California Apparel News

Gov.-elect could name new labor chief

Outgoing California governor Gray Davis recently signed a trio of senate bills that could affect the apparel industry.

These new laws would require large- and mediumsized manufacturers and contractors to provide healthcare insurance to employees and their dependents, contractors to add minimum-wage guarantees to their business contracts, and companies to adjust to new anti-sweatshop guidelines and penalties.

bull; SB2 is a law that mandates health insurance for nearly every worker in the state. Beginning in 2006, the bill requires employers to provide coverage for more than 1 million uninsured workers and their dependents.

bull; SB179 requires manufacturers and contractors to have a written contract to ensure that workers will be paid at or above the minimum wage. The bill prevents contractors from paying workers lower-than-standard wages in order to out-bid competitors for work services.

bull; SB578 sets up anti-sweatshop guidelines for state agencies that purchase goods from domestic manufacturers and subjects them to the same penalties as manufacturers that purchase apparel from overseas factories that have substandard work conditions.

On the eve of the recall race, SB2 was rushed through the Legislature and signed by Davis on Oct. 5. The new law requires employers of 50 or more workers to pay for health insurance for employees and their families.

Opponents of SB2 say the new law will compound the escalating costs of running a business in California, but proponents say it will provide health care for families that are not normally able to afford health care.

“SB2 is designed to provide health care for the people who are not organized and not represented by unions but deserve to have health care,” Davis said during a recent appearance at a health-care facility in Los Angeles.

Opposing sides

Davis’ signing of SB2, which was authored by Sen. John Burton (D–San Francisco) and Sen. Jackie Speier (D–San Francisco/San Mateo), has infuriated a number of business groups throughout the state, including the California Chamber of Commerce and the California Retailers Association, which have started a group called Californians Against Government Run Health Care and have begun the process of collecting signatures to repeal the vote. According to the California Chamber of Commerce’s Web site, the coalition has 90 days to collect almost 400,000 signatures and turn them in to county election officials to qualify the measure for the March 2004 ballot.

“I have never, in all of my 10 years in this association, seen a piece of legislation that has generated a negative reaction like this one,” said California Retailers Association President Bill Dombrowski. “Our chances of repealing it are good. When people understand the impact of this, they reject it.”

Officials at the transition office for Gov.-elect Arnold Schwarzenegger did not comment on whether the future governor would support a referendum. But Karen Hanretty, a Schwarzenegger spokeswoman, said the governor-elect opposes the new law because “it creates an onerous mandate on businesses at a time when California businesses are suffering from high taxes, over-regulation and skyrocketing costs of workers’ compensation insurance.”

Under SB179, manufacturers will be held accountable if their hired contractors underpay their workers. SB179 does this by requiring manufacturers to pay misdemeanor and civil fees ($250 per worker), plus wages due.

“The bill was designed to help level the business playing field while protecting the lowest-paid workers,” said Sen. Richard Alarcoacute;n (D–San Fernando Valley), who authored both SB179 and SB578. The bill is also a strong effort by lawmakers to destabilize the growth of the state’s underground economy, which accounts for more than $60 billion per year in goods and services, he said.

“Many law-abiding contractors––especially in the apparel industry––were being cheated out of good contracts by unscrupulous operators,” Alarcoacute;n said. “Those operators were underbidding on contracts, knowing full well that they would have to cut costs by cheating their workers out of minimum wages. In many cases, desperate workers are being exploited and legitimate taxpaying businesses are also being weakened ––sometimes even driven out of business.”

The industries targeted by the bill include construction, janitorial services, farm labor, security guard services and apparel manufacturers.

The Garment Contractors Association of Southern California is an opponent of all three bills. “[SB2] adds another mound of bureaucracy and red tape to the requirements that were recently imposed upon [contractors] by AB633,” said GCA Executive Director Joe Rodriguez. AB633 is a 3-year-old law that placed tighter controls on the apparel industry by holding California’s retailers liable for labor violations incurred at the manufacturer or contractor level.

But repealing SB2 without the support of workers is going to be a difficult battle, Rodriguez said.

“Getting the state Assembly and the state Senate to repeal SB2 is impossible right now because they just voted to pass it by a majority vote, and I don’t see them changing their minds,” he explained. “A repeal initiative is appealing to business people, and they’re outnumbered by the workers. The only efficient way to challenge it is in the courts.”

As for the other bills, there are mixed reactions. Rodriguez said he was surprised by Davis’ decision to sign SB179 just one year after he vetoed the bill. “Looking at it from an apparel business point of view, it’s not as harmful to contractors as some of the other bills, including AB633,” said Rodriguez.

The Garment Worker Center in downtown Los Angeles is in favor of the bills, especially SB578, which promotes sweatshop- free work environments.

“We’re glad that Davis signed the bill before he left,” said Kimi Lee, executive director of the Garment Worker Center. “Any improvements in labor laws is a victory for us. Low-wage workers face such harsh conditions, it’s important for the government to take a stand.”

New labor commissioner likely

The inauguration of Schwarzenegger on Nov. 17 will mark the beginning of a new administration, and many apparel industry insiders speculate that the governor-elect will most likely appoint a new labor commissioner.

However, members of the Schwarzenegger camp deny the governor-elect is actively looking for a new recruit.

“The governor-elect is currently planning to announce cab inet secretaries before he is sworn into office, and then he will focus on some of the other positions,” Hanretty said.

California Department of Industrial Relations spokeswoman Susan Gard said her agency could not comment on whether the incoming administration would retain the current state labor commissioner or appoint a new person to the position. “Any new appointment to this position—whether it be a former labor commissioner or someone who has never worked with the Division of Labor Standards Enforcement—will go through the normal legislative approval process before their appointment is confirmed,” she said.

Changing of the guard

Davis appointed current California Labor Commissioner Arthur Lujan in March 2000, after Marcy Saunders, another Davis appointee, resigned.

Lujan had the unenviable task of taking the top labor spot after the enactment of AB633.

“Art really wanted to help the apparel industry and made a sincere effort to pursue that by encouraging compliance,” said GCA’s Rodriguez. “The labor commissioners before Art didn’t have the task of administering AB633, which became a lightning rod of controversy in the industry. That’s all the more reason why it would have been good to have someone with a garment background.”

Lujan, who has been called a “hands-off manager” during his three-year tenure because of his quiet demeanor, has a strong labor background. Previously, he worked as the business manager for the San Diego Building and Construction Trades Council. Some sources say Lujan may return to Southern California to continue his support of the union industry after a new labor commissioner is appointed.

Political spectators say two possible candidates for the labor commissioner position are former Department of Industrial Relations director John Duncan and former labor commissioner Victoria Bradshaw.

Both would be good candidates for the job since they each have extensive experience working with the apparel industry, said industry sources. Duncan, who could not be reached for comment, has a history with the Department of Industrial Relations and is a Schwarzenegger team member. Bradshaw, who previously held the office, has a strong retail background.

Bradshaw, who earned a master’s degree in public administration from California State University, Sacramento, worked as the senior president of human resources for the Batus Retail Group in New York during the mid-1980s before being appointed by former governor Pete Wilson as California’s labor commissioner and serving from 1991 to 1995. “I just wanted to create a level playing field for law-abiding employers, not those who operate underground and undercut the legitimate employers also to the disadvantage of the employees,” Bradshaw said of her tenure as labor chief.

Currently, Bradshaw said she is focusing on economic policy for the Schwarzenegger transition team. She declined to say what her role would be in the Schwarzenegger administration and who might be a good candidate for labor commissioner. “I’m just looking forward to having a labor commissioner who will enforce the law and work with employers and employees to make California a better business environment,” she said.

Industry at odds with the state

The apparel industry has been at odds with the state’s Division of Labor Standards Enforcement (DLSE), especially after the agency began enforcing AB633, which places stricter registration and record-keeping requirements on contractors and manufacturers.

GCA’s Rodriguez said the state has come down hard on apparel businesses but it has not done a good job of running an orderly operation. He said several contractors in his association have complained in the past about the DLSE not returning phone calls. Some contractors complained that they did not receive their registration renewal forms in a timely manner and were subsequently forced to do a rush job on their paperwork or risk being in violation of the DLSE’s registration requirements, Rodriguez said. “That’s why I hope this situation will really improve,” he added.

Whoever is appointed to the labor commissioner position will have plenty of work to do in the apparel industry—starting with establishing an efficient means of enforcing compliance, according to Ilse Metchek, executive director of the California Fashion Association. Metchek pointed to the high costs manufacturers and contractors pay, from $750 to $2,500 each year in registration fees, which are supposed to be earmarked for enforcement efforts against underground operations.

“Most of that money is going into a general fund,” Metchek said. “And the DLSE never really has enough people to dig down and reach the people who are creating the problem.”