(September 22, 2021) A California Chamber of Commerce-opposed job killer bill that will increase costs and liability on employers in the garment industry is awaiting action by the Governor.

The CalChamber is urging Governor Gavin Newsom to veto SB 62 because it will put employers in the garment industry — already suffering from the financial crisis of the pandemic — out of business or force them to move operations outside of California. The retailers and licensors that will be liable under this bill simply will not take on the liability risk imposed by SB 62 and will not allow clothing to be made in California.

SB 62 (Durazo; D-Los Angeles) significantly increases the burden on nonunionized employers in the garment manufacturing industry in California, by eliminating piece rate as a method of payment even though it can benefit the employee, expanding joint and several liability for any wage violations to the entire supply chain, and shifting the evidentiary standards in a Labor Commissioner hearing to limit the ability for an employer to defend against an alleged wage violation. These additional requirements will encourage companies to contract with manufacturers outside of California, thereby limiting the demand and workforce of garment manufacturers in California.

The bill fails to address the root cause of the problems that exist in the garment industry: the need for increased enforcement of existing laws and education of workers and employers about California labor laws.

Current Law

California law requires all businesses engaged in garment manufacturing to register with the California Labor Commissioner and pay a registration fee. Those fees go toward processing garment worker wage claims and to a restitution fund called the Garment Manufacturers Special Account to pay wage claims where the Labor Commissioner is unable to collect from a business.

Manufacturers are jointly liable for the wages of the employees of garment contractors with whom they directly enter into contracts, just like other companies that exercise control over an employee’s working conditions.

SB 62

SB 62 seeks to significantly broaden existing joint liability by instituting a presumption that any company involved in a laundry list of garment-related activity in California, including a licensor, is liable for all wages

sought by a garment worker, including wages for work performed under someone else’s contract, even if that company has no control over those workers.

SB 62 imposes joint and several liability for wage violations on any company that contracts with another person for garment manufacturing. That liability applies to a new category of companies defined as “brand guarantors,” which includes any person or entity in the clothing industry, such as retailers or licensors, any company that licenses its brand to other entities, and small and large retailers that produce, dye, affix labels to or otherwise alter clothing in California.

Although SB 62 supporters claim the bill is needed because garment workers aren’t paid minimum wage or overtime and aren’t provided a safe working environment, California’s Labor Code and related laws already outlaw all this conduct and include some rules specific to the garment industry.

Further, proponents of the bill claim joint liability is necessary to hold liable brands who intentionally pay low contracts that do not cover workers’ wages. That conduct is already illegal under Labor Code Section 2810, which imposes liability on any entity that enters into a contract for the manufacturing of garments where it knows or should know that the price is insufficient to cover workers’ wages.

Nothing in SB 62 will address the problem of underground bad actors in the garment industry evading the law. Instead, SB 62 eliminates piece rate work and allows those bad actors to continue operating as usual while passing the cost and liability to companies that have no control over the workers.

In addition, SB 62 changes the evidentiary standards in a Labor Commissioner hearing to limit an employer’s ability to defend against an alleged wage violation. The bill creates a “presumption” that a brand guarantor is liable for an employee’s entire wage claim if the employee provides the Labor Commissioner with a label “or equivalent thereto” of a brand. A worker could come forward with one clothing item and that company would be presumed liable for the full amount of the worker’s claimed unpaid wages.

Targeted Enforcement Better

To eliminate the bad actors which operate outside the law in the garment industry, the CalChamber has suggested that the Legislature look to existing enforcement mechanisms and educating workers about their rights.

California should pursue targeted enforcement of existing laws, policing of registration requirements that the problematic companies avoid, restructuring the garment worker restitution fund, and eliminating entities that fail to pay their workers.

Staff Contact: Ashley Hoffman