A New State Labor Law Is Leading Businesses to Flee L.A.

Ironically, rules meant to protect workers have resulted in an increase in prices, which has led many companies to cut and run overseas
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Since the early 70s, Los Angeles has had a thriving Fashion District, where garment workers cut and sew low-priced apparel to be sold all over the world and thousands of independently operated retail and wholesale businesses sell everything from sneakers to fabric. One of the famed brands to popularize manufacturing in downtown Los Angeles was American Apparel; today, some of the garments from hip label Reformation are made in the Fashion District—and therefore, can boast of being made in the USA.

However, increasing costs and a new state law are threatening the Fashion District’s existence, reports Bloomberg. Ironically, rules under California’s year-old, groundbreaking Garment Worker Protection Act meant to protect workers have resulted in an increase in prices, which has made many companies cut and run to produce overseas. The loss is significant, as Los Angeles County houses over 25% of all apparel manufacturing businesses in the U.S.—the largest share in the country—according to data from the Bureau of Labor Statistics.

The worker protection act eliminates the piece rate, where workers were paid for each “piece,” or garment they sewed, and instills an hourly wage that cannot fall below the minimum wage. It also introduced incentive-based bonuses.

“Instead of getting paid hourly, they were getting paid per piece, per sewing operation, or per trimming operation, per pressing operation,” says Marissa Nuncio, director of the nonprofit Garment Worker Center, told KRCW. “Those piece rates could be as low as two cents, one cent, five cents, just depending on the operation.”

It’s a huge step up from recent data on working conditions in the Fashion District. An investigation by the U.S. Department of Labor in 2016 discovered that 85% of Southern California clothing manufacturers were violating wage regulations, paying workers below minimum wage, or providing no overtime pay.

On the macro scale, the law holds fashion brands responsible for labor abuses across their entire supply chains to the brand level, even if it is in another state. Critics say such strong but potentially costly legislation is motivating L.A. companies to say goodbye to domestic manufacturing.

The garment industry has notoriously razor-thin profit margins, which means work could—and has— pulled out from Los Angeles very quickly as a result of this law and fled overseas. Companies that spoke to Bloomberg said that manufacturing in L.A. has become more pricey because of the law, in some cases resulting in higher prices of items, and in general making company owners nervous about losing customers. It’s not known exactly how many have left the Fashion District, but it is significant.

Kathleen Talbot, chief sustainability officer of Reformation, a women’s fashion brand that produces about 30% of its clothing in Los Angeles and has no plans to move for the moment, told Bloomberg, “If you’re making a commitment to fair labor, there will be a higher cost, period.”

Talbot says that companies will have to incorporate their new margin into their business, and in some cases, “you will need to translate that to the customer.” In short, prepare for some higher prices if you want to operate within the new rule of law and treat workers fairly.

According to an employee-rights attorney, for the first time, these garment workers are receiving fair pay and overtime—and they no longer operate under the tyranny of being paid by the piece.


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