When Sanjeev Bahl, founder of Saitex, the only large-scale denim manufacturer in the world, opened his company’s first Californian factory, he was appalled. “I’ve spent most of my life manufacturing overseas,” he told us during a recent conference call, referencing Saitex’s Vietnam HQ. “I thought we dealt with modern-day slavery in different parts of the world … I was completely shocked when I got to understand that traces of modern-day slavery exist over here as well.”

By modern-day slaves, Bahl refers to the 46,000 garment workers that fuel fashion production in California, which is home to America’s largest apparel industry. The state’s garment workers are employed by over 4,000 manufacturers and contractors and, over the last two decades, they have been pushed into sweatshop working conditions by a system that exploits and fails them.

As California’s apparel industry bounces back to profitability from the financial hit of Covid-19, it’s those working within the supply chain who continue to pay the price. In order to meet productivity demands and maintain competitive profit margins, manufacturers operate on a piece-rate system where garment workers are paid per article of clothing — a deliberate decision that ensures garment workers are paid as little as possible. In reality, this means that many are paid three cents per garment, which translates to an average hourly wage of $2.68 to $5 an hour, while the state’s mandatory minimum is $15. In other words: California’s garment workers are robbed of a minimum of $10 each per hour. That’s millions of dollars in wage theft while brands continue to profit by the billions.

In other words: California’s garment workers are robbed of a minimum of $10 each per hour. That’s millions of dollars in wage theft while brands continue to profit by the billions.

If you’re wondering how such abuse is still possible in the United States, the reason is relatively simple: a lack of full liability. While wage theft laws do exist and aim to hold (in this case) manufacturers financially accountable for failure to pay their employees what they are legally owed, they don’t get to the root of this specific problem, which is that brands need to be held jointly liable for how manufacturers pay their staff. Why? Because brands pushing for lower production costs in the pursuit of larger profit margins set the agenda for how that production work is carried out. Their orders essentially force manufacturers to exploit the pay-rate loophole, yet when wage theft claims are filed, brands are currently legally able to raise their hands and say “we didn’t know, nothing to do with us.” And without joint liability between manufacturers and brands, that will not change.

Enter SB62 aka the Garment Worker Protection Act, a potentially historic new bill that seeks to up-end the current system. It will end the piece-rate system of pay and expand responsibility through to the top of the clothing supply chain to ensure that wage laws are upheld. This bill — which is set to be passed over to California’s Governor Gavin Newsom’s* desk at the end of next month — is the reason for our call with Bahl, who, alongside Elizabeth Cline, author, and Advocacy and Policy Director at Remake, and Carrie Freiman, Director of Sustainability at Reformation, discuss how urgently needed SB62 is and why its liability clause, in particular, is so vital.

Brands Have Undue Influence on Garment Workers Pay

“Brands have an undue influence on the wages paid downstream to garment workers,” says Freiman of Reformation, a womenswear brand that conducts much of its manufacturing in the Los Angeles area. “In fact, brands exploiting purchasing practices are often at the heart of the problem. [They] really need to understand how their purchasing practices can negatively impact workers in the supply chain; practices like low purchase prices, unfair penalties, or payment terms can really undercut a factory’s ability to ensure decent working conditions, especially when so many factories in California are struggling financially already. [It can also] increase the use of unauthorized subcontracting as a way of cutting costs, this is one of the ways that many brands today get away with wage theft.”

 

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“The system that we have set up right now really is not working for garment workers,” echoes Cline. “We’ve seen garment workers work through the pandemic without a social safety net. We’ve seen people die making PPE in factories. At some point, 77% of garment workers globally were facing food insecurity. Investigations into Los Angeles factories found that more than 80% of garment workers in Los Angeles have unfortunately experienced wage theft. [They] are struggling to put their children into school [and] to put food on their table simply because they’re not being paid what they are legally owed.”

When faced with figures such as these it’s hard to believe that anyone — particularly those with the power to enact change within the fashion industry — would oppose the bill, but alas. In June this year, the American Apparel & Footwear Association (AAFA), which represents over a thousand American brands including adidas, Patagonia, Calvin Klein, and Everlane, did just that. AAFA’s president and chief executive officer Steve Lamar wrote a letter to the California State Assembly claiming that the introduction of SB62 would “drive garment manufacturing out of California and lead to the loss of jobs in California’s garment sector” due to “heightened risk of being penalized for doing the right thing.”

He added that “the bill, as currently drafted, does not recognize that brands or buyers may have little to no control over how a particular factory employer manages their payroll or enterprises finances.” A stance that, as Freiman already stated and as Cline is about to echo, is just not true.

The US Department of Labor did an investigation into California factories and found that brands are often paying 73% less than they would need to for factories to pay a minimum wage.

It “has been debunked and established over and over and over again,” says Cline, hammering the point home. “The US Department of Labor did an investigation into California factories and found that brands are often paying 73% less than they would need to for factories to pay a minimum wage. In Germany and France, they already have due diligence; the EU is about to establish mandatory human rights due diligence. The notion that brands somehow have no control over what happens in factories is so outdated [that] quite frankly it’s embarrassing that an American trade association would even take this position.

“These trade associations are in this habit of putting out a reflexive opposition to any labor rights bill,” Cline continues. “It’s almost like there’s not an understanding of how much the business community has evolved to incorporate sustainable and ethical business practices.” Further still, after reaching out to several of the brands represented by the AAFA, she found “that most of them didn’t know that this group had put out an opposition.”

(Since Lamar’s letter, AAFA-represented brands Patagonia and adidas have both issued statements to say they do not oppose the bill. The bill has also been supported by 150 California-based brands and manufacturers, suggesting that business opposition to the bill has been somewhat, if not completely,  exaggerated.)

SB62 Promotes Manufacturing Innovation

“The argument against [paying minimum wage] has been so superficial and unjustified that it propelled me to prove and debunk this theory as far as we could as manufacturers,” says Bahl. For his company Saitex, that meant increased technological  investment that facilitates innovation within the supply chain. That approach has already proven fruitful.

“In manufacturing, you have to be proactive. When you’re talking about $15 per hour and you compare it to Vietnam or any other place that has $2, $3, or $4 an hour, it sounds a lot. But factories globally have played the labor arbitrage card, which has led to a lack of innovation and investment in modernized mechanisms that would correspond to a high level of efficiency. As an organization, we started incubating technology that revolved around artificial intelligence to manufacture a pair of jeans. The results are quite interesting. To manufacture 1000 pairs of jeans in a day in Vietnam takes 250 human beings, but with the modernized technology investments that we made here in Los Angeles, we are achieving 1000 jeans a day with 125-130 people. We have managed to reduce the footprint by 50% that allows us to be competitive even at $15 per hour.”

What’s more, Bahl says that this approach does not equal displaced labor. “It’s quite the contrary. You’re training labor to the next level of engineering, you’re creating an equal opportunity for people to get respectable jobs, which are sustainable. As we continue to innovate and work closely with futuristic technology, it cuts down lead times and minimizes inventory challenges. To people who keep on talking about cost: Start putting it into perspective and start looking at it from a productive and efficient standpoint as a business rather than marginalizing labor and blaming labor for expensive costs that they accumulate.”

Of course, he adds, the pushback against paying minimum wage is somewhat understandable when considering the psychology behind why humans take advantage of one another in the first place. “If your habit is to take shortcuts and your mentality is [to] persecute and take advantage [in order to maximize greed] then it’s not just labor, you’re going to take advantage of other things as well. We all saw what happened at Rana Plaza, we saw what happened in Miami. My concerns go well beyond wage theft. We don’t talk about preventative measures for people who have made taking shortcuts a habit. I’ve seen some facilities here that are shocking. Life-threatening. God forbid you have a fire; that’s when everyone will wake up and start talking about infrastructure here like they did in Bangladesh.”

Holding Brands Liable Will Lead to Increased Collaboration

However, the arrival of joint liability does not mean that brands have to shoulder responsibility for investigating and improving supply chain practices alone. Rather, it will lead to a recalibration of best practices, of seeing manufacturers as brand partners, and of working alongside other retail brands to collaboratively ensure positive impact.

That approach is already employed at Reformation. “Although we expect our suppliers to strive to meet our requirements and demonstrate a commitment to our core values,” says Freiman, “we recognize that this is also a collaborative approach with our suppliers and it takes two-way communication.”

This two-way mentality is also vital for developing our understanding of how the fashion supply chain actually operates. At this point, it’s common knowledge that many brands don’t know — or rather, can function and profit without knowing — who makes their clothes and where. Through collaboration promoted via enforced liability, brands can start working together to do their due diligence; to thoroughly research their production partners not only based on efficiency and profit margins but on labor standards and fair pay. “Passing these regulations could help establish a new standard of compliance and help drive decision-making for the industry at large,” Freiman says.

The Bill Could Transform California Into an Ethical Fashion Leader

SB62 would also stop California’s taxpayers from footing the bill for supply chain injustice, a fact that is often left out of the conversation. In 1999, the Garment Worker Restitution Fund was established to payout wage theft claims to garment workers, but due to the sheer volume of claims, the fund is often overwhelmed and rendered insolvent. For example, at the time of writing, the fund carries a balance of $700,000, but unpaid wage claims owed to garment workers totals $7 million. “What this means,” says Cline, “is that it’s often California taxpayers that are having to fill in these gaps in wages that are owed to garment workers.” Meanwhile, the workers themselves can wait years for what they’re owed, if they’re even paid at all.

SB62 actually offers an unprecedented opportunity to transform the state into America’s epicenter of responsible production, setting a standard not just for the rest of the country, but for the rest of the world.

Further, rather than drive garment manufacturers out of California, as the AAFA’s Lamar threatened in his opposition letter, SB62 actually offers an unprecedented opportunity to transform the state into America’s epicenter of responsible production, setting a standard not just for the rest of the country, but for the rest of the world. “SB62 would make ethical sourcing the norm in Los Angeles and help the local manufacturing industry and its workers,” says Freiman. “[It is] so necessary in California to protect the workers; frankly it’s necessary in the whole industry.” And as pandemic-induced global supply chain disruptions (increased delays, extremely high shipping costs) have already demonstrated, a return to domestic production could actually be more efficient for everyone involved. It would also reduce emissions caused through international shipments.

“It has never really been more important for the industry and government to come together to protect and improve working conditions,” she continues. “Covid-19 has really accelerated this need for close and collaborative partnerships between brands and their supply chain partners. I really hope that this is going to be the first of many that will be passed throughout the US and internationally.”

“We all have a moral compass,” says Bahl, “and every drop counts.”

Take Action: Remake’s SB62 Action Kit

*It is not yet clear what Governor Newsom’s stance is on the bill. Remake has reached out for comment. In the meantime, there are many ways in which you can show your support for SB62, including raising awareness on social media and writing to Governor Newsom directly. Find Remake’s How To guide here.



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