By LARRY KANTER
Mounting concern over sweatshop working conditions in the apparel industry has sparked a new cottage industry independent monitoring firms that investigate apparel firms with an eye towards bringing them into compliance with state and federal labor laws.
A number of such monitoring companies have sprung up around Southern California over the past few years. More recently, several accounting firms including some of the largest international firms have been adding new compliance divisions or beefing up existing ones.
With the U.S. Department of Labor cracking down with growing vigor, clothing companies have become increasingly willing to pay a third party thousands of dollars a year to bring their operations and those of their contractors and subcontractors up to standards.
“You would rather have the diagnosis and the prescription before you hear that you are terminal,” said Carol Pender, president of Cal Safety Compliance Corp., L.A.’s largest independent monitoring firm, with more than 150 clients worldwide.
Companies such as Cal Safety are likely to receive a boost in business following last week’s news that a White House task force of apparel firms, unions and human rights groups has agreed to a “code of conduct” to improve workplace conditions at home and abroad.
The code, which apparel firms would sign onto voluntarily, sets loosely defined standards for wages and overtime, prohibits forced labor, and bans the hiring of workers under the age of 15.
In addition, signatories would be required to adopt “an internal monitoring program” to audit compliance with the code a fact which has not escaped the notice of monitoring companies and accounting firms.
“It’s clearly an area where we see an opportunity,” said Randy Rankin, a partner in the consumer products advisory group of Price Waterhouse LP in New York. “The code of conduct gives us an opportunity to leverage our worldwide network of offices.”
Very few apparel companies actually manufacture their own clothes. Instead, they farm the work out to an often diffuse and increasingly global network of contracting and subcontracting shops, which cut, sew and press the clothing. Under the code, an apparel firm would be held liable not only for violations within its own operations, but also for infractions by any of its contractors or subcontractors.
Apparel firms say their web of suppliers makes it difficult for them to know the exact conditions under which their clothes are made.
That’s where an independent monitor steps in.
“We partner with our clients to make sure they take care of a problem before it comes to the attention of any state agency,” said Randy Youngblood, president of Apparel Resources Inc., a Yorba Linda-based firm with about 50 clients in the L.A.-area.
Apparel Resources’ monitors do everything from undercover surveillance work to poring over a contractor’s financial records to randomly spot-checking factory floors in an effort to uncover minimum wage, overtime, child labor and homework labor law violations.
The company charges clients about $200 per audit, which generally is performed on a quarterly basis. For a medium-sized apparel company with 10 contractors, the monitoring process can cost between $8,000 and $12,000 a year.
“We’re looking after our clients’ interests,” Youngblood said. “And their interests are that, if there is an issue, that it is identified and corrected.”
But critics of independent monitors question just how “independent” these private companies actually are.
“Who pays the monitor?” asked Hillary Horn, an organizer with the Union of Needletrades, Industrial and Textile Employees (UNITE). “Who oversees their independence? It all falls back on the industry.”
According to Horn, the monitoring process will be little more than a fig leaf for clothing companies unless labor unions, human rights organizations and church groups are brought into the process a matter which the presidential task force has yet to resolve.
Unions aren’t the only ones with reservations. Even some accounting firms are leery of wading into the middle of the bitter fight over sweatshops.
“We don’t want to be used as a public relations vehicle for the apparel manufacturers,” said Al Frank, a CPA in the downtown L.A. office of Deloitte & Touche LLP.
Frank said Deloitte & Touche likely will remain on the sidelines until a more explicit set of monitoring standards is established.
As it is now, monitors operate without certification or oversight by state regulators. And that is unlikely to change, said Gerald Hall, an official in the Eastern L.A. County Office of the U.S. Department of Labor.
“The responsibility lies with the manufacturer,” Hall said. “The manufacturer needs to evaluate the effectiveness of these contractors who are doing the monitoring for them.”
Hall added that “there are good monitors and bad monitors.” But companies with some form of auditing system in place are far less likely to be caught with workplace problems that those without, he said.
A 1996 Department of Labor study of L.A. apparel firms found that 64 percent of un-monitored companies had minimum wage violations; however, among monitored companies in the study, only 27 percent had such violations.
“At least on paper, it really seems to change behavior,” said Hall.