and yet on a case-by-case basis our retailers have been forced to go through the process of litigation. The California Retailers Association had hoped there would be language that would provide greater clarity with respect to the state’s retailers.

Donald Owen, contractor, California Joy Inc., Los Angeles

I think that listing the names of manufacturers that we do jobs for on employees’ paychecks could be harmful to our business—those are our trade secrets, and what if one of those paychecks gets in the hands of our competition? I think we should not be required to divulge that information. Another problem with that requirement is that there are no payroll software companies anywhere in the U.S. that have that kind of program. So, it’s going to be costly to have a specialized payroll system made just for the contractors in California. The state has not offered to provide our companies with software for that kind of payroll format, nor have they offered to help us fund such a project.

Stanley Levy, attorney, Manatt, Phelps & Phillips, Los Angeles

Unfortunately, the new draft of the proposed AB633 regulations, which the DLSE circulated for comments a couple of weeks ago, still does not properly address the industry’s legitimate concerns for protection of the rights of due process and privacy. The proposed regulations requiring residence addresses for officers, directors and principal shareholders are an invasion of privacy and may well be unconstitutional. The proposed regulations, which deem the worker to be the prevailing party in the process and therefore entitled to attorneys’ fees—even if, at the hearing, the worker is awarded less than the recommendation—violate rules of fundamental fairness and due process and encourage the worker to go to hearing rather than accept a meet-and-confer recommendation. Likewise, the proposed regulation requiring the manufacturer to post a bond following a meet-and-confer [during which] the worker rejects the recommendation is likewise fundamentally unfair and violates due process. The proposed regulation requiring the manufacturer as wage guarantor to pay interest has no statutory basis and is also blatantly illegal.

These proposed regulations, if implemented, are so burdensome and oppressive and improper that the state of California will continue to drive the apparel production by legitimate manufacturers and contractors out of California, thus costing thousands of garment workers their jobs and costing the state millions of dollars in tax revenues. The DLSE needs to re-examine the proposed regulations and modify them in such a way that the objections and concerns of legitimate manufacturers and contractors are properly addressed while at the same time the rights of the workers to their proper back minimum wage and overtime pay are properly assured.