Guess Inc. has agreed to pay up to $1 million to settle a 1996 lawsuit alleging that thousands of Los Angeles garment workers were underpaid by contractors working for the jeans giant.
The corporation admitted no wrongdoing under the settlement announced Tuesday.
Advocates for garment workers said that although it sets no legal precedent, the settlement--similar to several others involving garment manufacturers in the last two years--adds weight to the argument that manufacturers should be responsible for the employment practices of their contractors.
Attorneys must now track down workers who, at any time in the last seven years, sewed clothing for the nine contractors named in the suit, only four of which are still in business.
Lead attorney Kevin Reed said about 2,000 to 3,000 workers would qualify for the settlement, but probably only 15% will be located. Most workers are Spanish-speaking immigrants who move often, he said.
Awards will vary depending on where they worked and for how long, reaching a maximum of $35,000 per worker. Those employed by three contractors who closed after Guess stopped doing business with the firms will receive an additional $1,250.
The lawsuit was backed by UNITE--Union of Needle Trades, Industrial and Textile Employees--a garment workers' union that was in the midst of a bitter campaign to organize Guess workers in 1996.
Since then, Guess has moved most of its production to Mexico and UNITE has put its organizing drive on hold. The union has fewer than 3,000 members in Southern California, said Steve Nutter, regional director.
The lawsuit alleged that workers were paid a piece rate--a set amount for each sewing operation--that in many cases fell short of the minimum wage, which was $4.25 per hour in 1992.
Many workers also put in overtime "off the clock," earning the same low piece rate when they should have been paid time and a half, Reed said.
Some contractors maintained two sets of books, the suit alleged. One "official" set showed 40-hour workweeks and another reflected the true, long hours put in by workers. "People were offered additional work and they were happy to have it, but it came off the clock," Reed said.
Guess was particularly vulnerable legally because it had signed an agreement with the U.S. Department of Labor promising to monitor its contractors for compliance with wage and hour laws, Reed said.
However, Guess attorney Glenn Weinman said the company settled only to stem the mounting legal fees, which, had the case continued, could have cost more than the $1-million settlement.
"None of this has been proven. It's all hearsay," Weinman said. "These people were not our employees. They worked for our contractors, and those contractors were not working exclusively for Guess.
"We've always denied liability," Weinman added. "We're settling for an amount that economically made sense, and at this point we prefer to focus on other issues."
Julie Su, an attorney with the Asian Pacific American Legal Center, said she used the same legal principle--holding manufacturers responsible for their contractors' employment practices--to win $4 million in settlements for Thai garment workers who were discovered in slave-like conditions in El Monte in 1995.
"These cases tell manufacturers it will cost you to use sweatshop labor, even if you plead ignorance," she said.
State legislation that would set that responsibility into law--AB 633--has passed the Assembly and is in the Senate.
The contractors involved in the Guess case who are still operating are A&R; Contractors, Monterey Fashion Inc., Pride Jeans Inc. and Wu Yong. Also named in the suit, but no longer in business, are Jeans Plus Inc., Kelly Sportswear Inc., Buzz Sportswear, Infinity Jeans and Park Fashion Inc.
Guess shares added 6 cents to close at $15.13 on the New York Stock Exchange.