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.
Have you ever had the experience of going into a fitting room and trying on two of the same item in the same size, perhaps only in different colors, only to find that they fit quite differently—to the point that one might not fit at all although the other did? Production line manufacturing may be efficient, but no one ever claimed it to be an exact science.
No one expects the retailer to guarantee that every item sold under the same SKU will fit exactly like every other item bearing that SKU in the same size. But in fashion licenses, that kind of elasticity in expectations can become the subject of negotiation.
It typically plays out like this: the licensee agrees to provide pre-production samples to the licensor for approval. The licensor either approves or disapproves; if it disapproves, the licensee is often entitled to a second try, adjusting the style to suit the licensor’s expectations. Once the styles are approved, the licensee initiates production. More typically in the fashion business, the licensee contacts someone else, often half a world away, and tells him or her to initiate production.
The licensor may demand, in the representations and warranties section of the license (which has been the subject of this series of posts), that the licensee warrant that production models will not deviate from approved samples. If the licensee is careful, that may be qualified by adding in any material way or by breaking the force of terms like will conform by dropping in the forgiving qualifier substantially. But bolts of cloth from different batches can easily have variations, and sometimes the chosen buttons, snaps and other accessories run out and others need to be substituted; the list of potential deviations goes on. In a seasonal business such as fashion, where a handful of weeks can make or break a SKU, a style, a look, a collection or even an entire business, the date on which finished goods are to be sent to retail doors is hardly the time to get into an argument over whether something already bought and delivered does or does not substantially or materially conform to the appearance or other attribute of an approved prototype.
The first rule of warranties applies here as it does to all others: for the licensee, never make a promise that you cannot keep; for the licensor, never ask anyone else to make a promise that you can be reasonably sure he or she will not be able to honor. To avoid surprises, it is useful for the parties to think through, and to talk through, contingencies due to variations in manufacture and to consider adding to the license, as a defined term, exactly what they mean when they say something must conform to what has been approved. Even if something is completely non-conforming, alternatives such as sale into outlets or other lower end channels, or outside the territory, perhaps with labels removed, can sometimes work.
In the end, however, all licenses, like all contracts, rely more on the element of trust (and forgiveness) than lawyers can hope to draft into them. Simply, a well-written contract can get you a favorable result in court, but working with the right people is a good way to help stay out of court.
Here as with most else in licensing, the name of the game is cooperation. The devil, as they say, will always be in the details.
Credit: Alan Behr
See previously published related posts:
- “I’m A Good Neighbor–Most Places“
- “I Own It — I Mean, Really, I Do!“
- “I Hereby Promise That You Are My one and Only-ish“
- “I Promise, Therefore I Am“
- “No Guarantees In Life But Plenty in Contracts“