California Passes Law Establishing New Wage and Hourly Requirements for Employers in the Garment Industry | Sheppard Mullin Richter & Hampton LLP
On September 27, 2021, California Governor Gavin Newsom enacted SB 62, also known as the Garment Worker Protection Act. SB 62 makes California the first state to demand minimum hourly wages for textile workers by banning piece-work wages. SB 62 expands the definition of a clothing manufacturer and extends the scope of liability for violations of wages and hours to clothing brands and possibly certain retailers. Under SB 62, “any person contracting for the execution of the manufacture of clothing” is jointly and severally liable with one of its manufacturers and subcontractors, thus creating upstream liability for unpaid wages, lawyer and civil penalties resulting from violations of the Labor Code. Although the new law does not come into effect until January 1, 2022, companies that contract or subcontract for the manufacture of clothing, or have employees who perform clothing manufacturing functions in California, should begin to become familiar with SB 62 and determine if / how it affects their business. .
Elimination of piece-rate pay plans in the clothing industry
Piece-rate pay plans are common in many industries. Piece-rate compensation allows an employer to pay an employee a set amount for each part or unit produced, regardless of the number of hours the employee worked. As a result, employers can tie labor costs to production, and employees who are more productive receive higher compensation than less productive employees. Nonetheless, all employees must always receive at least the minimum wage for all hours worked, which means that the weekly remuneration must result in an hourly wage at least equal to the minimum wage. Additionally, overtime pay requirements still apply.
Under SB 62, California employers can no longer pay employees “engaged in the manufacture of clothing” by the piece. In addition, “making clothing” now includes “sewing, cutting, making, treating, repairing, finishing, assembling, dyeing, altering the design of a garment, altering the design. of a garment by another person, the affixing of a label on a garment or the preparation of any other garment or any article of clothing or accessory designed or intended to be worn by an individual. While employers can still pay garment workers incentive bonuses (which should be included in the calculation of an employee’s normal rate of pay), employers must now pay garment workers at an hourly rate which is not lower than the applicable minimum wage.
Extension of Liability for Wage and Hours Violations
In addition to changing garment workers’ compensation, SB 62 extends liability for violations of wages and hours. SB 62 states that “[t]o ensure that employees are paid for all hours worked, a clothing manufacturer, contractor or brand guarantor who contracts with another person for the performance of clothing manufacturing operations will be jointly and severally responsible with any manufacturer and contractor who performs these operations for the clothing manufacturer or guarantor of the brand. The new law defines the “guarantor of the mark” as “a person contracting for the execution of the manufacture of clothing. . . regardless of whether the person they are contracting with performs manufacturing operations or engages a contractor or subcontractor to perform manufacturing operations. In other words, the entire clothing supply chain, including fashion brands, holding companies and potentially retailers, may be jointly responsible for any alleged wage and hour violations committed by a contractor (and possibly the subcontractor (s) of a contractor) who manufactures. “For example, businesses selling clothing made in whole or in part in California can now be subject to prosecution and prosecution for violation of wages, even if the seller was unaware of or was unable to control the violations.
The guarantors of the mark are jointly and severally liable with any manufacturer and contractor for the total amount of unpaid wages and any other compensation, penalties and attorneys’ fees owed to an employee for any violation of wages and hours. Violators are also subject to the payment of compensatory damages of $ 200 per employee for each pay period in which each employee is paid piecemeal. Therefore, the potential cost of a case involving many employees could be substantial.
Additional provisions under SB 62
Garment workers can claim their rights under the new law by simply filing a claim with the California labor commissioner. An employee can establish a presumption of responsibility with as little as a brand label. Although SB 62 does not provide for a private right of action, it sets a very low bar of evidence for plaintiffs and creates a cumbersome and complicated hearing process for defendants. SB 62 creates a rebuttable presumption that a clothing manufacturer or brand guarantor is liable to the contractor for any amount deemed owed to the employee. In addition, the labor commissioner now has enforcement powers to issue an arrest order or a summons.
SB 62 also changes record keeping requirements, which now extend to any entity in the garment manufacturing process chain, including brand guarantors. Under current law, every employer engaged in a clothing manufacturing business must keep certain records for three years, including, among other things, contractual worksheets showing the unit price agreed to between the contractor and the manufacturer. However, SB 62 greatly expands the record keeping requirement. As of January 1, 2022, apparel manufacturers, contractors and brand guarantors are now required to retain all contracts, invoices, purchase orders, work orders, style or cut sheets, and other performance related documentation. of clothing manufacturing for four years.
Potential impact of SB 62
California has the highest concentration of apparel industry workers in the country. In Governor Newsom’s announcement on the passage of SB 62, he says it will “protect marginalized, low-wage workers, many of whom are women of color and immigrants, by ensuring that they are paid this day. due to them and by improving working conditions “. However, the California Chamber of Commerce called the new law a “job killer” because it “dramatically increases the burden on unorganized employers in the California garment industry.” The Chamber of Commerce maintains that “[n]nothing in SB 62 will address the problem of illegal underground garment industry players evading the law; Rather “SB 62 just eliminates piecework and allows these bad actors to continue operating as usual while shifting the blame back to companies that have no control over these workers.” While SB 62 may ultimately curb the practices of some “bad actors” in the garment industry, the most immediate impact of the new law’s requirements will likely be that some companies contract with garments. clothing manufacturers outside of California, thus decreasing the number of clothing manufacturers and workers in California.
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In light of the potential liability and lawsuits that may arise from SB 62, companies employing California-based garment workers should begin auditing their wage and hourly policies, and inquire about the policies of one of their sub- Californian contractors, to ensure they are complying with the new laws. requirements by January 1, 2022. Businesses with questions or concerns about compliance should consult with an experienced employment lawyer.