A new strategy to stop wage theft in the garment industry: Looking at what retailers pay for clothing

A worker sews a robe at a family-owned manufacturer in Chatsworth.
A worker sews a robe at a family-owned manufacturer in Chatsworth. Maya Sugarman/KPCC

Wage violations have plagued the garment industry for decades. Their persistence is part of what has led some observers to call Los Angeles the "wage theft capital of the world." 

But now the Department of Labor's Wage and Hour Division is trying a new strategy: analyzing the prices retailers pay for clothing, and tracing those prices all the way down the supply chain. This method is helping investigators know which companies in the chain are most at fault.

"They're all blaming each other," says the division's western regional administrator Ruben Rosalez. "The contractor’s complaining that they don’t get enough money to pay. The manufacturer says they’re not getting enough money to pay the contractor, and they’re basically blaming everything on the retailers."

The department recently issued a judgment against a Vernon-based clothing manufacturer called YN Apparel, which supplies clothes to Ross Dress for Less stores.

While investigating the case, Rosalez's department brought on an expert to study the prices Ross paid YN for wholesale clothing. It also studied the amount YN paid its contractors, who then hired garment stitchers to do the work. The investigators wanted to see if those amounts were sufficient to pay the garment stitchers the minimum wage and overtime for the time it took to complete the work.  

"The answer is no, nowhere near that," said David Weil, the Wage and Hour Division's national administrator. He explained that the Ross chain was paying about half what it should to YN, and YN was paying about a third of what it should to its contractors. 

“We watched different steps in the process for specific goods we knew were bound ultimately for Ross stores. We did our analysis of the labor time in each step."

Rosalez told KPCC that this method also helped them determine how much exploited employees are owed in back wages.

As a result, YN must now pay $212,000 in back wages to 270 employees of its subcontractors. It also must hire an independent, third-party monitor to make sure all of its domestic garment contractors follow overtime, minimum wage and record keeping rules.

This new strategy has also become a tool that Weil hopes will bring retailers like Ross into the conversation about wages. Weil says the division has reached out to Ross executives to discuss the problem.

"Not that we have any role in setting Ross' price, but we want to make them aware of the whole sequence of events that arises from setting prices too low at the retail level that is paid to the manufacturer," Weil said.

In an emailed statement, a corporate spokesperson for Ross Stores said it requires suppliers to uphold ethical standards and that the reatailer already has a dialogue with the Department of Labor:

We [...]work very closely with the Department of Labor to make sure our vendors understand and comply with all applicable federal, state, local and international laws related to products we purchase and sell, and this is an ongoing and continuous effort. 

Weil said that the division plans to take similar looks at other industries that depend on low-wage workers, like agriculture, and point out to the buyers at the top of the supply chain that their prices simply might not pencil out.

"We're tired of chasing the aftermath of this problem," he said.

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