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Fashion Nova made headlines late last year when it was revealed that behind the burgeoning fast fashion brand’s $25 denim and $35 velvet dresses is a web of “secret underpaid workers” laboring in factories in Los Angeles in order to churn out low-cost – but utterly Instagrammable – garments and accessories that have been heavily endorsed by mega-stars like Cardi B and the Kardashian/Jenners. According to a December 2019 report from the New York Times, Fashion Nova’s clothing is “made in dozens of factories [in Los Angeles] that owe $3.8 million in back wages to hundreds of workers,” with some allegedly paying “their sewers as little as $2.77 an hour.”

The public-facing claims made against Fashion Nova – the Southern California-based brand that has won over many-a-millennial since it was founded in 2006 – were hardly novel. In fact, they mirror those that have long-plagued no small number of domestically-headquartered retail companies, with the now-bankrupt Forever 21, among others, being cited on more than one occasion by the Department of Labor (“DOL”)’s Wage and Hour Division in connection with its manufacturing practices. 

At the time of the New York Times’ striking exposé, Fashion Nova’s general counsel said that “any suggestion that Fashion Nova is responsible for underpaying anyone working on our brand is categorically false.” Meanwhile, the company asserted that its dealings with the 700-or-so vendors tasked with making the trend-specific wares that it sells are in “strict alignment with California law.”

Despite the findings of the DOL, which seem to clearly suggest rampant wage and labor violations, Fashion Nova’s assertions that it is operating in line with California state law very well may be true, assuming that the company can successfully position itself as a retailer of apparel and accessories, and not a manufacturer. That technicality is an important one because it means that the company – and others – can escape liability under AB 633, the “landmark” anti-sweatshop legislation that the state of California passed two decades ago.

Enacted in 1999, AB 633 was praised for its aim to prevent wage theft in California’s sweatshop-infested garment industry, the home of the vast majority of garment manufacturing in the U.S. By enabling garment workers to recoup back wages from their factory boss, and any garment manufacturing company that does business with that person, the law seemed like a promising way to eradicate abuses from the state’s sweeping garment manufacturing sector.

However, in the time since AB 633 was passed (much to the chagrin of California-based fashion and apparel companies), its efficacy has been the subject of ongoing scrutiny. Significantly, because AB 633 focuses on individuals who have been damaged “by the failure of a garment manufacturer, jobber, contractor, or subcontractor to pay wages or benefits,” the acts of a retailer, such as Fashion Nova, are exempt from liability in accordance with a strict reading of the law.

As Los Angeles County Board of Supervisors member (and former U.S. Secretary of Labor) Hilda Solis said recently, “Some retailers and manufacturers have spent the last 20 years circumventing the law by creating layers of subcontracting, allowing them to avoid being classified as garment manufacturers, and to avoid liability [under AB 633], thereby, preventing tens of thousands of garment workers in Los Angeles County from recovering stolen wages.” 

One key player in the push to mold garment manufacturing operations in a way to ensure that deep-pocketed companies could escape liability? Forever 21. As the Los Angeles Times reported in 2017, when faced with DOL action over alleged labor and wage violations within its supply chain, Forever 21 benefitted from AB 633. In order to avoid legal fallout, “Forever 21 [characterized itself] as a retailer, not a manufacturer,” since all of the manufacturing for the garments and accessories it sold was completed outside of its chain of employees.” As such, counsel for the company argued that it has “always [been] at least one step removed from Los Angeles factories.” And its claims worked: as of 2017, “sewing factories and wholesale manufacturers have paid hundreds of thousands of dollars to settle those workers’ claims,” according to the Los Angeles Times, while, “Forever 21 has not had to pay a cent.”

Other, similarly-situated companies have followed suit and looked to the loopholes provided by AB 633 as lifelines.

The Garment Worker Protection Act

Against this background, the California State Senate has essentially said, no more. State Senator María Elena Durazo authored and introduced a new bill in February 2020 that aims to make retailers responsible for the wages of individuals employed by the contractors (and subcontractors) who actually produce the garments and accessories they sell. 

The new bill (SB-1399), if formally enacted, will close the AB 633 loophole in order to prevent retailers from escaping liability for wage and labor violations that may not be happening under their roofs but are, nonetheless, occurring within their supply chains. More than that, it will largely outlaw the commonly-used by-the-piece wage structure, in which individuals are paid in accordance with the number of goods their produce, in favor of an hourly wage system. That change could help to eradicate the overarching payment structure that has enabled manufacturers to avoid paying laborers the County’s current minimum hourly wage of $14.25.

Solis states that an estimated 45,000 garment workers garment workers in Los Angeles County are paid an average $5.15 per hour, while regularly working more than 12 hours a day and between 60 and 70 hours per week.

Still yet, in addition to expanding the definition of garment manufacturing to include dying, altering a garment’s design, and affixing a label on a garment, the bill would authorize the state labor commissioner’s Bureau of Field Enforcement investigators to issue citations across an entire supply chain, and not just to the contractors, thereby, giving authorities the ability to holder “retailers” accountable.  

Not yet signed into law, the bill has been met with mixed responses. While it was preliminarily approved by the California State Senate Committee on Labor, Public Employment and Retirement in May and more recently got the green light from the state Senate as a whole, it has, unsurprisingly, faced pushback from various entities, including the California Fashion Association, a trade group that counts companies like Dov Charney’s Los Angeles Apparel, Alibaba, and Topson Downs as members, along with law firms known for repping the likes of Fashion Nova and Forever 21.

As of now, the bill still needs to go before the state assembly and ultimately, bear Governor Gavin Newsom’s signature before it is enacted.