AB633's New Rules May Draw Retailers Back to California
With the Oct. 9 implementation of Assembly Bill 633 (AB633), which regulates the apparel industry more tightly, veterans say the measure could bode well for the sourcing industry in California.
AB633’s new regulations stipulate who can be held liable for labor law regulations. And industry watchers are hoping implementation of the measure will encourage some retailers to return to California to produce their private labels.
Those retailers had fled the state for cheaper off-shore production as well as a fear of “joint liability” for wages and working conditions at contracted facilities where garments were sewn. Under AB633, retailers conducting business with registered contractors and manufacturers aren’t responsible as third-party violators.
The manufacturer who has paid a registration fee of $750 to $2,500 acts as the go-between. However, those merchants who buy fabric, buttons or are a “holder of the product” and deal directly with a contractor are liable, even though they represent a smaller piece of the manufacturing pie.
“The positive aspect of this is the incentive for retailers to do business with legitimate members of our community,” said Ilse Metchek, executive director of the California Fashion Association. “There was always a ’maybe’ that kept retailers from doing business in the state. [AB633] will keep egregious lawsuits from happening.”
It’s a reversal for the industry, which has been plagued with cases won on the nebulous “joint liability” argument. Workers rights groups have argued that pricing pressures exerted by manufacturers and retailers have indirectly led to the violation of wage and hour laws. Forever 21, a Vernon, Calif.–based teen retailer, was the subject of a lawsuit claiming unpaid wages and poor working conditions at contracting shops used to produce Forever 21 clothing. A federal judge in March dismissed the lawsuit, and the case remains in appeal. In November, a federal judge ruled that retailer Bebe Stores Inc. wasn’t jointly liable for wage and working-condition violations that allegedly occurred at a sewing contractor Bebe monitored for compliance.
Metchek said she’s in the midst of a letterwriting campaign to dozens of retailers to renew their interest in doing business in California. The return of retailers could provide a ripple effect, boosting the number of manufacturing jobs in a state that witnessed a mass exodus of garment-producing positions in the last decade. The apparel industry still remains the largest manufacturing sector in Los Angeles County with about 89,300 jobs, but that’s still well off the all-time high of 110,800 jobs in May of 1998, according to Jack Kyser, chief economist at the Los Angeles County Economic Development Corp.
“The industry is under significant pressure from foreign imports and retailers pressing for lower prices, so AB633 could offer a glimmer of hope,” Kyser said.