Garment Industry: Efforts to Address the Prevalence and Conditions of
Sweatshops (Letter Report, 11/02/94, GAO/HEHS-95-29).

Sweatshop working conditions remain a major problem in the U.S. garment
industry, according to experts GAO contacted.  They say that working
conditions, in many cases, have worsened during recent years.  In
general, today's sweatshops differ little from those at the turn of the
century.  The Labor Department has made some progress in combating the
growth of sweatshops in the garment industry, but better coordination of
labor law enforcement continues to encounter a variety of impediments.
Some of these stem from existing legislative and administrative
constraints on the Occupational Safety and Health Administration and the
Internal Revenue Service.  Further, although Labor's Wage and Hour
Division has achieved coordination with those states that stress labor
law enforcement, such as California and New York, the potential for such
coordination appears far less with states with less vigorous
enforcement, such as Florida and Texas. The Division also faces a huge
and expanding regulatory mandate as its enforcement resources continue
to decline.  GAO applauds the Division's recent efforts to work with
garment industry manufacturers to foster voluntary compliance of their
contractors with federal and state labor laws.  However, the Division
recognizes that should these voluntary efforts fail, legislative action,
such as making manufacturers jointly liable for back wages owed by
bankrupt contractors, may be needed to better protect garment workers
from exploitation.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-29
     TITLE:  Garment Industry: Efforts to Address the Prevalence and 
             Conditions of Sweatshops
      DATE:  11/02/94
   SUBJECT:  Labor legislation
             Law enforcement
             Working conditions
             Occupational safety
             Occupational health standards
             Federal/state relations
             Clothing industry
             Labor law
             Interagency relations
             Labor force
IDENTIFIER:  New York (NY)
             Los Angeles (CA)
             Miami (FL)
             El Paso (TX)
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Commerce, Consumer and
Monetary Affairs, Committee on Government Operations, House of
Representatives

November 1994

GARMENT INDUSTRY - EFFORTS TO
ADDRESS THE PREVALENCE AND
CONDITIONS OF SWEATSHOPS

GAO/HEHS-95-29

Prevalence of Sweatshops


Abbreviations
=============================================================== ABBREV

  BLS - Bureau of Labor and Statistics
  DLSE - Department of Labor Standards Enforcement
  ESA - Employment Standards Administration
  FLSA - Fair Labor Standards Act
  INS - Immigration and Naturalization Service
  IRS - Internal Revenue Service
  OSHA - Occupational Safety and Health Administration
  WHD - Wage and Hour Division

Letter
=============================================================== LETTER


B-257458

November 2, 1994

The Honorable John M.  Spratt, Jr.
Chairman, Subcommittee on Commerce, Consumer
 and Monetary Affairs
Committee on Government Operations
House of Representatives

Dear Mr.  Chairman: 

As illustrated by the Triangle Shirtwaist Fire of 1911 and other
tragedies, garment industry sweatshops have long been a mainstay of
American work life.  This report responds to your request that we
determine the prevalence of sweatshops\1

in the U.S.  garment industry.  More specifically, you were
interested in knowing whether the acknowledged "widespread existence"
of sweatshops we reported on in the late 1980s had changed and, if
so, you wanted to know the factors contributing to that change.\2

You also asked that we identify actions that the Department of
Labor's Wage and Hour Division (WHD) has taken to coordinate efforts
for enforcing labor laws in garment industry sweatshops. 

To answer your request, we reviewed the economic and sociological
literature on the structure of the U.S.  garment industry and the
characteristics of sweatshop working conditions in that industry.  To
collect information on the prevalence of sweatshops and Labor's
coordination efforts, we interviewed over 50 experts, including
academics; federal and state labor enforcement officials;
representatives from local and international garment worker unions,
community organizations serving immigrants, and garment industry
organizations; and garment retailers, manufacturers, and contractors. 

Our review focused on the garment industry centers of El Paso, Los
Angeles, Miami, and New York City.  We chose New York and Los Angeles
because these are two of the industry's largest production centers,
according to Labor data, and because our past work focused on these
areas.  We chose El Paso and Miami because these are areas of rapid
growth in garment industry manufacturing and help to show the
variation in state regulation of sweatshops.  We visited three of
these centers--Los Angeles, Miami, and New York City--but did not
verify the data collected.  These visits included accompanying WHD
and state labor department enforcement officials on unannounced
investigations of six garment contractor shops, where we photographed
working conditions. 

We conducted our work from May 1994 to October 1994 in accordance
with generally accepted government auditing standards. 


--------------------
\1 We define a sweatshop as an employer that violates more than one
federal or state labor law governing minimum wage and overtime, child
labor, industrial homework, occupational safety and health, workers'
compensation, or industry registration. 

\2 In 1988 and 1989, GAO reviewed the nature and prevalence of
sweatshops in Sweatshops in the U.S.:  Opinions on Their Extent and
Possible Enforcement Options (GAO/HRD-88-130BR, Aug.  30, 1988) and
"Sweatshops" in New York City:  A Local Example of a Nationwide
Problem (GAO/HRD-89-101BR, June 8, 1989). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Although national data are unavailable, the sweatshop problem in the
garment industry has not improved over the last 5 years, most experts
believe, primarily because of legislative, resource, and economic
factors.  Legislative factors include weaknesses in the Fair Labor
Standards Act (FLSA) such as the lack of penalties for recordkeeping
violations and other limitations of the "hot goods" provision. 
Regarding the resource factors, since 1989, WHD has 17 percent fewer
enforcement resources for all of its regulatory objectives, 6 percent
more employers to cover, and additional laws to enforce.  Regarding
the economic factors, experts believe that the intense
price-competitive dynamics of the garment industry continue to foster
a willingness among manufacturers and contractors to break labor
laws. 

Although Labor has acted to coordinate its enforcement efforts, legal
and administrative limitations continue to constrain these actions. 
For example, although WHD officials say that they refer some cases to
the Internal Revenue Service (IRS), they report receiving little
information in return because the IRS Code generally prohibits IRS
from sharing information. 

WHD coordination with state labor departments varies widely,
depending on the emphasis the state has placed on combating sweatshop
working conditions.  For example, in California, WHD and the
California Department of Labor Standards Enforcement (DLSE) conduct
joint investigations in the garment and agriculture industries.  In
contrast, WHD has established far less coordination to combat
sweatshop operations with Florida and Texas, two states with less
stringent labor standard legislation than the FLSA. 

Since about 1992, Labor has tried to supplement its enforcement by
fostering voluntary oversight of contractors by garment
manufacturers.  These efforts involve educating the garment
manufacturers on their own employment-related responsibilities and
those of the contractors who depend on the manufacturers' production
orders.  WHD reports some initial success with this effort. 


   BACKGROUND
------------------------------------------------------------ Letter :2

FLSA is the federal law regulating minimum wage and overtime, as well
as child labor, in the United States.  WHD of the Employment
Standards Administration (ESA) enforces this law through workplace
inspections of employer payroll records.  In the garment industry,
WHD typically targets workplaces for inspection based on complaints
received from workers and other sources, as well as case referrals
from local, state, and other federal government agencies.  Depending
on the violation, WHD may assess civil monetary penalties or use
injunctions and other legal actions to deter noncompliance and
recover back wages owed by employers.  An additional tool is FLSA's
"hot goods" provision, which prohibits the production and sale of
goods produced in violation of the minimum wage and overtime
provisions of FLSA.  The Secretary of Labor can enforce this
provision by seeking injunctions stopping the employer from
producing, transporting, delivering, and selling goods until employer
compliance is achieved.  WHD is also responsible for monitoring
employer compliance with the employment verification requirements of
the Immigration and Nationality Act, as amended by the Immigration
Reform and Control Act of 1986. 

Many states also have legislation that supplements federal laws and
regulations governing the payment of minimum and overtime wages, as
well as the use of child labor.  In addition, states generally
require most employers to maintain workers' compensation insurance
and to pay unemployment insurance and other state taxes.  Some states
require the registration of employers in particular industries, like
garment manufacturing. 

The garment industry, one of the largest manufacturing industries in
the United States, is dominated by less than 1,000 manufacturers who
parcel out production to about 20,000 contractors and subcontractors,
all of whom enter and exit the industry easily.  Analysts have long
identified the labor-intensive U.S.  garment industry as one
characterized by extreme price competition, low wages, an immigrant
workforce, and a vulnerability to sweatshop working conditions. 

A typical garment manufacturer often has production orders with
smaller contracting or subcontracting shops.  These contractors may
be responsible for such operations as cutting, sewing, or completely
assembling the garment.  The finished work is either returned to the
manufacturer or shipped directly to the retailer (see fig.  1). 

   Figure 1:  Structure of the
   U.S.  Garment Industry

   (See figure in printed
   edition.)


   PRINCIPAL FINDINGS
------------------------------------------------------------ Letter :3


      SWEATSHOPS HAVE INCREASED IN
      MOST MAJOR GARMENT CENTERS
      REVIEWED
---------------------------------------------------------- Letter :3.1

On the basis of expert opinion, garment industry sweatshop operations
appear to have increased since 1989.  Experts we spoke with, however,
could not provide nationwide data on the number of sweatshops because
of the underground nature of these workplaces. 

In three of the garment centers included in our study, federal,
state, and local labor law officials; academics; employers; and
representatives of union and community groups generally believe that
garment sweatshops have increased since 1989.  The one exception was
New York City, where the Chief of the New York Apparel Industry Task
Force reported that, while sweatshops remained a widespread and
serious problem, the severity of the 1990-91 recession had forced
many shops into bankruptcy, significantly shrinking both the number
of sweatshop and nonsweatshop garment operations in the city.\3 On
the other hand, WHD officials in New York City believe the problem of
sweatshops in the garment industry remains the same as in 1989. 

In 1989, GAO reported that 4,500 of the 7,000 garment shops in New
York City were sweatshops; in 1994, one expert estimates that 2,000
of the 6,000 garments shops in New York City are sweatshops.  Other
estimates of garment sweatshops that experts provided were 50 of 180
(El Paso); 4,500 of 5,00 (Los Angeles); and 400 of 500 (Miami). 


--------------------
\3 The task force in New York City provided the most precise estimate
on the prevalence of sweatshops.  Representatives of community groups
said the number of sweatshops has increased, although they could not
provide estimates. 


      EXPERTS REPORT DEPLORABLE
      WORKING CONDITIONS IN
      GARMENT SWEATSHOPS
---------------------------------------------------------- Letter :3.2

Many of the experts we spoke with believe that sweatshop working
conditions in the garment industry continue to be poor or have
worsened in recent years.  While accompanying federal and state labor
law investigators in Los Angeles and in New York City on raids of
garment sweatshops, we found deplorable working conditions (see figs. 
2 and 3). 



(See figure in printed edition.)Figure 2:  Exposed Electrical Wiring
and Unsanitary Bathrooms

Figure 3:  Lack of Machine Guards

Some of the citations for violations that federal or state officials
issued included exposed electrical wiring, blocked aisles, unguarded
machinery, and unsanitary bathrooms.  Some experts also described the
working conditions in a typical garment shop as including poor
lighting, temperature control, and ventilation as well as blocked
aisles.  In Miami, we found the working conditions in garment shops,
while still poor, to be less severe than in New York and Los Angeles. 

Labor officials in New York and Los Angeles believe the large number
and severity of minimum wage and overtime violations may be related,
in part, to the larger population of undocumented immigrant workers
for garment manufacturing.  In contrast, Labor officials in Miami and
El Paso believe that because the workforce primarily comprises U.S. 
citizens and documented immigrants, there are fewer minimum wage and
overtime violations.  The Miami officials reported serious problems
with workers' sewing garments in their homes (industrial homework)
while officials in El Paso reported a growing problem with industrial
homework. 


      CHARACTERISTICS OF SWEATSHOP
      OPERATIONS HAVE CHANGED
      LITTLE
---------------------------------------------------------- Letter :3.3

Experts believe that many characteristics of sweatshop operations,
including their size, ownership, and workforce composition, have not
changed significantly since 1989.  Garment shops remain small in size
(generally 5 to 50 workers) and operate with mostly a female
immigrant workforce that is primarily Latin American with Asians in
some areas.  However, some experts have reported a recent influx of
male workers in sweatshops in Los Angeles and El Paso. 


      MULTIPLE FACTORS
      CONTRIBUTING TO SWEATSHOP
      GROWTH
---------------------------------------------------------- Letter :3.4

Experts believe legislative, resource, and economic factors have
contributed to the continued presence and growth of sweatshops in the
garment industry.  For example, legislatively, FLSA does not include
any civil monetary penalties for recordkeeping violations.\4

Federal and state labor law officials stated that records maintained
by the employer on the workers' pay and hours of work are essential
to assess whether the employer is in violation of the act's minimum
wages and overtime provisions.  In addition, the statute of
limitations governing FLSA back-wage cases can adversely affect WHD's
ability to collect all wages owed to workers.\5

Federal and state labor law officials in New York City and Los
Angeles identified another legislative weakness with FLSA's hot goods
provision.  Under current law, WHD must obtain a court injunction
permitting enforcement of the act through the confiscation of goods
produced in violation of FLSA.  This can be a time-consuming process,
permitting the contractor to ship the illegal goods in the interim. 
To obtain an injunction, WHD must demonstrate in court that the
contractor's violation of the act was willful--essentially, that the
contractor knowingly and recklessly disregarded the law.  WHD
officials state that this is difficult to prove even in some cases
with flagrant and repeated violations. 

Regarding resource factors, since 1989, WHD has had fewer enforcement
resources for all of its regulatory objectives and more employers to
cover and laws to enforce.  In addition, WHD has experienced a 17
percent (970 to 804) decrease in the number of investigators, while
the number of estimated employers covered by FLSA increased by over 6
percent (see table 1). 



                Table 1

  WHD Inspections, Investigators, and
 Covered Employers (fiscal years 1989-
                  93)


--------------------
\4 Changes Needed to Deter Violations of Fair Labor Standards Act
(GAO/HRD-81-60, May 28, 1981).  FLSA does provide for the assessment
of civil monetary penalties against willful or repeat violators of
the act's overtime and minimum wage provisions and for violators of
its child labor provisions. 

\5 Minimum Wages and Overtime Pay:  Change in Statute of Limitations
Would Better Protect Employees (GAO/HRD-92-144, Sept.  22, 1992). 

