State Joint Liability Laws and Pro Se Back Wage Claims in the Garment Industry: A Federalist Approach to a National Crisis

Abstract

The garment industry, one of the largest manufacturing bases in the United States, withholds millions of dollars annually from its employees in unpaid minimum wages. However, courts have not clearly addressed the question of whether the Fair Labor Standards Act, which establishes federal wage and hour laws, makes garment manufacturers and retailers liable for the minimum wage violations of their contractors. The U.S. Department of Labor (DOL), the federal agency that enforces wage and hour laws, investigates few garment contractors, and collects little of the total owed back wages. Further, the DOL’s relationship with the INS compromises its ability to advocate on behalf of immigrant workers, who form the backbone of the garment industry.

In the wake of federal inaction, some states have implemented antisweatshop laws designed to enforce minimum wage and hour laws. For example, New York has focused on manufacturer and contractor registration enforcement. However, New York's efforts have not resulted in increased wage and hour compliance. California's new law, Assembly Bill 633 (AB633), the Sweatshop Accountability Bill, improves on New York's approach by considering manufacturers and retailers "guarantors" of back wages owed by their contractors, and by providing a private cause of action for workers to assert claims against manufacturers through a Labor Commission hearing. However, AB633 lacks an efficient and effective adjudicative process, and suffers from vagueness on joint liability provisions. States where the garment industry flourishes should independently investigate garment employees' claims for owed back wages in Labor Commission hearings, and add a presumption that retailers and manufacturers are joint employers unless the contractor provided a unique service separate from the company's production process.

Critics may argue that (1) joint liability collapses the distinction between employers and entities that utilize legitimate independent contractors, (2) admitting a state investigation in the hearing denies due process to the parties, and (3) aggressive minimum wage enforcement will hasten globalization and worsen overall employee conditions. However, presuming joint liability is appropriate in industries that use contingent labor to avoid liability. Further, any loss in due process by admitting investigations does not prejudice either party disproportionally, and is outweighed by efficiency and fairness. Finally, even if enforcing labor laws results in contracting overseas, states should defend a basic standard of living over subpoverty employment.

Alternatively, critics may respond that a hearing process does not remove enough barriers, and that states should establish a strict liability insurance regime, like unemployment insurance, to reimburse workers for owed back wages. However, assuming the equal efficacy of both approaches, a state-led joint liability/pro se approach is superior because it maintains due process protections and treats nonpayment of back wages as an illicit act. Nevertheless, if guarantors restructure their production process to defeat the joint employer presumption, or if hearings fail to provide sufficient procedural protections for workers, states should consider a strict liability, insurance-based regime to help resolve this national crisis.

Keywords: Employment law, joint employer doctrine, access to justice, public enforcement

JEL Classification: K31, K42