HEARING ON

THE FAILURES AND PROMISES OF THE CALIFORNIA GARMENT INDUSTRY

OPENING STATEMENT OF HON. PETE HOEKSTRA, CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON EDUCATION AND THE WORKFORCE, U.S. HOUSE OF REPRESENTATIVES *

STATEMENT OF JULIE A. SU, ATTORNEY, ASIAN PACIFIC AMERICAN LEGAL CENTER *

 

STATEMENT OF ENRIQUETA SOTO, GARMENT WORKER *

STATEMENT OF LINDA S. KLIBANOW, ATTORNEY, PARKER, MILLIKEN, CLARK, O’HARA & SAMUELIAN *

STATEMENT OF TAUNI SIMO, UNITE MEMBER AND SORRENTO COATS EMPLOYEE *

STATEMENT OF MARIA RAMIREZ, UNITE MEMBER AND SORRENTO COATS EMPLOYEE *

STATEMENT OF PETRA DE LEON, UNITE MEMBER AND SORRENTO COATS EMPLOYEE *

STATEMENT OF SANG YUN LEE, FORMER PRESIDENT, GOODTIME FASHIONS, INC. AND SONG OF CALIFORNIA APPAREL COMPANY, INC. *

STATEMENT OF LONNIE KANE, PRESIDENT, CALIFORNIA FASHION ASSOCIATION AND KAREN KANE, INC. *

STATEMENT OF RICHARD REINIS, GENERAL COUNSEL & EXECUTIVE DIRECTOR, THE COMPLIANCE ALLIANCE *

STATEMENT OF PAUL S. GILL, SENIOR PROJECT MANAGER, NORTHERN CALIFORNIA MANUFACTURING EXTENSION PARTNERSHIP (Manex) *

STATEMENT OF HON. HOWARD "BUCK" McKEON, MEMBER OF CONGRESS, US HOUSE OF REPRESENTATIVES *

Appendix A – Written Statement of Subcommittee Chairman Pete Hoekstra *

Appendix B – Written Statement of Suzanne Seiden, Acting Deputy Administrator, Wage and Hour Division, US Department of Labor *

Appendix C –Written Statement of Julie A. Su *

Table of Indexes……………………………………………………………………...129

Monday, May 18, 1998

U.S. House of Representatives

Committee on Education and the Workforce

Subcommittee on Oversight and Investigations

Washington, D.C.

The subcommittee met, pursuant to notice, at 9:00 a.m., in United States Bankruptcy Court, Edward R. Roybal Federal Building and Courthouse, 255 East Temple Street, Los Angeles, California, Hon. Peter Hoekstra [chairman of the subcommittee] presiding.

Present: Representative Peter Hoekstra

Representative Howard P. "Buck" McKeon

Representative Patsy T. Mink.

 

Staff Present: Jan Faiks, Project Director

Paul Boertlein, Communications Director

William Matchneer, III, Chief Counsel

Arturo Silva, Media Assistant.

 

 

Chairman Hoekstra. Good morning. The subcommittee is meeting in Los Angeles today to hear testimony on a project that we call The American Worker at a Crossroads Project. Today’s hearing is entitled "Failures and Promises of the Garment Industry in California."

According to our house rules in Washington, Rule 12B, Ms. Mink and I will be making oral statements. Any other statements by members such as Mr. McKeon, who will be here later, will be inserted into the record.

Witnesses should also be advised that if they have any additional comments or materials that they would like to submit for the hearing today, they have three days in which those materials can be submitted for the record.

Before we begin I would just like to talk about my opening statement and why we’re holding this hearing.

Some of you may know, this subcommittee held a hearing in Washington on the state of working conditions in the garment industry, specifically in New York City’s Chinatown. That hearing took place in March. Ms. Mink and I have both had the opportunity to visit the garment industry in New York and walk through various manufacturing facilities.

The conditions in some of the manufacturing facilities that we went through can only be described as horrendous.

During our March hearing, we heard testimony from Chinese garment workers. Workers told us about their long hours, their little pay, lingering illnesses, and debilitating injuries. Some said they even had – in what I thought was a fairly innovative practice – to buy their paychecks. Now, we didn’t rely only on the words of these Chinese garment workers to frame a picture of their working conditions. Ms. Mink and I visited the sweatshops, as has the chairman of the full committee, Mr. Goodling.

In addition to the working conditions that I just described, these sweatshops have no ventilation or if there is any circulated air it comes from old, rusted-out fans. Dust floats and lingers heavy in the air. Open and exposed wires are hang from the ceilings. There are bars on the windows. The windows were covered so that people can’t see in; the workers can’t see out. The windows, though, didn’t hide the steam that streams from the buildings. In fact, that is how we found the sweatshops. You can walk along any street in Chinatown, look up at a building and see steam being pumped out. You say, "I’d like to go in that building on that floor." Behind the walls, locked doors, and windows are sweatshops. So, at random we went through these shops.

We asked tough questions at that March hearing:

We wanted to know how conditions like that could exist in the U.S.

We wanted to know what the Department of Labor was doing about these conditions.

We wanted to know what Congress could and should do to alleviate these problems.

Today we will hear from experts in the garment industry of California. I am hopeful the story we will hear today will be more positive. We all know the sun shines brighter in California, that maybe true at least in the garment industry. Although if you saw the weather forecast I’m not sure the Midwest is as nice as Hawaii this week, but it’s not bad.

We are told that the conditions in California were not unlike those just a few years ago in New York City. Changes have been made. An innovative monitoring system is in place and we’ll hear how that has changed conditions here in California.

Why is a congressional subcommittee interested in the garment industry? Why is it interested in the garment industry’s position in the state of California? Why focus on what many agree is a declining industry of little relevance to an America that is becoming increasingly high tech? I think these questions in part will be answered by those testifying here today. The relevance of the promises and failures of California’s garment industry to the nation will be obvious to all but the oblivious.

Before hearing from our witnesses I think it’s important to offer some context to the discussion you will hear today. The hearing is being held under the banner of The American Worker at Crossroads Project, a special project of this subcommittee that is reviewing America’s labor law. The American Worker Project will make a series of legislative recommendations in the form of a congressional report at the end of this year.

To increase the likelihood that these recommendations are sound this committee has received input from workers of all kinds – union leaders, management, front-line workers, academics, and others. The input has been sought through congressional hearings, round table discussions and site visits. Some of these discussions have taken place in Washington, D.C. and in places like Detroit, Dallas, Silicon Valley, and Atlanta.

There is perhaps no better industry than the garment industry to use as a lens to evaluate the effect of today’s labor laws on our society. It is through this industry that we are able to see what is working and what may be failing in the system of labor laws that govern our work places today.

Almost every facet of labor law affects this industry. Some labor laws only affect this industry. Furthermore this industry has faced almost all of the great issues that have altered the American work place over the second half of the century. International competition, working conditions, wage pressures, and security issues have all affected this industry dramatically.

We have heard from high tech workers during some of our hearings. They often complain that the labor laws which exist today were made for industries of a different time and a different era. Unlike the high tech industry, the garment industry did exist when many of today’s labor laws were passed. Although those laws may have once served the industry and America well, the industry has changed. Based on some of the testimony we heard about working conditions in Chinatown, many of today’s labor laws affecting the garment industry may need to change. If today’s labor laws don’t work for emerging industries and they don’t work for our nation’s oldest industries, then clearly changes need to be made.

We are told that there is a successful, voluntary monitoring program working here in California that is increasing garment manufacturers’ compliance with labor laws. Maybe California’s experience with this program can offer some of the solutions that we are looking for. What the America Worker Project and the Subcommittee on Oversight and Investigations want to do – more than anything else – is to find solutions to the problems preventing American workers from achieving security and prosperity. We can’t find those solutions only in Washington. This hearing is part of an attempt by the American Worker Project to draw a map of the state of the American workplace.

I, now, would like to yield to our ranking member, Ms. Mink, for her opening statement.

Mrs. Mink. Thank you, Mr. Chairman.

I am pleased to be able to join this subcommittee today. I regard this as a very, very important effort on the part of this subcommittee to make recommendations to the Congress with respect to problems that most of us have been aware of for many years. We are now attempting to try to put some degree of understanding and effort to solve the problems that we have witnessed.

I thoroughly agree with the chairman of the subcommittee that this an important endeavor and we hope to come to a better understanding of what’s going on in the garment industry here on the West Coast.

The minority has had a bill pending in the Congress, H.R. 25, for a number of years. It’s had different numbers over the years. The effort under that legislation has tried to find responsibility for the failure of the industry to adequately ensure that the workers, whether in the East Coast or the West Coast, are compensated in accordance with the Fair Labor Standards Act, which is compliance with minimum wage. It seems to the minority that the manufacturers have a clear responsibility in this regard. And so the legislation that is before the Congress places responsibility on the manufacturers.

We take that position because we believe that an understanding of what goes on in the garment industry is clearly in the hands of the manufacturers. They know exactly what is expected of the retailers as to their responsibility. They understand the nature of the contractors and how they are applying the work responsibility to those that they employ.

Given that situation we believe that it doesn’t take high math to figure out that if you have a job and you know the approximation of the number of hours that is required to do that job and if you are not paying a commensurate amount of money for that performance in accordance with the bare minimum wage of $5.15, than surely something is wrong, and that should be obvious to those who are parsing out the work.

Also, where there is a demand for a rush job, where overtime is required, it seems to me no high math is required to determine the amount of overtime hours that might be required to do a particular contract.

So we look upon these hearings as very informative as to whether the assumptions that we make in H.R. 25 are correct. And an understanding of the degree to which a problem exists in the industry.

And so I look forward to the testimony today and I thank all the witnesses who are here. And hope that your elaboration and understanding of the workings of the garment industry here on the West Coast will enlighten us further and enable us to correct whatever problems there are in the industry. Because certainly we feel, I feel, the minority feels, very strongly that the workers do need the protection of the basics of our labor laws in this country.

Thank you very much, Mr. Chairman.

Chairman Hoekstra. Thank you. Let me introduce the witnesses.

I would also like to thank all of the witnesses for appearing and being part of this process and being part of this ongoing dialogue that we are having.

We have 11 witnesses. Each has their own particular story to tell that should help us better understand the concerns and the conditions of California’s garment workers. And the innovative approach to the sweatshop problem that the industry and the Department of Labor have developed.

Just as a footnote, we had requested the Department of Labor to testify today. The Department of Labor refused to testify, which needless to say is disappointing. I can guarantee to everyone here that such behavior is not tolerated nor will be allowed to continue. We have powers within the committee to ensure that federal agencies, which fall under the oversight jurisdiction of this committee, will testify.

A letter will be sent to the Secretary of Labor indicating our concern and disappointment. When we came out to California to take a look at this industry and to take a look at the programs that the Department of Labor is administering in California, the Department of Labor told Congress no. No, we will not testify and we will not share information about our programs and our efforts here in California. This is an issue we are both concerned about.

Mrs. Mink. Will the chairman yield at this point?

Chairman Hoekstra. I will more than yield, yes.

Mrs. Mink. I, too, am very disappointed that the U.S. Department of Labor did not send a witness here today.

We tried very hard to bring them to the table and for a variety of reasons they offered to me they have declined. So we will see them back in Washington.

Chairman Hoekstra. Yes. This is kind of fun when you and I actually have a project we can agree on.

Mrs. Mink. Hey, I’ve been very agreeable.

Chairman Hoekstra. Yes. All kinds of good things happen when you come to California.

Let me introduce the witnesses to you this morning. We will begin with Julie Su who is a Los Angeles labor attorney. Ms. Su represents several workers from the El Monte Garment Shop. Good morning.

Ms. Su. Good morning.

Chairman Hoekstra. We have Edna Bonacich.

Mrs. Mink. She is not here.

Chairman Hoekstra. She is not here. Okay. Then we have Enriqueta – we know who you are – Soto. Who is a garment worker in Los Angeles. Good morning.

We have Linda Klibanow who is a Los Angeles labor attorney representing a variety of clients in the garment industry. Her clients in one case include our next three witnesses, who speak only Spanish and will require an interpreter. They are Tauni Simo who has acted as a shop steward at Sorrento Coats; Ms. Maria Ramirez; and Ms. Petra DeLeon. Thank you very much for being with us today.

Next is Mr. Sang Lee who emigrated from Korea 15 years ago. Through his own hard work and ability, he built two of the top garment contracting shops in Southern California, the Song of California Apparel Company and Goodtime Fashions, Incorporated. Good morning to you.

We were also expecting two former employees of Mr. Lee as confidential witnesses today. Perhaps, though, Mr. Lee’s testimony will share with us why they may, in fact, not be testifying today.

We also have Mr. Lonnie Kane, President of the California Fashion Association and Karen Kane, Incorporated, a garment manufacturing company based in Los Angeles. Mr. Kane will talk about the innovative self-monitoring program that has been developed by the Department of Labor and the garment industry in California.

Next we have Mr. Richard Reinis. Mr. Reinis is general counsel to the Compliance Alliance, a garment industry group that promotes self-monitoring. He is a Los Angeles attorney who grew up in the garment business and can really put the monitoring story in context for us today.

Finally we have Mr. Paul Gill, who is a senior project manager of the Northern California Manufacturing Extension Partnership. He works with the fashion industry in San Francisco, which has an ethnic Asian base that is very similar to the one that we heard about at our hearing in March on labor conditions in New York’s Chinatown. He will tell us how self-monitoring is working in the labor market that he knows best.

Thank you all for being here. As we begin, let me explain the three little lights up here. You begin with a green light. I think we’ve asked each of the witnesses to keep their testimony to about five minutes. The green light tells you have plenty of time. The yellow light tells you have two minutes left. The red light indicates that your time is up.

Now nothing major happens when the red light comes on except maybe you start talking a little faster and wrapping up your statement. I am known to have a weak gavel most of the time, so we’re a generous with the time. But if you get going too long then I may just start tapping the gavel. Watch the lights and we’ll be fine.

There is testimony from the Labor Department that will be entered into the record without objection. We just can’t ask any questions about it.

Chairman Hoekstra. Ms. Su, let’s begin with you.

Ms. Su. Thank you, Mr. Chairman. Good morning and good morning to the members of the subcommittee. I thank you for your generosity in advance with respect to the gavel. I’ll try to speak very quickly. But your opening statement inspired some thoughts and I will try to get through all my thoughts as quickly as I can.

My name is Julie Su and I am testifying on behalf of the Asian Pacific American Legal Center of Southern California, where I am staff attorney and Director of the Workers’ Rights Project.

I want to just tell you about my office really quickly. An entire wall of my office is covered with art. Not the kind of fancy art in glass frames that light the halls of most law offices. But my art is 20 pieces of construction paper drawn with crayons and colored pencils. The artists are third graders who, having learned of the conditions in the L.A. garment factories, basically put their thoughts to paper and sent them to me.

One drawing has a picture of a big department store and a salesperson standing outside it with bubbles that come out over the heads of stick figures. And it says on it, "Want to come in and buy something pretty?" The customer has another bubble that says, "No!" with an exclamation point. The words at the top of page say, "You can vote between style and justice."

Another drawing has a thick orange line drawn with a crayon down the middle, and on one side is a really colorful shirt and the other is a roughly drawn woman hunched before a sewing machine. At the top of that picture it says, "What’s worth more, a shirt or a life?"

I have these all over my wall because they give me hope. On my good days I believe that by the time these third graders are 30 we will have eliminated sweatshops. None of us will ever have to look in the shiny faces of young people and tell them that a worker toiled endlessly and lives in poverty so that someone else can live in luxury. Kids learn early on that they should "share," not only because it’s nice, but because it’s fair. Sweatshops violate that basic principle.

Thank you, Mr. Chairman, for initiating these hearings on an issue of such critical importance, the garment industry in Los Angeles and, specifically, the well-being of the hundreds and thousands of garment workers who struggle working full-time, year-round, yet remain in poverty. I understand that you have visited New York’s Chinatown and witnessed firsthand the deplorable working conditions that garment workers endure. Unfortunately the conditions here in Los Angeles are no better. I have to disappoint you about the sun shining brighter on the garment industry in Los Angeles.

In fact the U.S. Department of Labor does a quarterly report which indicated that between July of 1996 and June of 1997, 57 percent of the shops in California investigated were in violation. A rate of 13 percent higher than that of New York State.

In 1997 civil penalties in California totaled $365,921 for 221 investigations versus $19,480 in New York for 312 investigations.

62 percent of California shops inspected between April and June of 1997 were in violation as compared to 21 percent in New York. I could go on, Mr. Chairman, but I think it makes the point that the structure of the industry is such that it’s very difficult for the light of the sun to shine all the way down to the sweatshop where workers work.

How is it that in this great nation at the dawn of the 21st century we have 19th-century working conditions in the garment industry? How is it that in 1995 workers can be held against their will sewing garments behind barbed wire and armed guards? The answer is, I believe, that we have allowed this industry to forget another basic principle that all third graders learn – take responsibility for your actions – not only when someone else is watching, not merely to avoid punishment, and not just because you’re legally required to do it. But do it because it’s right.

It has been an incredible privilege to represent the Thai garment workers who were enslaved in El Monte, California. But while the barbed wire in El Monte has come down, the structure of an industry that gives rise to slave labor has not. For example, the Thai workers have continued to work in the garment industry since their freedom. Many in jobs requiring six days a week and many not making minimum wage. The industry has taken some steps, and it should be commended when it does what is right. But I would caution this committee to look behind the rhetoric and look behind the image and see what concrete changes have really occurred. Too often resources are diverted to image creation, and this becomes dangerous when it distorts – or even masks – the truth among an uglier reality.

While national attention has in recent years turned to garment industry sweatshops, manufacturers and retailers have focused more on the side players, so to speak. Garment retailers and manufacturers have suggested, for example, that unions, the Department of Labor, globalization of the economy or the existence of the, "underground" are the roots of the problem. But these ignore the true reason for sweatshops, namely the choice made by industry leaders to ignore their moral responsibility to America’s workers. To choose what is right over what they can get away with.

Briefly let me touch on each of these side players.

First, the union, UNITE. I understand that the union has been a focus of this committee’s work. My experience with UNITE in Los Angeles has been that it has a genuine commitment to improving workers’ lives, and an acute awareness of the formidable challenge of organizing in this industry. UNITE has been active in a number of community organizations, coalitions and it has worked on behalf of union and non union workers in the garment industry. Many, many workers, some of whom who are here today but not testifying, and many other advocates, will echo my thoughts on this. Attacking the union is tantamount to blaming the medicine for not curing the disease rather than going after the disease. Same for faulting the Department of Labor. While the DOL’s approach leaves much to be desired, government is not nor should be the primary solution.

Second, on globalization. Yes, globalization is real, but it is not an invitation for corporations to initiate a worldwide race to the bottom, where the most exploited workforce is the production center of choice. Companies can choose to take responsibility or to close down and move the shop, depriving workers in the U.S. of jobs and depressing wages and working conditions throughout the world. It is a choice.

A third side player is the so-called "underground." Industry leaders particularly like to blame an underground because it helps to support the myth that sweatshops are isolated incidents or the product of a few bad apples, but not caused by the very structure of the industry itself. The reality is that there is but a very thin line between the so-called underground and the so-called legitimate shops. Routinely the workers who come to my office who have been denied minimum wage or have worked long overtime hours off the books or who have not been paid at all are working for registered shops. They are sewing for major labels.

Often registered shops front for unregistered shops so they really are part of one integrated business operation. Let us be clear. If we are serious about ending sweatshops then we must demand responsibility, moral and legal responsibility from all those who are responsible for creating sweatshop conditions. These include of course the contractors, are apparently at a loss to provide limited opportunities to hold such contractors accountable through wage and hour claims for example. And my office handles a number of these claims.

But enforcing against contractors alone is an imperfect and incomplete remedy. As the contractors themselves are under intense pressure by manufacturers to produce their goods ever more deeply. Representative Mink alluded to this structure and the downward pressure on prices that occurs that forces contractors to squeeze what little profit they can on the prices they get and leave the rest, which are only pennies for workers.

As a result contractors, even though their registers are often marginal operations with limited assets, which fold overnight and the fact that they avoid full liabilities for workers. So now we move to the real crux of the issue. Manufacturers decide who to give contracts to, how much to pay and how quickly they want it done. They display enormous creativity in their design, advertising and marketing design, yet when it comes to limiting sweatshops they are still at a loss for ideas.

They claim they cannot possibly know all the conditions of the workers making their clothes, yet they routinely send all the control personnel to factories to examine with an excruciating eye the garments being made in those factories. In other words, the quality of the garment of their product is a priority so they can know it down to a stitch. But the quality of life of workers is not.

If there’s one thing that this committee can do, it can propose legislation to tip the scales in favor of the quality of life of these incredible workers who really make the clothes that all of us wear.

As the committee is aware, some manufacturers have agreed to self-monitor their contractors. Monitoring is not a panacea, however, unless manufacturers are responsible monitoring only identifies the problem, but it does not solve it. Manufacturers must be held legally responsible, for they will do what we all know is right for the wage violations of the workers making their clothes. Without this, monitoring becomes another part of image. It’s good for public relations but meaningless in workers’ lives. As such, monitoring will not ferret out the sweatshops.

Case in point. The El Monte slave shop operators also operated a front shop where 22 Latino workers who I also represent labored in sweatshop conditions. That front shop was registered with the California labor commissioner and it was monitored by Cal Safety. Yet El Monte went undetected for years.

I've also been told that Calvin Klein has an agreement with the Department of Labor. Workers sewing Calvin Klein labels have reported minimum wage violations, overtime off the books, even non-payment for weeks at a time. Guess. I understand there are serious allegations of wage and hour violations and a homework ring by Guess workers against the company. If monitoring is effective, why weren’t they disclosed to the monitoring process?

It is my firm belief that if manufacturers knew they would be held responsible for violations they would put the same resources that they now put into quality control, sales, design and "image" into ensuring the most basic protections for workers.

You can correct this major failing in the labor laws and allow the strength of labor laws, the light of labor laws, to shine in the darkness of sweatshops.

As many manufacturers themselves point out, however, manufacturing self-monitoring is an inadequate remedy to the sweatshop problem, because retail has turned a blind eye to the process. Other witnesses on this panel I heard say that and have submitted that as part of testimony today. Poverty and exploitation are greeted by the pressure that each level of the industry is describing. What manufacturers say about retailers is essentially the same phenomena that contractors are saying about manufacturers. It’s a downward pressure that makes fair competition all but impossible and sweatshops all but inevitable.

So let’s hold all of them responsible. We can do much better.

In closing, this committee has labeled its work the American Worker at a Crossroads Project. This implies a degree of choice that garment workers in this industry simply do not exercise. That somehow they can choose between two roads. The reality is that the garment worker is at a dead end. Because the structure of the industry makes the most culpable actors act within community. Workers have little choice but to keep working or starve. Yet these workers get up each day believing in the promise that work brings with it dignity and self-sustenance. Essentially they believe in the American work ethic.

A more apt title for this important project might be An American Industry at the Crossroads. We can decide now whether the industry will take one road, a responsible, vibrant dynamic one, the highway, Mr. Chairman, that you described that will "carry the American worker into a future that is flexible, secure, and prosperous" or whether it will continue down its current path. Leader of the global race to the bottom. Using sweatshops here and abroad.

We can make the choice. America has always been driven by an abiding sense of justice. I believe that we want to live in a world where no one has to ask what's worth more, a shirt or a life. Because every life, including the life of every garment worker, has value, not only in our stated principles, but in our common practice. The momentum exists now with industry, as evidenced by your series of hearings, to create some real change and to move beyond image. Let’s not squander it. Thank you.

Chairman Hoekstra. Thank you. Ms. Soto.

Ms. Soto. Good morning. My name is Enriqueta Soto. I live here in Los Angeles. I have worked in the garment industry for 17 years. And I worked in about seven different shops. My experience in this industry has been a very difficult one. In most of the shops minimum wage is not guaranteed. Overtime is not paid. Holidays are not paid. There is no paid vacations. We have no medical insurance.

The shop in which I am currently working guarantees me a minimum wage. However, we’re expected to produce enormous amounts of garments and if we don’t fulfill that quota then we don’t get the minimum wage. My experience as Jeans Plus, where they had a monitoring system, the conditions there were the same.

We couldn’t complain to the people who were doing the monitoring. And the monitors were there upon the request of the manufacturer, Guess. Because those people who were monitoring only spoke to those employees who were selected by the contractor. When one of my co-workers decided to speak to the manufacturer, when she decided to speak up, they simply decided to punish us and they removed the work. So 400 of us lost our jobs. They shut down the plant.

Then I went to work at a shop called High Line. When the inspectors from the manufacturer came into the shop, the contractor would select workers and would hide the other workers or would send them home early. One of my co-workers who was working at that shop was very nervous. And I asked her why she was afraid. She said, "I have a previous experience where I had spoken up about what was happening, and as a result of that I was fired." And she said that the manufacturer had also withdrawn the work from that contractor and that the shop had closed.

How can we feel secure that – how can we assure that our employer is going to protect us from these labor violations when they were in fact committing these violations? How can we feel secure in the fact that they will do what’s right? How do we report things to governmental agencies? Or that we can report to the contractors themselves, if the consequences of doing that mean losing our employment? We have no assurances, either from the monitoring system or from the Department of Labor.

If I had time and I could tell you everything that happens to us while working at these shops, it would take a long time. But we’re glad that you have already made your investigations to look into this problem. And I as a garment worker am concerned about what’s happening, and I hope that you recall the issues and you pressure the manufacturers and the Department of Labor. Thank you very much.

Chairman Hoekstra. Thank you. Just for the record could you please state your name, the translator.

Ms. Fraga. Yes. My name is Eliza Chavez Fraga. That's spelled F as in Frank, R-A-G-A.

Chairman Hoekstra. Good. Thank you. Ms. Klibanow.

Ms. Klibanow. Good morning. Thank you for the invitation to testify here today. My focus this morning will be on how certain labor laws, in particular certain labor laws unique to the garment industry, have allowed certain abuses to occur.

Ms. Su talked about I believe in her concluding remarks giving garment workers a choice. Under the National Labor Relations Act, Section 7, in particular, garment workers are supposed to have a choice whether they choose to belong to a labor organization or choose not to belong to a labor organization. And the facts undermine the case I’m going to talk about which is Tauni Simo, et al. versus the Southwest District Council of UNITE, et al.

It demonstrates how the employees of Sorrento Coats were denied these very important Section 7 rights to either be represented by a labor organization or otherwise to choose to represent themselves in direct dealings with their employer. And these violations and abuses occurred because certain labor law provisions allowed an abuse of power to occur.

The case whose technical name I gave is a case which involves 25 employees of Sorrento Coats against the Southwest District Council of UNITE International of UNITE and two officers of the council. A brief background. About 1990 UNITE became the exclusive bargaining representative of the employees of Sorrento, not through a secret election, which is the general procedure contemplated within the National Labor Relations Act, but rather through coercion and violence. And the terms and conditions of the Sorrento employees thereafter seriously worsened over a course of seven years, in terms of wages, availability of work, and also equity as to who the union required to pay dues, who got insurance, et cetera.

Ultimately 42 out of 52 employees of Sorrento, including the incumbent shop steward of UNITE, who got little, if any, support from the union in her efforts to better the conditions of the workers. She submitted handwritten petitions written in Spanish and in English to their employer stating that they no longer wished to be represented by the union. Whereupon, in violation of federal statutes prohibiting discrimination and retaliation and federal common law –

let’s call it the fiduciary duty of fair representation as well as certain state common law rights –UNITE initiated a campaign of warfare against the very employees it represented to punish them for having exercised their Section 7 rights.

Thus in May of 1997 by threats of repeated violence which accompanied a 1990 strike, UNITE coerced Shapiro, who was Sorrento’s primary supplier, to cease doing business with Sorrento – who was Shapiro’s contractor of choice – due to the excellent quality of its work and its workers. This, thereby, threw the Sorrento employees into unemployment and summarily interrupting their medical insurance benefits.

The union also commenced a campaign of harassment, including repeated night-time unwelcome visits to the Sorrento employees in their homes, at which union visitors would threaten them that because they signed a petition against the union they would have no work and would have to quote, "eat shit." Telling them, also, "the war has just begun."

When the employees sought assistance, progressively, from the International Union, the National Labor Relations Board and ultimately, of necessity, due to the failure of the other two forums to provide any relief, from the courts, the union threatened the employees that if they persisted in their suit, they would "go to jail" and the union would find someone to "silence" them.

When the Sorrento employees were out of work and losing their homes, some of them pregnant and without medical benefits, what was the union’s response to me, the employees’ attorney? The union knows what’s best for these workers. Such institutional and personal arrogance, and indeed, violent and uncivilized conduct, is unfortunately encouraged by the National Labor Relation Board’s various presumptions applied in their case determinations as well as in the union’s many statutory privileges.

Not surprisingly, the union’s main defense to the lawsuit that was brought in federal court for breach of the duty of fair representation and the other claims I alluded to, was to seek to have the district court dismiss the claims on the grounds that the National Labor Relations Board had exclusive jurisdiction. In other words, the employees had no right to a day in court, in federal court.

Preemption is a legal term of art. I’ll just try it like this because it’s not the day for this. But preemption is a matter of congressional intent. It’s not clearly stated in the National Labor Relations Act as written currently. It could be clarified what matters are exclusively for the board and what matters are for the state and federal court. It is very interesting also that the union has argued that what happened to these employees, as I’ve just very briefly summarized, was foreseen by Congress in 1947, and it was okay with Congress.

I don’t believe that. I don’t believe that Congress ever foresaw that the unions were viewed in the garment industry but used the special powers of work and the special economic weapons they have against those people it has the fiduciary duty to protect.

Fortunately the district court did not dismiss the case but now the union is trying to exercise extraordinary measures to get it before the 9th Circuit. The district court properly recognized the federal court as the protector of individual rights under the National Labor Relations Act.

What the board did when the employees in late August ultimately filed a formal decertification petition, as is their statutory right and as the board has a mandatory duty to process, the board ignored the petition. They ignored the petitions, didn’t process them, didn’t investigate it, didn’t even communicate with the workers or their counsel, but rather, assisted UNITE in repeatedly amending its unfair practice charges against Sorrento, its employer. Even though, those were filed after the employees had requested not to be represented by the union, the board through some of the various presumptions it uses held would bar an election on the employees’ decertification petition.

Then proceeding that, the union initiated against Sorrento was settled with the board’s approval. And with denying the employees any participation in those proceedings. The way it was settled was that the employer was again going to recognize the union, thus foisting upon the employees who had exercised all their rights under Section 7 not to be represented by the union, foisting upon them for an indeterminate period in the future exclusive representation by the union that was harassing them and had thrown them out of work.

The statutes propagate these sorts of abuses as they’re currently written and interpreted by the National Labor Relations Board. They do violate individual rights under the National Labor Relations Act. That is what our lawsuit is about. But I also hope it is something that Congress will consider, and consider the personal stories of the three employees who are here as witnesses when they review the National Labor Relations Act. Thank you.

Chairman Hoekstra. Thank you. Ms. Simo.

[Speaking through interpreter, Monica Desiderio]

Ms. Simo. My name is Tauni Simo. I have been working for Sorrento Coats for ten years and seven months. Before the Union came into Sorrento, this was a factory that had a lot of work to do. There was a lot of work to do, they paid for holiday, and they paid for vacation. They used to pay for everything. So the Union was really not needed at that factory.

The people managed to get into the factory and talk to the workers saying they needed a union there. And many people believed those who had come into the factory and they went outside and formed picket lines. Most of us though remained inside. Those were people who insulted others, who said many ugly things to them. And they used to slash tires of cars. They used to throw eggs at people. They used to tear cars apart. They broke windows, so that the Union could come into Sorrento.

That is the way in which the union came into Sorrento Coats. There were no elections, there was nothing.

When the union…

Ms. Desiderio. What she just said is that as soon as a union came into Sorrento all the companies that work with Sorrento withdraw because they did not want to have anything to do with a factory that had a union in it.

Ms. Simo. And they asked me to be a representative of the Union so that I could talk to our employer about the problems that we had at work. I used to talk to my employer trying to resolve all the problems. I would talk to the Union representatives over the phone and I would tell them everything that was going on. There were people who paid union dues but did not have insurance. So most of the people realized that it was no good to have. There were people who would stay at home for three and four months because there was no work. Even though there was a Union at work. When there was not too much work at Sorrento, the Union representatives would come in but would leave really quickly so that nobody could ask them why it was that there was hardly any work at Sorrento.

That is why these people got together and made the decision to present a petition to withdraw the Union from Sorrento because it really wasn’t worth to have them. I was a shop steward at Sorrento and I was one of the first people who were surprised to see that the people did not want the Union. There were only promises, only promises, but they would never have anything to show for them. Okay.

Chairman Hoekstra. Thank you. In perfect timing. The interpreter’s name is?

Ms. Desiderio. My name is Monica Desiderio, D-E-S-I-D-E-R-I-O.

Mrs. Mink. Mr. Chairman, since we do not have any prepared testimony, I don’t have…

Chairman Hoekstra. We do.

Mrs. Mink. We do?

Chairman Hoekstra. We have all three.

Mrs. Mink. Ms. Soto, we didn’t have any prepared. If she has one, could she leave it?

Chairman Hoekstra. Ms. Ramirez.

[Speaking through interpreter, Monica Desiderio]

Ms. Ramirez. I am an employee of Sorrento’s. I’m going to repeat almost the same testimony except that the reason I never had great problems with them was because I communicated with them very respectfully. When Antonio Orea talked to me I asked him why the union had come in there if there had been no elections. He really didn’t know what to tell me.

A worker who is with him whose name is Ava gave me the papers. And that was his answer. If I did not sign up with them I could no longer continue being an employee of Sorrento’s. I told Ava, I have been employed here at Sorrento for ten years and I have never had any problems with the salary nor with employers. And when she told me that it really hurt me because I had already worked at a factory that had a union and there was no work left. And they said that we were not going to run the same risk with them.

All that I am saying is the truth here because I have proof that they really did not save me with insurance. Because I respected the rules, whether I worked or not I always paid my dues because I was using their insurance. So then the day that we all enrolled, Tony Orea came up to me, we had a conversation that lasted approximately 45 minutes. And he never was disrespectful to me, he just wanted an answer as to why they had never paid attention to the needs that we had as employees. He said, "We’re trying." My answer was, "We have been with you for seven years and we depend on the salary and we haven’t received it, what are we supposed to do?"

That was the only thing he said that there was no reason why we should leave them. And the people there, you know, there was no reason for us to leave the union or nobody told us to leave the union rather. We left it because we saw that there was nothing there for us.

Maybe we really were out of luck when we worked with them. The only thing that I can tell you was salaries we received with them were pretty high. Then Mr. Shapiro who had been the contractor for more than 30 years with Mr. Profit, he went to the factory and said that he could not raise the employer’s salary and if he couldn’t do that he couldn’t do that with our salaries either.

Mr. Shapiro’s answer was as soon as he knew that we withdrew from the union he took the work away from us. Our employer had a lot of problems trying to get work because none of the companies really want to have anything to do with unions. We have all been affected because of this up to this day. Because we do not know if the company that we have right now is going to stand by us.

That’s all. Thank you.

Chairman Hoekstra. Thank you. Ms. De Leon.

[Speaking through interpreter, Monica Desiderio]

Ms. De Leon. Good morning, my name is Petra De Leon. I have been working for Sorrento for 25 years. Excuse me, 21. What I have to say today is very brief. Because what I’m doing is standing by the testimony that they just gave and mine is exactly the same.

The only thing I can say about the union as well, they never really mistreated me. What she is saying is exactly the truth. The difference is that she used the insurance and I still do not understand why they kept taking money away from me when I never had their insurance or anything.

I asked Mrs. Roxana Guevara once why it was that they were withdrawing money from me if I did not have their insurance and I didn’t have anything else with them. The only answer that she gave me was that’s the way it’s supposed to be. Because you know, they never really came up to me. Only when I decided to ask them a question, then they would say that’s the way it’s supposed to be.

That would be the only thing that would be different from what they said that I would have to say here today. The rest is all the same. You know, the companies withdrew. What she just said about having good salaries and paid vacation, all that is true.

Ms. Klibanow. Mr. Chairman, are we getting a true interpretation of what the witnesses said?

Chairman Hoekstra. Yes.

Ms. Klibanow. I could clarify the record. She seemed to be approaching the end of her remarks and I wanted her to testify as to…

Mrs. Mink. The light is still green, ma’am.

Chairman Hoekstra. She was just asking her to talk about something. I think we’re okay. Ms. De Leon, go ahead.

Ms. DeLeon. When they took everything away they took the work away. Then I was under a lot of pressure because it even got to the point where I was about to lose my house. Because I need my salary to live and we lost our jobs. And they really complied with the threats that they made to us of having us lose our jobs. And we are still under the effects of all of that.

I think that’s all I have to say.

Chairman Hoekstra. Thank you, Mr. Lee.

Mr. Lee. Good morning, Mr. Chairman, and members of the committee. My name is Sang Lee. I used to own Song of California Apparel Company, Inc. and the Goodtime Fashions of Los Angeles.

Before I start my testimony I have to apologize because two of my ex-employees which they should have showed up today as a witness, they couldn’t come. Obviously they didn’t want to come because they’re scared to death. Even if three years later on this case.

I tried to contact them since a week ago, I had several conversation with them on the phone and face to face. They promise me they’re going to come today. Unfortunately last night around 10:00 p.m. one of ex-employee called me with her son, nine years old. She said, Mr. Lee, I don’t want to go there because I don’t want to have that kind of views written, even she says she doesn’t want to die. Because she has a little son.

I never knew when UNITE tried to organize my shop. Even they followed her on the freeway number 60. UNITE organized, they chased her bumper to bumper, she even kill myself. So she stopped at, you know, Monterey Police Department, she reported and immediately they disappear. She talked to me yesterday.

And the other girl same thing. And one other man is same thing. She said, Mr. Lee, you need to know, even I have one sister, so they actually worse than your KGB. So she doesn’t want to show up here today. So please forgive me I couldn’t bring my ex-employees.

In August 18, 1995 I had to close my business, both of them as a result of an attempt to unionize both shop by UNITE. Therefore, 278 workers from Song of California and 158 workers from Goodtime lost their jobs. Those workers really wanted to keep their jobs and did not want a union, that’s period. All they wanted was to keep everything status quo. They even protested in front of the UNITE office against formation of a union on August 10, 1995.

I’m sorry, when I get emotionally excited I cannot pronounce well. Mr. Chairman, I came to this country 20 years ago, not 15 years. But still I have a pronunciation problem. If you cannot understand me clearly, just ask me.

When my ex-workers protested in front of UNITE office David Young even meant to me, David Young who was a formal union organize for union team. David Young called me by phone. Mr. Lee, this is the first time in union history workers came to in front of my office there and protested. Anyway, so now really we have to not think about what happened. UNITE cost 400 people their jobs and closed their strong business which took 15 years to build and grow.

Now, I just want to know, tell me if UNITE was for the workers how could they do such things. What was UNITE support for? Was it really for workers or was it for money? In a meeting between David Young, again former UNITE organizer, and the five employees from Song of California and Goodtime Fashions in August 10, 1995, Young stated that he didn’t care if they lost their job or not. His concern is only I have to organize myself or I have to close my business. His purpose was to create a union or force the close of both factories.

I know time is up but I have to mention about the secondary boycott. Mr. Chairman, I learned from my attorney, union attorney, labor attorney, Charles Goldstein, he said only common union can have a right to have a secondary boycott. Okay, which they did. They went to Guess shop, which in Beverly Hills. They went to Karen Kane, they even went to Dr. Marten. Even they went to small shop, however, they did on a secondary boycott. They talk to the owner of the manufacturers stop giving to work to our family or Song of California and Goodtime. Reason if I’m not getting enough work they might go to I’m going to sign on their contract, which is they made a mistake. Okay. I talked to them I won’t sign. Because I treat my people as much as I can. Even this day whole Los Angeles knows I treat my people the best.

Secondary boycott, one example, all of Dr. Marten he came to Las Vegas to have a show. He stayed in Tropicana Hotel. Even his people went to Tropicana Hotel, they did a boycott. You know, as I know I learned from my attorney again, this law secondary boycott, made about 40 or 50 years ago. I think it’s time we have to change. We have to, you know, think about this kind of old and really not bit of use, and evil practice. We have to stop this one.

I cannot actually continue because of my emotional things. But I want to say one more thing. It has been three years since I lost my business. During the time I was operating my business I followed all rules, regulations, and the labor laws. Not once have I mistreat my workers or been unfair to them. Even today I cannot understand why someone can abuse the system and cost hundred of innocent people’s job and crush the dreams of an emerging businessman. Just like UNITE wanted, I lost my business, but I’m still contracted, my former employees still wish to work with me. That’s all, Mr. Chairman, thank you.

Chairman Hoekstra. Thank you very much.

Mr. Kane.

Mr. Kane. Good morning. Thank you for having me here to testify before the committee. We welcome the committee’s investigation into the labor practices of the apparel industry and hope that with knowledge gained from this that you’ll better be able to legislate than we have seen in the past.

My background. I have over 25 years experience in the California apparel industry. As a young man in my middle twenties with no industry experience I got a job as a production clerk in a small jean manufacturing company. After two years I moved to a small junior knit company and took the opportunity to move up the ladder and within two years. I became the production manager, the position in the apparel company responsible for planning and production of product, and the position is generally responsible for all subcontracting work.

In 1979 my wife Karen and I started up our own company, Karen Kane, Inc., of which I am currently president. Karen Kane, Inc. is a better sportswear manufacturer that does roughly $70 million a year in wholesale volume to major stores, retailers, and small specialty stores. 75 percent of our production is manufactured domestically, the remaining product made in China and Mexico.

I am also president of Karen Kane Stores, Inc., an operator of specialty stores in California selling predominantly apparel produced by Karen Kane, Inc.

Since 1996 I have been president of the California Fashion Association, a trade group comprised of various factions within the industry. We concern ourselves with enhancing worldwide distribution of California textiles and apparel products as a source of information concerning textiles and apparel in California, enhancing technology in the industry in dealing with current issues that affect the industry, such as labor law issues and the monitoring of manufacturing sites.

I am also a director of the Federal Reserve Board, San Francisco Bank, Los Angeles branch.

My capacity here today, my purpose in testifying here today is to relay to you Karen Kane, Inc.’s experience of having been picketed and boycotted by the International Ladies Garment Worker’s Union/UNITE in July of 1995 for providing work to a contractor, Mr. Lee. And to explain the monitoring process as used by Karen Kane, Inc., to monitor its contracting force and assure itself that it is abiding by state and federal laws and regulations to provide proper pay and working conditions where its products are produced.

In July of 1995, I received a phone call from a Mr. David Young, an organizer at UNITE, who informed me that UNITE was picketing at Goodtime/Song of California. I asked why? Mr. Young did not reply to my question, but continued to say that we, Karen Kane, Inc. either pull our work out of the shop or UNITE would take action against us. I informed Mr. Young that I need to review the situation, would get back to him. Still no explanation as to why the action was being taken against Song of California.

I now found myself in an arena where I was not familiar with. Where the rules apply unequally and are intended to be broken. Only to be concerned with after a compromise has nullified all violations. Where threats and innuendoes are the coin of the realm and public opinion is tainted by sixty-year-old events and outright lies.

I contacted my labor lawyer who we used to advise us of current labor laws, update our employee manuals and for general employer/employee issues. Our labor lawyer started to review the situation and the next day received a phone call from our retail corporation’s store in Beverly Hills. The picketers had come into our store, handed out leaflets that referred to Karen Kane and Lon Kane as sweatshop operators. They blocked our doors and pushed themselves upon our customers. Verbally inferring that myself and my wife and Karen Kane, Inc. were operators of sweatshops and that we take the food out of their children’s mouths. Inferring that they were out of work because of Karen Kane and they would disrupt Karen Kane's business until we stopped working with Song of California.

Police were called to organize the picketers back onto the sidewalks and not from blocking the door to the store. These actions continued on and off for a number of days. Simultaneously picketers would occasionally picket Karen Kane’s office and warehouse in Vernon, California. But since this did not have the sensationalism of Beverly Hills, UNITE concentrated on where they could hurt our pocketbooks and image the most. Again, Karen Kane, Inc. had done nothing wrong. Karen Kane Inc. now had a labor dispute. However, our employees were not involved. But UNITE made every effort to tell and give the idea that Karen Kane was a bad company.

I quote, "The owners of Karen Kane make millions of dollars each year living in big comfortable houses and driving luxury cars. They can afford to pay us a living wage. They certainly charge you enough as a consumer." What innuendo is UNITE making? I have the flier that was handed out in my stores.

The facts of the Song of California situation were: Song of California purchased new state-of-the-art pocket setting machines, each costing tens of thousands of dollars. With these machines in place Song of California could lower its operating costs and produce jeans more rapidly. Fewer operators in this area would be required. And the operators needed would be retrained and paid a new piece rate in relationship to the average number of pockets set per house on the new machines. Operators who excelled could make higher hourly wages and those who lagged would need their piece rate to be subsidized and meet minimum wage requirements.

Isn’t this what industry is supposed to do? Advance with new technologies, provide opportunities for its employees to advance with additional training and job experience? A few pocket setters who were not happy with the changes complained to UNITE, who did not represent them in the first place. UNITE took advantage of this situation and used it to try to organize Song of California, though not requested by the large majority of Song’s workers. Song was picketed and then extortion was used to stop the manufacturers from giving Song of California work, and forcing him to agree without a vote to a union contract. Mr. Lee steadfastly refused. Under continued picketing of Karen Kane Stores, we signed an agreement on August 1st to stop providing Song of California with work.

Within weeks Song of California was out of business and 400 employees were out of work. UNITE has put more people out of jobs than they even represent in Southern California. Yes, more employee have lost their jobs because of UNITE’s actions than the number of members there are in UNITE of Southern California.

Karen Kane, Inc. and the California Fashion Association seek monitoring of "shops" as a cure to labor law violations and insuring that workers are paid a fair wage. The program started just a few years ago consisting of outside monitoring services visiting shops on a programmed basis. Sometimes with advanced notice and at a time on a surveillance basis to compile data and access if the shops are meeting all state, federal, and OSHA requirements.

The data is compiled and given to the manufacturer who contracts for the report. Reports are used to evaluate and monitor the shop’s activities on an ongoing basis. Do violations still occur with monitor shops? Yes, they do. But they are few and generally resolved quickly. I myself have had two violations in the last three years.

Generally manufacturers hire a monitoring service and then sponsor a seminar for all their contractors to attend. And instruction is given on how the process works, what the laws are and what information will be required at each visit. The manufacturers support the monitoring process by advising contractors that they will only use legitimate operators who pass the inspection. The process involves giving each contractor a first visit and helping them correct any needed violation before the formal procedure begins. The process cannot work without the manufacturers backing it up.

Changing the way our industry has worked for years and years will take some time for monitoring to be universally accepted. But the change is taking place. By the way, Song of California was a monitored shop with no violations.

Monitoring has greatly reduced violations among the legitimate manufacturers and contractors in California. I use the word legitimate because CFA has been working with the State Department of Labor and DOL pointing out a major segment of the local underground economy that is not registered with this state, is in violation of the labor laws and is not monitored. They use this advantage to lower prices and unfairly compete for retailer’s orders with the legitimate manufacturing community.

I am happy to say both state and DOL has actively been investigating these manufacturers, wholesalers, retailers, because they are combined, and have found major violations. Though, when the DOL reports their quarterly numbers, the number of violations found, it will look bad for Southern California. Where the violations are concentrated will indicate the underground is under attack. We at the California Fashion Association support the state and DOL’s efforts and know a little bad generally proceeds a lot of good.

California Fashion Association is in the process of producing for general distribution the first handbook on monitoring. We are working with both the state and the DOL to include their requirements in hope for this handbook to become the "primer" for both state and federal requirements in the monitoring process.

Monitoring is the answer to eliminating sweatshops.

Thank you.

Chairman Hoekstra. Mr. Reinis.

Mr. Reinis. Good morning, Mr. Chairman. My name is Rick Reinis. I’m the Executive Director and General Counsel of the Compliance Alliance.

In 1955 my folks moved out to California. My dad had been in the garment industry all his life and he moved my brothers and I out here when he went broke and started anew out here as a lot of people did in that period of time.

He’d been in the garment industry all his life. It was the topic of conversation across our dinner table, basically all of my life. When I went to Princeton I would work summers in a unionized cutting room that my dad operated. He was in the coat business which basically is no longer in existence out here in California. And I began work in the garment industry principally as a lawyer.

1976 I went to work for my dad’s company and again worked in a cutting room and basically all phases of the business. As a matter of fact Sorrento was a contractor we used from time to time. In 1981 I left the manufacturing business and went to work as a lawyer in the California Mart that was and still is the center of the garment industry in Southern California. I worked there as an attorney for eleven years and then I moved out of the building and still continued to practice. We have a small firm that specializes in representing manufacturers and contractors and designers and salesmen and anyone in or about the garment industry.

In 1992 the Department of Labor started to use the hot goods provision of the Fair Labor Standards Act in a way it hadn’t been used before. To impose upon manufacturers liability for goods that were made in contracting shops by independent contractors whose workers were paid in violation of Fair Labor Standards Act.

As a result I contacted several of my clients and friends in the industry and said we should come forward voluntarily and agree with the department. Not wait for the department to come to us because of a violation in any of our shops, but we should agree to begin monitoring. With the freedom to expand and contract seasonally which is required in the garment industry, I said we need to be responsible. With that freedom comes responsibility and the responsibility rests upon manufacturers to become proactive. And so we organized a not-for-profit corporation called the Compliance Alliance and negotiated from 1994 through June of 1995. This is months before El Monte ever happened.

And then Secretary of Labor, Robert Reich, came to California and signed an agreement with me on a cutting table in Vernon, California. The agreement is now known as the long form agreement. Compliance Alliance members at that time constituted seven members, today we are sixteen. We represent approximately the manufacturing of 4 million garments a month, $1.3 billion in wholesale value of goods. Our members employ directly 2800 people. And most importantly, they use from time to time 400 independent contractors, sewing and cutting contractors, in Southern California.

Through the Compliance Alliance three independent monitoring companies are employed to go into the shops of our members and to be certain that there are no violations, or to the extent that there are violations to immediately remediate them.

When the Department of Labor publishes its time line indicating the efforts that its made that really launch this committee hearing and many other things that you’ve heard here today, the first fact they point to in that campaign is the execution of the agreement with the compliance alliance. We are today, I believe, about 20 percent of all of the United States manufacturers involved in the process of monitoring. It has been through the Compliance Alliance that monitoring has broadened throughout the United States and become, as Mr. Kane just testified, perhaps the single most important factor in improving working conditions in the garment industry.

I am proud to say that we started this process with the encouragement of the Department of Labor. And I would say to you that although the department has received some demerits today for not appearing, it is in fact through the leadership of the United States Department of Labor that a reform is occurring throughout the country. It is through the efforts, principally of a regional director by the name of Rolene Otero, Jerry Hall, and others, that the Department of Labor initiated what ultimately became a voluntary effort on the part of Compliance Alliance. These efforts on the part of many other manufacturers, responsible manufacturers, began a monitoring process. These people led, which is in fact the responsibility of government, and the industry has responded.

Let me give you just a brief explanation of what monitoring is, Mr. Kane has given you some idea. Compliance Alliance monitoring is done pursuant to a long form agreement that requires unannounced surveillance at each contracting shop, the training of contractors and quality control personnel. I’ve remarked at Ms. Su’s comments about production personnel.

It is true that quality control personnel go into every shop where there is work. Those quality control personnel are trained by Compliance monitors to be the eyes and ears of Compliance monitoring people when they can’t possibly be there. It’s just an enormous task. So the quality control people are in fact trained and they go into every shop and they look for wage and hour violations, among other things.

In addition to that the Compliance organizations hand out written instructions in the language of the contractor and in Southern California you can imagine there are many different languages. We’re also involved in the handing out of educational material to the workers. We perform on-site investigations. The on-site investigations include ad hoc interviews with employees, not selected employees as was previously implied by in fact ad hoc interviews with employees in their own language. Interviews with managers, interviews with owners. Examinations of piece rate tickets, some of which I brought here for you to take a look at today if you desire. Time cards and pertinent time records. Physical examination of the work in process. Documentation and support of that work which is a process that vitally important to prohibit subcontracting.

A confirmation is performed of state registration, Workers’ Compensation Insurance, an examination of bookkeeping methods, in particular payroll records. And investigation of immigration records. We have to perform I-9 investigations during these analyses. We do an analysis of machine capacity to make certain that the work that’s on the floor in that shop can match the machine capacity. An OSHA inspection is done and a violation verification form is filled out for every Compliance Alliance investigation.

The violations of the Fair Labor Standards Act if there should be any are immediately noted on a report and remediated. The word "remediation" is a word you’ll hear a lot from monitoring people. That means the back wages are paid on the spot.

In addition to that summary reports are delivered to me. I review those reports and quarterly reports are submitted to the Department of Labor. The Compliance Alliance hasn’t ended abuse by any means. What we’ve done, however, I think is to make a serious dent in what was a problem that the Department of Labor first focused national attention on.

In 1997 the Department of Labor recorded that minimum wage and overtime violations in Los Angeles were significantly less likely to occur in monitored shops. That the average violations in monitored shops were 60 percent less than those in non-monitored shops. 73 percent of monitored shops investigated were in compliance with minimum wage as compared to 36 percent of non-monitored shops. And there was an even greater disparity with respect to overtime violations. There’s no doubt that monitoring has had an effect.

We know, however, you should understand this, on any given day Department of Labor investigators or you, should be going to any of these shops, and I encourage you to do that, can occur. You can’t be in a shop every day. It’s impossible to monitor the work on a day to day basis, unless you are the employer. And the manufacturers are not the employers. This is something that you should keep in mind when you consider what I perceive to be an ill-conceived notion and I address this to Ms. Mink with respect to the possibility of joint liability legislation.

You are crossing a distinct line that has existed not only in this industry but many other industries between an independent contractor, an out source, a term used in other industries for instance, and the employer. The employer is the contractor who employs people, sets the standards within that shop, and regulates their comings and goings, their break times, their vacations. Someone who determines what their piece rates should be. That’s an intimate relationship, upon which liability should arise. The manufacturer is removed, despite the fact that monitoring occurs.

It seems ironic to me that it would be proposed that manufacturers would somehow inherit liability, joint liability or otherwise, and I’ll get to the otherwise in a second, because they’re monitors. We’re involved in the process of bringing about a revolution in this industry through techniques that involve industry initiated activity. And I suggest to you that it is through the leadership of the Department of Labor that this is coming about. But before you recommend legislation I think you really should get a better understanding of the complex issues that we face every single day. It is not a simple matter. You don’t simply take the number of hours you work and the amount of money paid and calculate from there. If it were that simple these things wouldn’t be occurring.

We are having this debate in a sense because it is very complex. Let me give you an example. Most garment workers are paid piece rate. While the Fair Labor Standards Act makes reference to piece rate agreements in its Article 7G, in fact the emphasis is on hourly wage, to which you made reference. However, it’s inconsistent with the way workers are paid. They’re paid based upon performance in what's known as piece rate.

When you deal with recent immigrants to the United States who hardly speak the language, and try to tell them that while their structure is a piece rate structure, the principal piece of legislation of the Fair Labor Standards Act requires that they pay on an hourly basis. It’s very difficult. That calculation of how piece rate translates into hourly wage, was the principal problem that I had in the early ‘90s through 1995, before this all began, in trying to explain the contract in their own language, who this conversion had to be made. It’s a very difficult problem.

I have a client who is Thai by origin. She guaranteed her workers minimum wage and time and a half overtime in what’s known as a backing in situation. That is, you earn your piece rate. If your piece rate didn’t generate minimum wage and overtime, at time and a half, she would make up the difference. That’s illegal in the Fair Labor Standards Act, you can’t do that. It might sound like it’s legal, but it’s not. Because the regular rate under the Fair Labor Standards Act is calculated by taking the total compensation and dividing it by the total number of hours. Therefore you cannot avoid an overtime violation based on the regulations of the Fair Labor Standards Act, it’s impossible.

And if you do a backing in, which is outlawed, you’re also in violation. And I’m giving you one of the simplest examples, because of time restraints. Let me tell you, it’s extremely complicated, there are cultural issues here.

Let me address a few of the other issues. Cost is in an issue. The major manufacturers who are members of Compliance Alliance average $81 million in sales a year; that’s big. This is an industry shaped like a pyramid, and the guys who do that kind of volume are way up at the top. The massive numbers of manufacturers are way down here at the bottom.

For each contractor, and with 16 members and 400 contractors you can see they use a lot of contractors. You have to pay a minimum of $1,750 per year just for the basic recording. If a contractor requires intensive monitoring which occurs when they violate the law, that number goes up to about $3,550 per contractor. If they have no violations for nine months it drops down to $1,150 a year.

In addition to that it’s $250 per contractor for each quarterly report. It’s $400 for the initial seminar in which they are taught what’s required of them and told if they don’t comply with the law they’re not going to be used. The economic leverage message is delivered by the compliance and so on.

There are many other costs involved. So what we have is manufacturers at the top who are responsible who account for let’s say those who are monitoring just the Compliance Alliance, probably amount for more than 60 percent perhaps as high as 80 percent of production. The vast majority of manufacturers are small. They find it very difficult to justify the cost of monitoring. They can do it in house, but in my view in-house monitoring is fraught with difficulty. Or they can use an independent monitor and then the cost can become significant.

And one of the reasons it’s significant is the retail community is indifferent. The retailers of this country have buried their heads in the sand as though this were not their problem. One of the reasons they get away with it is in 1949 there was an amendment to the Fair Labor Standards Act which gave them what’s known as a good faith exemption. That good faith exemption says that if they send a standard form letter to Lonnie Kane or to Paul Gill at the beginning of the year or every month and it says, "Have you been a good boy? Are you using contractors that comply with the law?" That’s all they need to have to satisfy the good faith exemption. It’s a joke.

You know, having the experience that you have, much less than the retailers know about the industry. The retailers are fully cognizant that there are problems in this industry. And they seek to satisfy the good faith exemption from the Fair Labor Standards Act by simply sending a standard form letter to their vendors asking them to sign a letter stating that they’ve complied with the law. It’s a joke. The retailers by being indifferent sent a message. The message is we don't care. And if you’re going to do something, I suggest strongly that’s where you put your focus.

The retailers represented by their associations have been very helpful. And when Secretary Reich got to organize a summit of retailers after the El Monte incident, he was unable to get virtually any support from the retail community. Morris Cain who was a leader of the Mass Retailers Association made a statement very typical. And that was stay away from the retailers. The focus should be on the manufacturers, after all they're the ones that are deciding what contractors to use.

Well, the answer is the Department of Labor’s initiative, your initiative, should be use your economic leverage to bring about reform. Let’s not have a gap between the worker and the people who are benefiting from their labor so great. Well, if you want to do that the way to do it is to involve everyone in the food chain in the apparel industry. That not only means the manufacturers, it means the retailers, that exemption should go. You can make it go.

There are a couple of other issues I just want to mention briefly to you. You have mentioned joint liability and I’d like to address that specifically. The violations you’ll see from the Department of Labor statistics the violations are principally record keeping violations. In addition to that minimum wage and overtime, here in California we do not have a significant problem with child labor so far as the department is concerned. And I think that the statistics bear out that that doesn’t exist here to any great extent. It exists, but it’s not as terrible as it is in some other parts of the country.

Record-keeping is a significant day-to-day enterprise done by an employer. With computers it has become a little bit easier but it is still a significant problem. Minimum wage and overtime isn’t simply a method of calculation. It has to do with the way piece rates are determined. It has to do with punching in a clock and punching out a clock. You cannot expect a manufacturer who is in many cases hundreds of miles removed from the premises to be responsible for violations of those things. It’s a very significant step you’re taking. Let me tell you why.

Creative lawyers have used RICO, a statute never intended to be used the way it’s used today, to ensnare people who never were envisioned by Congress in liability schemes. Joint liability statutes have the prospect of offering creative lawyers an opportunity to bring employee grievances against manufacturers that he never envisioned nor will you ever envision. The National Labor Relations Act, civil rights violations, discrimination matters. The myriad problems that exist between an employer and an employee will be visited on the manufacturer by virtue of a legislation you have discussed. They will use joint liability to expand the scope of this in myriad ways.

While it may be viewed and narrowed by you to what you think are only Fair Labor Standard Act violations, the truth of the matter is it will be broadened, trust me I'm a lawyer, I’ve been there, I know. It will be rendered useless. And if you create some kind of exemption three years from now there will be hearings why that exemption has carved a loophole in the legislation so large it's become meaningless and we’ll be right back where I'm predicting you're headed today. You cannot allow joint liability to blow the line between independent contractor or an employee.

It’s not only our industry that has been the focus of this kind of thing. You’re dealing with a relationship that exists in every industry. And if you take this step you will be impairing the rights of manufacturers, not only in our industry, but in other industries, when we use this as an analogy. So I strongly urge you to reexamine that this a very complex matter.

We have an incredible industry in California. We are the County of Los Angeles’ largest employer in the manufacturing sector. Over the last 15 years every manufacturing industry has lost employment but our industry. Despite predictions by me and others that the results of NAFTA cost us to lose tremendous amounts of employment, our employment base is growing. We need this industry here. This is a ladder, a stepping stone for people who don’t have a stake in America, being that stake in America. This is a chance for people to really become equity holders in the United States. We don’t require skill, all we require is hard work.

Lonnie didn’t mention this, but virtually in every company that I know in this industry, minority members are in executive and management positions. They got that way by working in shops. We’re a stepping stone in America. One of the few industries that offers that. More and more companies are registering to become apparel manufacturers than ever before. With the decline of the draw of professions as an industry of the future, the apparel industry is one of the few. In a sense we’re like the software and the high technology industry, low capital requirements in our industry, however. So we are beginning new businesses every day at a more rapid rate than ever before, despite NAFTA our employment base is growing. Despite the fact that there’s a huge disparity between our minimum wage and the Mexican minimum wage we still employ more and more people. As of last month 122,000 people in this county alone in sewing and cutting.

What you are thinking about, and I’m looking at you, Madam, because you mentioned joint liability, really puts in jeopardy the jobs of 122,000 people in this county. And I’m serious about it, very serious. We have an enormous employment base in Orange and San Bernardino Counties and others, and I hope that you will seriously consider the significant employment base we have. The issue is jobs. Thank you.

Chairman Hoekstra. Thank you.

Mr. Gill.

Mr. Gill. Thank you, Mr. Chairman, members of the committee. I flew down here this morning from northern California to talk about what is happening in the Bay Area. I thank you for the opportunity to testify.

I am currently working for a non-profit corporation called Manex, which is the Northern California Manufacturing Extension Partnership Center. Part of the national program affiliated with NIST, in the Department of Commerce. And the MEP program, was created to assist competitiveness for small and medium sized manufacturing firms in this country. Particularly in those industries which trade legislation may have created an adverse effect for both business and employment prospects. It was created as part of the Omnibus Trade Act of 1988.

The apparel industry certainly fits that profile and Manex has hired me to direct apparel related projects in the Northern California region. Just for reference apparel manufacturing in the Bay Area, it’s the largest manufacturing employment sector in the cities of San Francisco and Oakland.

Before I joined Manex up until January of this year I was the co-owner of a small apparel company in the Bay Area. We’d had the company for many years until we sold it and actually I have about 26 years of experience in the apparel industry. We contracted with all of our work with contractors locally in San Francisco and Oakland and of course I’m completely familiar with the process by which that happens, as Lonnie is.

From 1993 through 1997 I was president of the board of directors of San Francisco Fashion Industries, which is a 77-year-old trade association. It’s the oldest trade association of manufacturers and wholesalers in this industry in the United States. And from 1993 on as president of the association I became very deeply involved with industry efforts to address wage and hour compliance problems as they were brought to our attention quite forcefully I might add, by the San Francisco District of the Wage and Hour Division. They paid us a visit and asked us what we were going to do about it, never really occurred to us that we were going to do anything about it as a trade association, but they were quite persistent.

They had done a survey in 1992, which is when they started their real efforts in California. And they determined that only 12 percent of the shops that they surveyed were at full wage and hour compliance. What we did was really business responding to regulators. I mean we’re not making laws. Everything that we’ve done has been in the context I think of businesses and other associations, all of us in the community responding to existing laws, responding to the regulators as they’ve approached us.

I was fairly skeptical about the department’s efforts because it seemed to me that they were cracking down in California. The Federal Government had passed NAFTA. Within a short period of time I always told them that they were opening the door to Mexico with one hand and pushing us through with the other hand. And that jobs were the issue.

It was an unhappy coincidence to say the least. Because even if the jobs remained in California as Richard alluded to, there’s no question that NAFTA has suppressed the wage base. I mean there is no question that California companies are competing with companies that are across the border.

One of the things that surprised me was that the wage and hour administrators in Region 9 in the San Francisco District, and Region 9 includes Southern California, were very willing to listen. They were very willing to look at creative ways of addressing the problems. The regional administrator of wage and hour, William Buell, who has since retired, was, I think, a very creative man and a very intelligent man and worked very hard at encouraging the people that worked under him to come up with solutions that went beyond mere law enforcement. Because quite honestly it’s a large industry with many, many, many, many work places, employing that many agents was probably not going to be part of his budget. I think that the wage and hour remains very, very helpful and creative up to the current day.

One of the things that we talked about was just implementing a strategy of cracking down on violations if unconnected to other strategies might destroy the employment base. One solution is to close the shop. If you can’t figure out how to reform the industry you close the shop. And that was going to create an unfortunate effect particularly in the cities that I’m familiar with, San Francisco and Oakland. And so they were looking for ways for us to help them.

Our association in conjunction with the contractor’s association in Northern California, the Northern California Chinese Garment Contractors Association, negotiated under the watchful eye of the Department of Labor, something we call the master agreement. The master agreement was really a way for a manufacturer and a contractor to adopt good business practices. There are other considerations such as the question of good business practices. When you have violations that occur willfully, it’s as if someone is determined to break the law and not pay minimum wage and overtime. That is a law enforcement problem. That’s not a business problem. That’s a law enforcement problem.

And if somebody is determined to hide it, it’s going to be very difficult for a businessperson to find it. On the other hand, there are a lot of violations that occur, have occurred, and continue to occur because of what I would call bad communication, bad organization, and bad business practices. So we set out to look at ways in which we could correct that jointly.

We also embrace monitoring as a technique. We use monitoring in Northern California as well. But we’ve also tried to work on this business of trying to have a more creative framework to improve productivity, to improve communication between the manufacturers and the contractors. They may be difficult to execute but they’re not necessarily difficult to understand.

I mean for example, in a shop that has not a very good quality control program you could have 10 to 15 percent of the work that’s done have to be redone. Now who pays for that? You know, it was not uncommon in the past for the shop owner to say, especially in a small shop, you know, I paid you the piece rate for that and you didn’t do it right, you’re going to have to take it home and fix it. That’s a violation.

Well, we can say that’s a violation and you’re going to have to pay the worker to fix it, but the manufacturer can’t necessarily be induced into paying the contractor again to have the same work fixed that they already paid for. And the retailer certainly isn’t going to pay for it. So the question is how do you address that problem.

Well, one way to address the problem is to train the factories to have a lower percentage of rework. If we can reduce the percentage of rework in a factory from 12 percent to 2 percent, even if there’s a small cost in the inspecting process, we’ve gained a lot. And that’s the kind of work that we’ve been trying to do.

There are a number of programs, though I am not going to go into all of them. But the Bay Area apparel industry has been united in embracing these goals. We have participation in programs from the Chinese Contractors Association, the San Francisco Fashion Industries, UNITE, the City of San Francisco, through the Mayor’s office of community development and now with Manex.

The programs have been hosted at City College of San Francisco through the Garment 2000 program. While it would be nice to say that the programs we’ve embraced have been responsible for all the results – I am not comfortable in saying that – but, the surveys that the Department of Labor has shared with me show that in 1997 approximately 90 percent of the factories surveyed were in compliance with federal and state law in terms of minimum wage – from 12 percent to 90 percent is quite an improvement.

So at this point with Manex, I’m directing a program on behalf of a pilot group of 28 contractors. It’s called Made by the Bay, and the program coordinates resources from City of San Francisco, the Department of Labor, the chancellor’s office of the California community colleges, Manex, and the contractors. What we’re trying to do is improve quality control and productivity, enhance business development and further ensure compliance to an industry sponsored voluntary monitoring program.

The latter was formed in conjunction with Region 9 Wage and Hour so that the monitoring meets the highest standards. The program is unique in that the contractors have agreed to monitor themselves employing independent monitoring service which reports only to an industry oversight board with the Department of Labor having access to all the records. In effect, the contractors have agreed to monitor their own shops, with the understanding that there’s random surveillance, that there’s random inspections. They understand what is at stake. They understand that if the monitoring service reports to the Department of Labor have violations then they’re in trouble.

They understand that participation in the productivity enhancement programs depends upon them remaining in full compliance. Nevertheless, these are the leading factories in the region and they step forward to embrace this. So it’s monitoring, but it’s monitoring done by the contractors with themselves, so to speak.

The industry in California has not improved its compliance performance only because we’re really great guys and everything is terrific. We have a lot of problems in the industry, readily available low wage labor from other countries which force costs down, an unrestrained environment of retail consolidation which have forced wholesale prices down by limiting competition.

What we have had is strong leadership. We’ve had strong leadership from the Department of Labor, we’ve had strong leadership within the industry. And our experience is that when you have strong leadership that it’s possible to answer some of the problems that have existed.

Thank you.

Chairman Hoekstra. Thank you. Since all the panel members have rigorously adhered to the five-minute time frame, we are going to take a five-minute break, and we’ll start questioning at 11:15.

[Recess.]

Chairman Hoekstra. Mr. Reinis, 120,000 workers, growing industry, or at least you indicated that, it's starting to grow. Largest manufacturing base, is it L.A. County?

Mr. Reinis. Yes.

Chairman Hoekstra. How many of those 120,000 workers would be covered under the monitoring program?

Mr. Reinis. There are 400 shops that we monitor through the Compliance Alliance. The estimates today are that 60 percent of the shops in Southern California are monitored.

Chairman Hoekstra. Are monitored?

Mr. Reinis. That’s Southern California. I can’t tell you on a county by county basis. But there’s some suggestion that approximately 60 percent of production is monitored at this time.

Chairman Hoekstra. And of those 60 percent you’re fairly confident that a large number of those would be in compliance with federal labor law?

Mr. Reinis. In their last published survey, although there is a new one yet unpublished, the Department of Labor indicated that with respect to minimum wage violations 73 percent of the monitored shops were in compliance. And a higher percent of compliance on overtime issues. Again, monitored shops.

Chairman Hoekstra. And are you working at trying to increase that percentage? You have identified the major players and it’s my understanding that it is just going to require an inordinate amount of effort.

Mr. Reinis. Well, it’s always the effort of the monitoring process to try to increase the number of shops that are in compliance. It’s a never ending battle. We have over 5,000 contractors.

Chairman Hoekstra. Right.

Mr. Reinis. And those contractors change hands frequently. So you really begin afresh every season. It’s a difficult process. And I would say to get to 100 percent compliance is a nearly impossible task. But we’re moving in the right direction.

Chairman Hoekstra. It’s a nearly impossible task.

Mr. Reinis. Nearly.

Chairman Hoekstra. That’s correct.

Ms. Su, do we have a difference of opinions here on the panel as to the state of the garment industry in compliance with federal labor law? Or do we all have pretty much the same kind of picture that it’s getting better. You made a reference that maybe the sun isn’t shining any brighter than what it was before.

Ms. Su. I think that we have several fundamental disagreements. The first is that from my experience workers are not doing better than they were before. Mr. Reinis talked about several promising trends in the industry, like upward mobility for garment workers, which there are studies done about this, and UCLA professors have documented that this is simply not the case. And maybe he’s talking about one or two people, but the reality is that these are dead-end jobs that workers going up and out of.

Chairman Hoekstra. What is the status in L.A. today, in Southern California, with compliance with federal labor law?

Ms. Su. Well, the latest study that the Department of Labor did, which was supposed to come out early this month I believe, has not yet come out. But the preliminary reports are that it is still a sweatshop industry. It is still largely in noncompliance with basic minimum wage, overtime laws. And any suggestion that we are going to do things to improve conditions leads to the threat that we’re not being pushed out the door, but we’re going to walk out the door. I think that’s highly problematic.

I think the compositions of the testimony today seems to suggest that the problem lies with UNITE at some level. When in fact the testimony of the workers and of Mr. Lee confirmed is that it’s not UNITE choosing to move industry away to avoid compliance, it’s manufacturers going to great lengths to avoid union-made goods, union shops.

Chairman Hoekstra. See…

Ms. Su. I think that there’s really…

Chairman Hoekstra. Do you disagree or agree with Mr. Reinis’ assumption that compliance is working and those good propositions of the people that are in the monitoring program are meeting federal guidelines? Would you disagree or agree with that?

Ms. Su. I would defer to some of his expertise.

Chairman Hoekstra. Okay.

Ms. Su. On the area of where monitoring has worked. But what I will say is somewhat suspect about their position is that they cry on the one hand that monitoring is extremely endeavor, when the truth is you have the most powerful monitors you can get within your shops yourselves, which are the workers themselves. If you give workers the power to monitor the conditions in their own shops, they’ll do it. And it requires a real shift in the power between manufacturers and workers. It seems to be that is why the call for some sort of external monitors does not include workers. It makes me at least suspicious that they are not actually looking for is compliance, but what they are looking for are more ways to show their production practices.

Chairman Hoekstra. Would that be the case in the core company that you were working with, Ms. Klibanow? That they were trying to shield their practices? That they were trying, striving to meet and they were meeting federal standards and requirements?

Ms. Klibanow. They were meeting all the legal requirements.

Chairman Hoekstra. And the workers were empowered. You’d argue that in this case, in your scenario, that the workers were empowered but actually when they came to the Federal Government were not empowered. Is that correct?

Ms. Klibanow. That’s correct.

Chairman Hoekstra. And how did that happen?

Ms. Klibanow. That they lost the power?

Chairman Hoekstra. Yes.

Ms. Klibanow. To deal directly with their employer?

Chairman Hoekstra. Right.

Ms. Klibanow. Because without any election, with coercion, a union came into the shop, which was not representing the interests of the employees. Many employees reached that conclusion and mobilized themselves to what’s called decertify the union. In other words, to arrive at a legal status where the union was no longer the exclusive bargaining representative. When they took those steps the union immediately retaliated against them by pulling the work from their primary supplier at that time which was Mr. Shapiro.

And also then filed charges with the National Labor Relations Board, which had the effect when the employees got counsel and filed a formal decertification petition, because of the presumptions utilized by the Labor Relations Board, no election has been held. And in fact under the aegis of the board, the employer notwithstanding the wishes of its employees, in order to stay in business, has basically kowtowed to the power that the union enjoys to be the voice of these employees supposedly. And they accomplished that essentially by removing the work. In other words telling Mr. Shapiro that it could not do business anymore with Sorrento, because the employees had filed a petition.

And that’s exactly what the union representative said to the employees, because you signed this petition you will have no work. That’s a blatant violation of the fundamental right of employees under the Act to choose to be represented by a labor organization or to choose not to be represented by a labor organization.

But in our system as it is, the only person or entity who could say you are the representative or you're not, is the National Labor Relations Board. So these employees have no voice right now. As a matter of NLRB law, UNITE is still their representative. And they don’t have a right to deal directly with their employer. They did have that before and they tried to get it back, because conditions have worsened, not improved. But the legal system as it is has them out in limbo. Their rights to deal directly with their employer are given over to UNITE who has basically indicated that it will throw them out of work for its own purposes.

Chairman Hoekstra. Thank you. Ms. Mink.

Mrs. Mink. Thank you very much, Mr. Chairman. I just wanted to note the comments made by several witnesses here today indicate that they’re very supportive of the Department of Labor. So I’m sure that Department of Labor will regret not being here to listen to the words of support. And I shall communicate those comments to the Labor Department.

I’m here primarily to see if we can find some way to augment and facilitate the enforcement of the Fair Labor Standards Act. Not to find fault with any particular player in this entire industry. Certainly to recognize that notwithstanding some nay-sayers the industry has grown remarkably in California and that because of initiatives by the Department of Labor you have started a voluntary system of monitoring.

Our concerns are preliminary comments that we’ve heard from the department and elsewhere that the monitoring has not worked as well as they had expected. And that current surveys indicate that it’s moving in the opposite direction. And that’s unfortunate because if it were otherwise and this and the evidence indicated that it was working, perhaps that's what we should depend upon.

I have several questions. One stemming from what Julie Su indicated that and in response to your comments, Mr. Reinis that the monitoring expenses are high. And as a result not all of the people in it can participate because it's a costly activity. What is your comment about the use of the worker in these factories as part of the monitoring system? I assume that they’re not part of it now. What is your general comment in creating a mechanism which included them at least part of the players.

Mr. Reinis. There is a provision now in all Compliance Alliance shops for a posting of an 800 number. Workers are encouraged to use that. The signs that are posted permit the employee to make calls either anonymously or with the protection of anonymity with respect to those calls. They go directly to the monitor, not to the manufacturer.

By the way, the monitors are answering pretty much to Department of Labor and to me – not to the manufactures. So that independence in my view is quite important. It does tend to dilute what might be perceived to be a bias in favor of the manufacturer, and make it much more bias in favor of the worker.

I think that you have to recognize in our capitalist system there’s a function to be played by the difference between management and employees. Workers have a very important opportunity to communicate. That opportunity to communicate with the Department of Labor is sometimes difficult to exercise. We think, through Compliance activities and the strength of independent monitoring, that workers will have another needed avenue to register complaints. In effect to self-monitoring, by not speaking to their employer, not speaking to the link between the employer and their income, but rather to speak to an independent non-profit agency such as the Compliance Alliance or the independent monitoring organization about what the workers perceive to be as abuse.

Mrs. Mink. Wouldn’t it enhance the monitoring system considerably if in it you included some designated worker in each of these shops as part of the monitoring system? It seems to me that that’s a very simple component that could be added that would strengthen the work place as a protector of the worker’s rights with respect to minimum wage and overtime, which is the essence of why you’re involved in all of this activity, is to try to get compliance. And if this is voluntary anyway, that the whole system is voluntary and they expect the monitors to come in to look at quality, and at the same time to also monitor for, you know, wages and overtime.

You testified that sometimes the jobs were concurrent. They came in to look at qualify and they could also look at the wage scale and overtime and so forth. Since that part of it is already set in place it would seem to me that if you had a worker, just one in each of these shops, as a designated person that could report on what was going on, that this would really enhance the reliability of the system.

Mr. Reinis. Each of the shops generally has a floor person who has been elevated to the position, supervisorial position from the ranks of the workers, oftentimes based upon performance and other areas as well. Those floor persons are not necessarily the direct contact, now made, because oftentimes the floor persons are political and not necessarily echoing the needs of the workers. So when employee contact is made by a Compliance Alliance investigator through an independent auditing company, not QC personnel, those contacts are made with the workers specifically and directly so that they’ll have no layer of bureaucracy between them and a source of help.

I don’t disagree with what you’re saying. I think that a system has existed for many years that allows that person who has performed well to achieve a level of responsibility in the shop and to be spokesperson. I think one of the persons here is obviously an articulate spokesperson for the workers that were at Sorrento. And that kind of person exists in virtually every shop.

Mrs. Mink. Is it possible that the people that are working for this Alliance would be willing to examine the validity of Ms. Su’s suggestion that a worker be put in place in this monitoring system?

Mr. Reinis. I can’t speak for them. But it seems to me that it’s a suggestion worthy of discussion and investigation. We need to continue to emphasize the relationship between the worker and compliance. And we’ll take every step necessary to improve.

Mrs. Mink. I apologize that I’m going to have to leave to catch a plane, so I’ll have to abruptly leave, and perhaps miss my second round of questions. But I do have one more. And that was your suggestion to me that we were narrowing our overview of a potential solution to this sweatshop problem by zeroing in only in the manufacturers. And you suggested rather directly that there should be a link up with the retail community. Can you elaborate on that? I am perfectly willing to add them to my legislation.

Mr. Reinis. Yes. It seems to me that when focus is made on the manufacturer only we’re overlooking an element in the garment industry that is different today than it was in 1949 when the Act was amended to protect the retailer.

Mrs. Mink. So all you’re suggesting is that we remove this full faith and credit – good faith compliance and that would do it?

Mr. Reinis. I think that there needs to be more than that. You’ll find attached to my statement a program that would involve virtually no cost. But responsibility in my view, worker morality on the part of retailers. That would involve establishing a compliance person at every retailer. Every major retailer should have a compliance person. Every major retailer now qualifies vendors to be on their matrix which means eligible to sell that vender. Qualifications do not include monitoring. They should. They should be told, required, that in order for them to exert good faith exemption rights, they need to say to vendors you must have a monitoring program in place, you must report to our compliance officer.

They should make occasional ad hoc visits unannounced. Not only to the manufacturers but also to the contractors that are performing work for them. They should become much more actively involved in compliance matters in terms of education. They should require there to be seminars of all of their new vendors with respect to monitoring. The program is outlined in the materials that I’ve submitted to the committee.

Mrs. Mink. Thank you very much. What percentage of the industry now is unionized, Mr. Reinis?

Mr. Reinis. In Southern California?

Mrs. Mink. In California.

Mr. Reinis. We have a hundred…

Mrs. Mink. Southern California.

Mr. Reinis. We have a hundred and twenty-two thousand workers in the County of Los Angeles in sewing and cutting. Less than 200 are unionized. It’s not an issue here.

Mrs. Mink. Two hundred workers?

Mr. Reinis. Yes.

Mrs. Mink. Out of a hundred and twenty-two thousand?

Mr. Reinis. Thousand, that’s correct.

Mrs. Mink. And with respect to northern California?

Mr. Reinis. I believe there are about 500 workers in northern California.

Mrs. Mink. That are unionized. Thank you very much, Mr. Chairman.

Chairman Hoekstra. Mr. McKeon.

Mr. McKeon. Thank you, Mr. Chairman. Thank you for coming to California and holding this hearing.

I was a retailer before I came here to Congress and so I have a little different view of a retail side. I remember when I first started in the retail business I was the only person in the store. And I don’t know where I can come up with another person that I can hire to be a compliance officer. And most retailers across the country probably fit that mode. Now, if you’re talking, you know, major department stores and large retailers of that type that may be able to fit that, but from a local small retailer as I was it would be pretty difficult.

In fact I had a call from my brothers, who are still running the business, and they had a problem like this. Where one of our shirt manufacturers that we bought from in either Texas or Colorado had a problem with one of their contractors such as Mr. Lee where they went in and caused him lots of problems. I don’t know if they totally put him out of business. But, you know, there was no way for us to know that somewhere down the food chain there was a potential problem. There may be some other ways to fix this.

I think that government doesn’t always intentionally do things to hurt, it just happens that way. And I think that sometimes we pass laws and then the unintended consequences or some bureaucrat somewhere takes some authority that we’ve given them and uses it to access and causes lots of problems.

I think unions have sometimes done the same thing. And union leaders or someone again gets a little authority and takes it to the access where you put a company out of business and put people out of business. 400 people lose their jobs over sometimes somebody’s excessive use of some authority that was given to them, sometimes by members of Congress passing a law that they don’t realize all the consequences that may take place.

So I think a lot of things have been brought up today and I apologize that I got here late and didn’t hear all of the testimony.

One thing I would like to clarify for the record. Ms. Soto, this is not the first time you testified before a congressional committee. Is that correct?

Ms. Soto. I had testified before coming here.

Mr. McKeon. At a congressional hearing? About the same type of problems?

Ms. Soto. The time before when I testified when I testified at a congressional hearing was in regards to NAFTA and how easy it is for the employers to move their operations elsewhere when employees protest their conditions. Which was something that really hurt us.

Mr. McKeon. Did UNITE encourage you to testify at that hearing?

Ms. Soto. They didn’t encourage. It was an opportunity that was offered to me to speak about what we as employees, as workers, are exposed to or have to deal with.

Mr. McKeon. Did UNITE encourage you to testify today?

Ms. Soto. They didn’t encourage me. What they have is my ongoing request for them to inform me whenever there is an opportunity to speak up at events such as these to let me know so I can speak on behalf of myself and other people in my condition.

Mr. McKeon. You’re not a member of UNITE?

Ms. Soto. No.

Mr. McKeon. Did you go to meetings with UNITE organizers before you were fired from Jeans Plus?

Ms. Soto. Yes, I did go to meetings at a church.

Audience Member. Your Honor, I dont want to be out of order but it’s illegal to interrogate a worker about participating in union activities.

 

Audience Member. Well, I believe that’s for an employer to do that.

Chairman Hoekstra. Do you have more questions in this area?

Audience Member. Not for a Congress…

Chairman Hoekstra. Go ahead, Buck.

Mr. McKeon. And my last question. Are there any other occasions that you have spoken in behalf of UNITE? Have you spoken at other times on their behalf?

Ms. Soto. The only thing I can say to you is that we hadn’t had support from UNITE, if they hadn’t been willing to back us up then I would never have felt any kind of courage to say what is happening to us. And even if it wasn’t for their support we would not have gotten the Department of Labor to listen to us even though we presented on multiple occasions evidence. They wouldn’t have paid any attention to us. I know they wouldn’t have.

Mr. McKeon. I feel your emotion and your strong support of UNITE. I also understand from some of the other testimony some of the problems. There are people probably on the other side of the issue also. I just wanted to get that in the record. Thank you, Mr. Chairman.

Chairman Hoekstra. Thank you. Ms. Klibanow, your testimony today, you talked about Sorrento Coats and the two factories and then we also heard testimony about the two Sang Lee factories. And the unions didn’t just picket but they also boycotted the factories where they had grievances. They also picketed and boycotted their customers, correct?

Ms. Klibanow. I believe that was the testimony of Mr. Kane.

Chairman Hoekstra. Okay.

Ms. Klibanow. Regarding secondary boycott activity there is a garment industry proviso to the general prohibition on secondary…

Chairman Hoekstra. It’s generally prohibited, correct? Except for the garment industry, there’s a carve out.

Ms. Klibanow. Yes. And there’s a somewhat more limited exemption in the construction industry. But those are the only two industries that are specifically enumerated in the National Labor Relations Act as having special privileges to broaden the scope of a labor dispute. To neutral…

Chairman Hoekstra. Right.

Ms. Klibanow. These are legal terms of art. But to employers and businesses that are not, say the primary target of organizing activity or economic pressure in support of negotiations for a contract, a bargaining agreement. So what Mr. Kane was describing is secondary activity which but for the fact that this is a garment industry would have been illegal.

Chairman Hoekstra. Illegal in any other industry?

Ms. Klibanow. Illegal in any other industry with a slight proviso for construction industry, but…

Chairman Hoekstra. All right. Can you talk to us a little bit about the other one which is kind of unique to this industry, which is liquidated damages?

Ms. Klibanow. In all honesty I am not directly familiar with the liquidated damages. I am familiar with some litigation in a district court in New York on the issue of contracts which have liquidated damages. I have experienced in the Simo litigation a problem, which is that the union in defense of its activity was invoking its bargaining agreement with Mr. Shapiro. And yet, before I initiated any legal action through their own, the union’s own internal grievance procedures, I requested a copy on behalf of the employees I was representing. And actually they signed individual requests that they wanted to see what that contract said, since the union was invoking it as a defense to putting them out of work. And they refused to provide a copy.

And in our litigation, our trying to take to the 9th Circuit whether they have any obligation as a fiduciary to employees they represent to provide a copy of a bargaining agreement with another employer. What I understand is going on in the other litigation is that where a union may be representing a manufacturer and a contractor, and the manufacturer for whatever reasons wants to use a non-union operation, they can pay the union for the privilege of doing so.

And the argument has been raised that that union which has those two agreements has a conflict of interest because they may be representing employees of a contractor that wants work, a unionized contractor. And yet, it would be more profitable for the union to let the manufacturer buy the privilege of getting it done offshore.

Chairman Hoekstra. That’s exactly the case that’s going on. That’s the merits of the case in New York.

Ms. Klibanow. That can only happen because of the garment industry’s particular privileges and exceptions that are in the NLRA currently to secondary activity and what’s called 8(e) agreements. These agreements are, in other words, where the union in the garment industry can actually strike to put into their bargaining agreement with a manufacturer that they will only use unionized contractors. That type of provision is generally unlawful for the union to tell the manufacturer who he can do business with. But there are these provisos to the two sections of the Act which allow the union to do this. And that's where the opportunity for abuse has risen. That's why they can have liquidated damages in these contracts.

Chairman Hoekstra. Mr. Kane, how do you feel about extending liability to the retailers, or involvement with the retailers?

Mr. Kane. One needs to understand the power structure of the apparel industry and how it’s changed over the years.

Mr. Reinis has stated a very complicated industry many years ago. Ms. Su made reference to a term called power, okay. What I do is not about power its about manufacturing product, okay. Very simple. I think on the way to work each morning about power.

The industry was once mainly controlled by the manufacturers because they provided the product and we sold to thousands of different stores. Through the years there’s been a consolidation within the industry. Where I had I would say probably 17, 1800 active accounts, I have less than half of that today. And predominantly 80 percent of my goods go to 10 customers. They absolutely have it. There’s the term power. They have the power over me today.

They share in my business and I deal in better goods. I charge a set price. My price is not negotiable with the stores. They don’t have to come in and say I don’t want to pay that I want to pay this. There’s a level below me called moderate and budget where the prices are negotiated on the table. If you take the major retailer in the United States today, dictates what he’s going to pay to the manufacturer. Obviously there’s a trickle down from that effect.

If that major retailer had somewhat a little more concern with the activities of the day to day operations that go on in the apparel industry, I think he might well budget a slight, few pennies more in the price he pays for a garment.

Chairman Hoekstra. Ms. Mink.

Mrs. Mink. Following on the questions to Enriqueta Soto, I wanted to indicate that my counsel advises that majority staff had met with UNITE in preparation for these hearings. And that UNITE’s suggestion that they could have a garment worker testify was in consultation with your counsel, with which we concurred, given that a major portion of the panel had to do with UNITE’s activities with reference to one of the companies.

So I just want to say, Mr. Chairman, that I commend Ms. Soto for coming and providing us her insights. That’s certainly her right and her responsibility to her friends and to her co-workers and to her colleagues. And it is irrespective of who invited. I would have extended the invitation to you directly had I had any prior knowledge of your willingness to be a spokesperson. That is a rare character in people in our communities, willing to stand up for what they believe and to express it in circumstances such as this where there may be opposite voices. So I think that your coming here and offering us your personal insights and evaluation is tremendously valuable.

Now I want you to go away from the hearing knowing that we have benefited greatly from your testimony and thank you very, very much for the courage that you have displayed in coming today. Thank you. Thank you, Mr. Chairman.

Ms. Soto. Thank you.

Chairman Hoekstra. Mr. McKeon.

Mr. McKeon. My questions were not in trying to intimate that you didn’t have courage. I, too appreciate your courage. I just want to make sure that there’s other sides, and these other witnesses have also shown a great deal of courage in coming here to testify also.

It’s unfortunate that that even happens in our country that we have to show personal strength and courage to come and testify because of things that happen in the work place. It should not be a part of our country.

I missed Ms. Simo’s testimony by arriving late. I will go back and read it. When I see that things like this go on – that you had a good job and things seemed to be great, and the employee seemed to be happy, the employer seemed to be happy, and then the union came in and caused all of these problems and this violence, I think that is something that we should not have happening in our country.

I again want to commend the chairman for holding these hearings. I think this is the kind of thing that gives us the chance to see what’s going on and to air it out other than in a courtroom. Here in this forum, we have a chance to listen to some of the things that have happened and then try to move forward to fix some of the wrongs that have happened and maybe we are able to do that with legislation.

I apologize, too, Mr. Chairman, but I'm going to have to leave to catch a plane. And again, thank you for the opportunity of being here. I want to thank the witnesses that have taken time out of their schedules to be here and enlighten us on this subject. Thank you very much.

Chairman Hoekstra. I would like to thank everyone on the panel for being here today. You have given us a lot of good testimony. It appears that – at least in this industry –there are many parts of the system that aren’t working. Whether it’s the Labor Department, the NLRB, organized labor, retailers, or manufacturers. But I think there’s a commitment and an involvement that we want to have with you in working through this process and resolving the issues.

So thank you all very much for being here, and the subcommittee will be adjourned.

[Whereupon, at 12:00 p.m., the subcommittee was adjourned.]