L’Officiel USA is on the receiving end of a striking new lawsuit filed by the City of New York’s Law Department and the Department of Consumer and Worker Protection. In an announcement on Wednesday, the city revealed that in its suit, which was filed in New York County Supreme Court on November 29, it alleges that fashion and culture publication L’Officiel has engaged in an “egregious pattern or practice of unlawfully failing to compensate – or in some cases to timely compensate – at least 24 freelance workers for work performed by them for [L’Officiel] under contract,” thereby, running afoul of the Freelance Isn’t Free Act. 

In the newly-filed complaint, the City of New York asserts that L’Officiel USA – which is an American subsidiary of French family-owned media group Jalou Media Group – has “repeatedly and systematically failed to compensate, and in some cases, failed to timely compensate,” at least two dozen freelance workers, despite “having received and benefitted from the services performed” by those individuals. As a result, L ’Officiel USA has “unjustly benefitted, and continues to unjustly benefit, from the skilled work performed by countless freelance workers, causing great harm to the affected freelance workers, and to the City as a whole.” 

Since New York City’s Freelance Isn’t Free Act (“FIFA” or the “Act”) was enacted in 2017, the City alleges that it has received twenty-four complaints against L’Officiel for failure to comply with the Act’s payment requirements, including by failing to pay the freelancers’ invoices – which range from $200 to nearly $20,000 for writing, editing, and photography services – and that at least some of the complaints also alleged additional violations, including L’Officiel’s “refusal to provide a written contract and retaliation.”

While the City’s Law Department and the Department of Consumer and Worker Protection provided written notice of each complaint and a deadline to respond to L’Officiel, in all but two instances, the publisher allegedly failed to respond. In the two instances when it did respond, L’Officiel did so “by making the outstanding payment owed.” 

Freelance Isn’t Free

With the foregoing in mind, the City sets out two claims of FIFA violations, and is seeking injunctive relief to require L’Officiel to “bring themselves into compliance with FIFA by paying all outstanding amounts owed to the unpaid freelancers,” “make all necessary modifications to their policies, practices, and procedures to comply with FIFA’s timely payment procedures going forward,” and “engage a court appointed monitor, at [its own] expense, and submit to that monitor monthly documentation establishing its regular and timely payment of freelance workers going forward, or face penalties of $10,000 for each subsequent documented violation of FIFA’s timely payment provision.” Still yet, the City is seeking monetary damages to be determined at trial, including an award of double damages to the freelancers whose rights were violated. 

The first law of its kind in the U.S., the complaint states that FIFA was enacted “to ensure that the City’s many freelance workers are not taken advantage of by those who hire them to do work,” and to that end, “it provides statutory protections that allow freelance workers to obtain and enforce written contracts; to ensure prompt and complete payment for services provided; and to be protected from retaliation for enforcing their rights under FIFA.”  

Specifically, the law requires a “hiring party” – i.e., any person who retains a freelance worker to provide any service – to pay the freelance worker for the services provided on or before the date the compensation is due under the contract, or if the contract does not specify, no later than 30 days after the completion of the freelance worker’s services under the contract. The state law defines a “freelance worker” as “a natural person or organization composed of not more than one natural person, whether or not incorporated, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for compensation.” 

In a statement released in connection with the case’s filing, New York City Mayor Bill de Blasio said, “Freelancers are a valued part of New York City’s workforce and their work isn’t free. We will not allow L’Officiel to get away with reaping the benefits of our talented freelancers without paying them for their hard work. To those who break the law: New York City will hold you accountable.”

“L’Officiel published articles, photography, and illustrations by freelancers but either didn’t pay them at all or sometimes paid them months, even years later,” Corporation Counsel of the City of New York Georgia M. Pestana, who is representing the City in the case, stated. “Our suit seeks to hold L’Officiel responsible for its consistent and blatant disregard of the City’s Freelance Isn’t Free Act, which was enacted to address a growing problem faced by the freelance community in New York City.”

Beyond L’Officiel: A History of Freelance Issues

Not a novel phenomenon, the fashion and media industries have been rife with reports of freelance labor violations dating back to at least the summer of 2001 when thousands of freelance journalists made headlines for taking on some of America’s biggest media outlets. In a strongly-worded lawsuit, 2,500+ freelance writers and various writers’ guilds, alleged that the New York Times, Dow Jones, and the now-defunct newspaper behemoth Knight Ridder were allegedly profiting off their work and not fairly compensating them for it. After a 17-year-long legal battle, the case finally come to a head in 2018, and the freelancers walked away with a $9 million victory.

Around the same time as that lawsuit was wrapping up, widespread complaints were surfacing within the fashion industry – and beyond – about the terms of massive publications’ deals with freelance writers and other creatives. For instance, in the spring of 2017, Vogue’s parent company Condé Nast made headlines for adding language to its freelance contracts to allow for quicker payment in exchange for a discount on the agreed-upon rate. This set the industry and the internet abuzz with fury, while Condé Nast later stated that the new language is meant for larger vendors, such as Staples and FedEx, and not individual creatives, noting that it has “and will continue to pay freelancers within 30 days but wanted to offer them some flexibility and have added this industry-standard option.”

All the while, Ebony Media Operations was named in a headline-making lawsuit that the National Writers Union filed in 2017 on behalf of dozens of freelance writers, who claimed that they were owed more than $70,000 in unpaid wages. On the heels of the initiation of lawsuit and after an #Ebonyowes social media campaign gained significant traction online, the media group agreed to pay $80,000 to compensate 39 writers, editors, and other creatives for contributions to its print and web publications in violation of Illinois state wage and labor laws, and settle the suit.

Against this background, the L’Officiel suit is, nonetheless, being characterized a “first of a kind suit,” as it is the first time that the fashion media has been brought under the microscope of FIFA, in particular. Chances are, the case is likely to prompt additional actions by the City against other entities, both in fashion and in other industries. 

Peter A. Hatch, who is the Commissioner of the City’s Law Department and the Department of Consumer and Worker Protection, asserted this week that despite the departments’ “best efforts to support compliance, L’Officiel continues to flout the law, so we had to sue to recover the money it owes these workers.” He also notes that the City is “encouraging any other freelancers who have not been paid by L’Officiel to contact us.” 

The case is The City of New York v. L’Officiel USA Inc., 453762/2021 (N.Y.Sup.)

Fashion Nova made headlines in late 2019 when it was revealed that behind the fast fashion behemoth’s $25 denim and $35 velvet dresses was 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 was being “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” based on the number of garments created. 

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 mirrored those that have long-plagued no small number of domestically-headquartered retail companies, with 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 in 2019, 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 clearly suggested the existence of rampant wage and labor violations, it was not necessarily inaccurate for Fashion Nova to argue that it was operating in line with California state law. That assumed, of course, that the company can successfully position itself as a retailer of apparel and accessories, as opposed to a manufacturer. That wasan important distinction because it meant that the company – and others – could 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, were 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 at the time of the Fashion Nova report, “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.” 

According to legislative findings, “So-called ‘retailers’ contract with a network of manufacturers and contractors to produce their garments and dictate the pricing structure that causes wage violations. This leads to a vicious price competition, resulting in garment workers being paid an average of $5.15 per hour, well below minimum wage,” in accordance with a pay-per-piece-made system, as opposed to an hourly wage one. 

One key player in the push to mold garment manufacturing operations in a way to ensure that deep-pocketed companies could escape liability, namely by adding layers of contractors (and likely subcontractors, as well) between themselves and the individuals actually manufacturing the trendy garments? 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. Meanwhile, “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 a way to boost their margins and limit their expose to liability.

Garment Manufacturing & Senate Bill 62

The lifeline for brands that exists in AB 633 loopholes has been pared way back, however, with the passage of a new piece of legislation, Senate Bill 62, or the Garment Worker Protection Act, which California Governor Gavin Newsom signed into law on September 28. Stating that “the garment industry in California is rife with violations of minimum wage law, overtime laws, and health and safety standards,” while simultaneously having “the highest concentration of garment industry workers in the country,” SB 62 endeavors to ensure that laborers in the apparel manufacturing space in California are paid a minimum wage by the hour instead of having pay dictated by the number of pieces created. 

Upholding the intent of AB 633, the newly-signed law states that “upstream liability,” (i.e., liability for the commercial customer of the manufactured apparel, such as brands like Fashion Nova) must be “established, or the unrelenting problem of wage theft in the garment industry will continue.” 

In addition to requiring “every employer engaged in the business of garment manufacturing” to keep detailed and up to date records of “the names and addresses of all garment workers directly employed by such person,” “the hours worked daily by employees,” and “the wage and wage rates paid each payroll period,” among other things, SB 62 requires that “employees engaged in the performance of garment manufacturing shall be paid at an hourly rate not less than the applicable minimum wage.” 

In terms of liability, SB 62 states that “a garment manufacturer, contractor, or brand guarantor who contracts with another person for the performance of garment manufacturing operations shall be jointly and severally liable with any manufacturer and contractor who performs those operations for the garment manufacturer or brand guarantor, for … the full amount of unpaid minimum, regular, overtime, and other premium wages, reimbursement for expenses, and any other compensation, including interest, due to any and all employees who performed the manufacturing operations for any violation of this code.” 

Put simply: The new law makes clothing brands and their holding companies jointly liable for the full amount of an employee’s unpaid wages and any other compensation alongside garment manufacturer contractors. And this goes all the way down the supply chain, making a brand jointly liable for the entirety of the manufacturing chain when it contracts with another entity to perform garment manufacturing operations. 

Speaking about SB 62 on Tuesday, which has faced pushback from various industry groups as potentially capable of pushing apparel manufacturing operations (and the jobs that they provide) out of California, Governor Newsom asserted that “California is holding corporations accountable and recognizing the dignity and humanity of our workers, who have helped build the fifth-largest economy in the world.” 

As for what brands should do in the immediate wake of the signing of the new law, which is slated to take effect on January 1, 2022, Seyfarth Shaw attorney Scott Mallery encourages companies to “immediately begin auditing their vendors to ensure compliance with all California wage and hour laws, regulations, and wage orders.” Going forward, he states that companies selecting vendors “might consider measures such as: (1) checking for membership in the Fair Labor Association, (2) third-party audit certifications, (3) posting of bonds, (4) enhanced financial strength screening, and (5) review of any prior wage violations” in order to avoid potential issues in connection with the new law. 

SB 62 is the latest in a string of efforts in recent years that seem to indicate that significant regulatory change may be coming to the fashion industry in Western Europe and the United States, particularly as ESG issues continue to find traction among consumers and investors, alike.

As part of a six-pronged national strategy to combat COVID-19, President Biden announced last week that all private employers with 100 or more employees will need to ensure that their workforce is fully vaccinated or require any workers who remain unvaccinated to produce a negative test result on at least a weekly basis before reporting to work. Non-governmental entities and their work forces are expected to have between 50 and 90 days to comply with the order once it is signed off on by the Department of Labor as part of a sweeping mandate that will impact a combined 100 million private sector and federal laborers. 

Biden’s initiative – which is the latest push to get individuals across the U.S. vaccinated – will raise an array of logistical and legal questions for the companies that it applies to. Among them, according to Troutman Pepper attorneys Emily Schifter, Tracey Diamond and Richard Gerakitis: Who will pay for non-vaccinated employees’ COVID-19 tests; whether employers will continue to be required to provide exemptions; whether the mandate will cover remote employees; how employers can verify the vaccination status of their workforce; and how the 100-employee threshold will be determined (the 100-employee trigger will apply on a company-wide basis, rather than on the number of employees at a particular site, per Occupational Safety and Health Administration (“OSHA”) senior advisor Ann Rosenthal, but it remains unclear how things like joint employment will factor in.)

(The impending Emergency Temporary Standard (“ETS”) on COVID vaccinations, which will be drafted by OSHA, will almost certainly bring about court challenges, including from states, employers, and/or labor unions. However, as Womble Bond Dickinson stated in a note this weekend, companies should still prepare for its implementation, with “the Biden administration likely to argue that the OSH Act – which generally gives OSHA the ability to issue an ETS that would remain in effect for up to six months without going through the normal review and comment process of rule making – provides OSHA the authority to issue Emergency Temporary Standards for employee safety.”

Meanwhile, Beveridge & Diamond PC attorneys Mark Duvall, Jayni Lanham, and Heidi Knight expect OSHA to defend the vaccine ETS by pointing to “rising infection rates, particularly among unvaccinated persons; the high transmissibility of the delta variant; and resistance to receiving the vaccine.” They note that the key requirements for an ETS are that OSHA determines that: “(1) employees are exposed to grave danger from exposure to substances or agents determined to be toxic or physically harmful or from new hazards, and (2) such emergency standard is necessary to protect employees from such danger.”)

Beyond purely legal and logistical issues, companies are expected to face potential public relations fall out depending on if/how they respond to the impending mandate. “Even if it does not spark many all-out protests, a company’s decision to ignore the mandate might impact brand image,” data intelligence company Morning Consult determined from a recent survey of 4,400 adults in the U.S. Aside from refusing to adopt the mandate, “The longer corporations wait to comply with the new rule, the more they risk reputational damage,” the survey suggests, with the majority of respondents (59 percent) saying that they support corporations with more than 100 employees requiring their staffs to be vaccinated or enforcing weekly testing. 

While 70 percent of the individuals surveyed stated that they would “not go so far as to boycott companies that ignore the mandate, 30 percent said they would consider taking that action against brands that resist Biden’s new rule.” The survey similarly revealed that roughly 1 in 3 consumers (34 percent) would be “more likely to buy products from companies that adhere to Biden’s plan, compared with 12 percent who said they would be less likely to purchase from those businesses.” In terms of prioritizing companies that abide by the vaccine order and do so swiftly, Morning Consult found that “baby boomers [individuals who are currently between 57 and 75 years old], those who earn more than $100,000 per year, and white-collar employees are especially likely to spend money with brands that abide by the rule.” 

With this in mind, companies are not only encouraged to begin preparing for OSHA’s ETS now, including by determining whether the ETS applies to their workplaces, how to deal with remote workers, how to handle employees who refuse both vaccination and testing, and how to keep records supporting compliance, among other things; they should also consider the role that the risk of bad press will play should they fail to abide by the mandate and implement it in a timely manner, as not only are monetary fines at play (the mandate is expected to carry with it a penalty of $14,000 per violation), potential damage to their reputation is at stake, as well. 

COVID-19 and the corresponding lockdowns that have come with it have resulted in relatively a long list of well-known retail bankruptcies and in some cases, business casualties. Despite widespread market disruption and plummeting sales over the past year for most apparel companies, the perpetual rise of fast fashion has resulted in a sales rebound for the likes of H&M, ASOS, and co., and growth that does not appear to be slowing any time soon. In fact, global clothing consumption is predicted to rise by 63 percent by 2030, fueled both by increasing demand for readily available, mass-produced, trend-driven fast fashion, and by a growing middle class population with disposable income.

Given that the apparel industry is considered to be one of the most-polluting industries in the world, with some estimates suggesting that it produces around 8 percent of global greenhouse emissions, the social and environmental cost of this demand – as tied to the constant promotion of trendy, new clothing – is significant, and continues to make headlines. 

For instance, an estimated $500 billion is lost annually due to clothing underutilization, according to the United Nations Alliance for Sustainable Fashion, with 300,000 tons of clothing ending up in landfill every year in the UK, alone. Beyond rampant over-consumption, there are enduring issues associated with waste products in the oceans, production (which requires vast amounts of water and pesticides), and the human implications of low-cost labor and poor working conditions. 

The existing regulatory landscape

Globalization has fueled the rapid growth of the $30 billion-plus fast fashion industry, and yet, at the same time, it presents a barrier to harmonization. Supply chains are spread across the world, with a significant proportion of manufacturing and production now taking place in developing countries, where protections and regulations are limited. Therein lies the challenge of trying to regulate a global industry without standardized practices.

In the UK, the fashion industry is largely one of self-regulation with firms guided by industry codes, such as those set by the Retail Ombudsman. The Organization for Economic Co-Operation and Development, for instance, which counts the UK as a member, has adopted global guidance for due diligence requirements in supply chains. Similarly, the Sustainable Apparel Coalition – which has 250 global members, including many major fashion companies – provides a framework for sustainable production by which companies can measure their social and environmental impact. All the while, many fashion brands are clamoring to introduce “eco-friendly” products, oftentimes in conjunction with third-party sustainability standards.  

However, most memberships and certifications like these remain voluntary, with no legal repercussions if companies fail to follow through on the relevant guidelines. And still yet, widely-used terms, such as “sustainable” and “ethical’ do not have legally objective definitions, remaining open to interpretation across the sector. Consequently, achieving any sort of regulatory harmony likely requires more action on the part of the UK and global governments, and even consumers.

In a 2019 report, the UK’s Environmental Audit Committee (“EAC”) made several retail industry-specific sustainability recommendations to the Government. The EAC suggested that tax reforms could reward retailers for reducing their carbon footprint, proposed that a ban on landfill of unsold clothing, and recommended laws requiring companies to perform due diligence checks across their supply chains. While the Government did not act on any of the EAC’s recommendations, it, nonetheless, recognized the concerns raised and highlighted other proposed actions being taken as part of its 25 Year Environment Plan and Resources and Waste Strategy. But without legal changes, critics have questioned whether this is enough.

Solutions for the future?

Given the current climate, it seems unlikely that the UK Government will pressure struggling retailers with more regulations. However, the UK – and others – could learn from other existing approaches to these issues, as the retail industry opens up again. France, for example, appointed a Secretary of State to the Minister for the Ecological and Inclusive Transition, with Brune Poirsion becoming known as the unofficial Minister of Fashion and proving instrumental in the anti-waste law passed by the French parliament in 2020. One core focus for this ground-breaking piece of legislation was to introduce a ban on the burning of unsold clothing in France.

The Swedish government has similarly considered action if its own, including the potential implementation of a tax on clothing and footwear products containing substances of very high concern – or “SVHCs” – which are identified by Article 57 of the EU REACH Regulation. The proposal recommended enforcing the tax beginning on April 1, 2021 in order to “cost-effectively reduce the incidence or risk of exposure to, and spread of, substances in clothing and footwear that are harmful to the environment and human health.” (As of this month, the Swedish government revealed that it has delayed introducing a tax on SVHCs-containing garments and footwear to January 1, 2022, without offering a reason for the action).

In the UK, retired judge Sir Brian Leveson has recently been appointed by fast fashion retailer Boohoo to assist the brand in overseeing its “Agenda for Change” and assessing the overall suitability of its supply chain after reports of poor labor conditions in its supply chain in 2020. Leveson published his first report in January on required areas of change and progress required, and just this month, the retailer revealed that it “has ceased doing business with a number of manufacturers who were unable to demonstrate the high standard of transparency required, despite being provided with opportunities to address any issues identified in the auditing process.” 

On an individual company basis,potential fiscal penalties could encourage improved and updated ethical practice in the supply chain process for apparel companies across the board. The use of binding contract terms to guarantee particular standards within supply and purchase agreements could help to apply much needed pressure on brands and their suppliers, and promote forward-thinking environmental policies and sustainable practices in the sector as a whole.

Finally, as discussed above, currently voluntary certifications could become a legal requirement in the UK. “Ecolabelling” refers to labels used by fashion brands (currently on a voluntary basis) to confirm their sustainable credentials and commitment to more environmentally conscious fashion. The idea is that the label can be found on specific items of clothing and is therefore directly accessible to consumers. Mandatory certification, it is hoped, could have wide-reaching ramifications.

Following high profile movements including climate change protests across the world, there has been a marked change in consumer awareness and an increase in demand for information relating to how garments are manufactured. While the fashion industry still has a long way to go in terms of regulation, there are various strategies available that can attempt to enforce sustainable polices and therefore drive change in the industry. What is clear, however, is that most of these are local solutions. The global nature of the fashion industry requires worldwide co-operation to face these problems head on.

Manon Huckle is an associate in the commercial dispute resolution team at Penningtons Manches Cooper LLP, based in the London office. This article has been co-written with Jenny Wright, a trainee solicitor in the commercial dispute resolution team.

A crackdown on excessive wealth in China, including by way of potential tax hikes for the rich, in order to build out a bigger middle class has put luxury brands in a lurch. As Luca Solca stated in a note this week, the possibility of new taxation would be “bad news” for purveyors of luxury goods, which are heavily dependent on the Chinese market for revenue gains, with the Bernstein analyst pointing to data from the U.S., which shows that higher taxes on the rich directly correlate with a lull in luxury spending growth, as “consumer feelgood and discretionary spending go hand in hand.” And vice versa. 

Even if “highly disruptive action from Chinese authorities seems unlikely” for a number of reasons, including that it would put a damper on existing efforts by the government to repatriate luxury spending from international markets, brands’ stock prices have not been immune to worries of investors, who fear the impact that President Xi Jinping’s wealth crackdown – paired with the enduring effects of COVID-19 and halted international travel – will have on luxury goods groups, particularly in light of their large-scale reliance on that market. 

Regardless of how significantly the impending attempt to curb excessive wealth in China hits luxury brands, and it is worth noting that this is not the first time that Beijing has implemented such an endeavor (the government cracked down on corruption and conspicuous consumption in 2012), brands may have something else to worry about when it comes to China, which is slated to become the biggest luxury market in the world by 2025: shifting values of prized younger consumers. 

Speaking recently on Motley Fool’s Industry Focus: Consumer Goods podcast, analyst Asit Sharma stated that China has an “aspirational middle class” on its side, which “see luxury goods as both status [symbols] and as a realization of their efforts in working,” which has helped provide some “resilience for the high-end luxury-goods model,” which is especially susceptible to economic volatility. The onset of a global health pandemic, for instance, or the raising of taxes for high earners, among a slew of other possible scenarios, have a sure-fire way of reigning in luxury spending. 

But even if the luxury models being observed by the likes of LVMH, Kering, Richemont, Chanel, Hermès, and co. have proven to be “pretty stable” amid a wide range of risk factors, Sharma states that young consumers – i.e., the very ones that many luxury brands are vying for the attention (and future dollars) by way of video game endeavors, virtual fashion, and collaborations with streetwear brands, etc. – “are still figuring out what they want to do over time with their lives.” Case in point, per Sharma: “Young people in China are starting to rebel against what is expected of them, [including] that they will stay in jobs where they are putting in 50 hours a week, 60 hours a week, [and] that they will find happiness in purchasing these luxury consumer goods.” 

Pushback Has Been Building

The pushback against excessive working schedules has been building in recent years, with Chinese labor rights expert Li Jupeng telling the BBC back in 2018 that “young people, especially the post-90s generation, are reluctant to work overtime,” and have taken to challenging the “996” working hour system, which sees individuals work from 9 am to 9 pm six days a week. “The term originated in the technology sector around five years ago, when the country’s nascent internet companies were racing to compete with Silicon Valley,” the New York Times states. “At first, workers were willing to trade their free time for overtime pay and the promise of helping China match the West.” 

At least some of that overtime pay invariably went to helping luxury giants boost revenues in China, which has further had a hand in sending the Asia Pacific region (excluding Japan in most cases) to the top of the earnings-by-region totem pole, with many of the industry’s biggest players generating almost half of their revenues from sales in Asia. A shift in consumer values – and thus, a potential change in levels of discretionary income that may come with that – could prove troubling for luxury goods purveyors. 

And it is not merely laborers that are pushing back against China’s often-grueling work culture, courts are taking a stand, as well. As recently as last month, the Supreme People’s Court held that working 12 hours a day for six days runs afoul of national labor laws, which – without any loopholes – limit overtime to an additional 3 hours per day and not more than 36 hours per month. The case was initiated by an individual who was fired by his employer, a Chinese courier company, for refusing to observe the mandated overtime schedule. The Supreme People’s Court’s August 26 decision – which upholds the previous findings of an arbitration panel – also cited 10 similar cases in which laborers alleged that they were denied overtime pay and related compensation despite working compulsory overtime hours. 

Many of China’s biggest tech companies have been known for “encouraging an obsession with work” in recent years, according to the Guardian, with “Huawei reportedly promoting an aggressive, cut-throat ‘wolf culture’ among its ranks,” and Alibaba head Jack Ma stating on WeChat in 2019, “If you join Alibaba, you should get ready to work 12 hours a day. Otherwise, why did you come to Alibaba? We don’t need those who comfortably work eight hours.” And based on the surging growth of these companies and others, it appears that ambitious employees were willing to go along for the (hard) ride. However, the landscape is beginning to change. 

Not All is Lost

As for where that leaves luxury goods brands, not all is lost. The pushback against excessive hours and pay that is not commensurate with such working conditions could give rise to boosted earnings for individual laborers, which in tandem with the government’s aim to bolster the middle class, could ultimately lead to more spending in China, albeit not at the levels of the 110,000 ultra-high-net-worth individuals who currently prop up the luxury goods market on the mainland.

Beyond that,  Jupeng notes that at the forefront of the push for a better work-life balance are “millennials who are often better educated, more aware of their rights and more interested in finding something fulfilling than the previous generation.” Critically, she says that these are largely only children, who “are receiving a lot of support from their families – including a financial safety net should their careers not go as planned.” 

Chances are, some of that safety net will continue to be spent on luxury garments and accessories amid work culture upheaval. As for the products, themselves, they might be in the midst of a change, as well, with luxury brands likely to tone down the logos or other showy elements as the government pushes to move away from “unreasonable income” and the lavish spending that comes with it.