When you hear the term fast fashion, what pops into your head? Trendy designs, hot off the runways of Europe, reinterpreted at prices for all? Affordable, mass-produced clothing? How about labor unrest?
It’s long been true that the garment industry, as with others in which production is outsourced to developing nations, has had its troubles with employment practices at source factories. Those practices continue, particularly in factories in Asia and Eastern Europe. Most production appears to be completed fairly. Recently, however, an unwelcome spotlight has fallen on Zara and its parent company, Inditex. Back in July 2016, the Bravo Tekstil factory in Turkey, which had manufactured clothes for Inditex under the Zara brand, as well for as other fast fashion houses such as Mango and Next, abruptly closed. The former Bravo workers went to court to obtain a ruling that they were entitled to three months’ unpaid wages and severance pay from their former employer. With the employer’s principal having disappeared with the funds that the factory had received for the production of the garments, the workers attempted to have Inditex and the other fashion houses take responsibility for the payment of their lost wages. Although apparently not legally liable, Inditex had announced in 2016 that– together with Mango and Next – it would establish a “hardship fund” to compensate the workers. The three companies have since offered to pay about one quarter of the claims, collectively offering the equivalent in Turkish lira of about US $700,000.
That did not satisfy the former workers, who have focused their efforts on Inditex and the Zara brand in their attempt to recover their money. A number of these workers recently went into Zara stores in Istanbul and inserted hidden tags into merchandise. The tags advised potential purchasers that the people who had made Zara clothes such as those had not been paid for their work. Although it is not clear if the pieces so chosen were made in the shuttered factory, the resulting publicity surely did Zara no favors. Indeed, if there is a party in the wrong, it is the former employer, but that party is out of the picture, and the result is contention over what was intended to be an act of corporate generosity.
Why do these situations exist? In large part, it is due to the fast-fashion business model, which requires production of vast quantities of inexpensive clothes very quickly (as the name implies). Rapid and cheap can be, and has been, accomplished successfully many times, but the exceptions can be horrific. The Rana Plaza building collapse in Bangladesh, which killed over 1,130 garment-factory workers and injured over 2,500 more several years ago, is the most famous case in point.
How can a company as much as half a world away, eager for quick production, trust that its sources pay fairly, honor agreements to workers, provide clean working conditions and—quite literally—assure that the roof will not come down?
Contracts with source factories typically contain clauses prohibiting child labor and forced labor, mandating safe and healthy working conditions—and demanding compliance with often very strictly delineated employment standards and practices. But from far away, that is difficult to enforce, and as anyone who has ever inspected a factory knows, when they are aware that you are coming, things start to look much better—at least as long as you are there.
Earlier this year, a coalition of labor and human rights groups produced a report on transparency in the global garment industry supply chain. The hope is that, by encouraging fashion companies to publish accurate information concerning the factories in which their garments are manufactured, they will undertake to assist further to prevent, address and correct any human rights abuses that may occur there. It remains to be seen as to how successful these new initiatives will be. All that can be certain for now is that the problem will not go away and that counsel for companies seeking sourcing in developing areas should be diligent in working with management to help minimize both business risks and any potential harm to factory workers.
Credit: Laura E. Longobardi
Laura is counsel to Phillips Nizer’s Litigation Department and Labor & Employment Law and Real Estate Law Practices.
Tips To Help Avoid Adverse Claims and Protect Your Company
In the Event of a Lawsuit
It is axiomatic that a successful business in the fashion industry requires close attention to detail and countless hours of work. While the threat of potential litigation should not be at the forefront of management’s thoughts, here are some tips to bear in mind to reduce your potential future exposure and to place your company in a better position to defend itself in the event it is faced with a lawsuit or a potential lawsuit:
- Notify your Insurance Carrier. If you are served with a Summons and Complaint, or are threatened with a lawsuit, notify your insurance carrier. If you fail to timely notify your insurance carrier it may deny coverage, and the company could be stuck with otherwise avoidable out-of-pocket defense and indemnification costs.
- Implement and Enforce an Anti-Harassment Policy. An affirmative defense may exist to protect the company from vicarious liability for certain sexual harassment/discrimination claims based upon actions by supervisors and co-employees if the company implements and enforces an anti-harassment/discrimination policy; exercises reasonable care to prevent and correct promptly any sexually harassing discriminatory behavior; and the employee unreasonably fails to take advantage of any preventative or corrective opportunities provided by the employer or to avoid harm otherwise.
- Two Company Representatives Should Participate in Disciplinary, Evaluation and Exit Interview Meetings With Employees. Many employment claims (or issues that may give rise to employment claims) can stem from a disciplinary meeting, employee evaluation or exit interview, when a company representative (whether the H.R. director or an immediate supervisor) informs an employee of job concerns, performance issues or that employment is being terminated. It is advisable for the company to have two company representatives at those meetings to be better able to confirm or deny what transpired (to avoid a “he said she said” scenario) in the event of a subsequent claim by the employee.
- Careful! Emails Are Not Private. Once a lawsuit is underway, the company will likely be required to turn over emails (or entire accounts) that may be relevant to the subject-matter of the lawsuit. So, the next time you send a personal email from your work account, be mindful of its content, especially if you don’t want some lawyer, like myself, reading about your personal life. Conversely, lawyers either prosecuting or defending a case are always looking for the “smoking gun.” So, before you click “Send”, make sure you are comfortable that, if a lawsuit arises, your email will not be the “smoking gun” that an opposing lawyer may be seeking.
- Keep Accurate Time Records of Non-Exempt Employees. It is not only statutorily required for employers to do so, but is critical to the defense of a Fair Labor Standards Act claim for unpaid (or underpaid) wages, to accurately keep and maintain time records of all non-exempt employees. If the company maintains accurate and orderly time records on a daily basis, you will not be in the position of having to scramble (or spend countless hours) compiling these crucial documents for your defense or trying to defend against an employee’s claim without potentially crucial documentary evidence.
- Avoid Spoliation Claims Arising From Destruction of Surveillance Videos. Sometimes a claim for spoliation will be made if relevant evidence has been intentionally or negligently destroyed. This can arise not only from the destruction of documents, but also when video surveillance captures relevant footage which is not retained. A possible defense here would be to ensure the company has thoroughly documented and enforced a recycling and retention procedure relating to the company’s surveillance.
The list above is generally focused in my practice areas of litigation. It is not intended to be, and in fact is far from, a comprehensive list. Each point merits its own blog post, which will likely follow in the near future.
Credit: Kathryn T. Lundy
Kathryn is an associate in Phillips Nizer’s Litigation Department and Labor & Employment Law Practice.