First criminal prosecution for wage theft in California garment sector

About the case

• On 12 October 2023, the California Labour Commissioner’s Office (LCO) and the Los Angeles District Attorney’s Office announced charges against a garment manufacturer and garment contractor for wage theft. The accused are named as Lawrence Lee of garment manufacturing business Parbe Inc., dba Fabiola, and Soon Ae Park, a sewing garment contractor. Their businesses operated in South Los Angeles between 2017 and 2022, and Park performed most of the sewing for Lee’s business. They both have previous wage theft violations. They have not been publicly linked to retailers or brands.

This case has multiple elements, with the authorities pursuing the defendants on several fronts:

• The LCO fined the manufacturer and contractor a total of US $161,738 for several violations relating to workers’ compensation and record-keeping, as well as breaching the garment registration provision. According to the LA District Attorney’s Office, Lee and Park had previously been fined for wage theft in 2018 but failed to include this in their application.
• Separately, the LCO and the District Attorney’s Office are pursuing criminal and civil charges against the manufacturer and contractor, which will likely proceed to trial.
• This is the first wage theft case under the California Penal Code Section 487m (Penal Code Grand Theft of Wages Amendment), which came into effect on 1 January 2022.
  • This new amendment to California criminal law allows prosecutors to bring felony charges, i.e. charges that carry a potential term of imprisonment of one year or more. In serious cases of Grand Theft of Wages, employers can face a prison sentence of up to three years for intentional failure to pay wages, benefits, tips or other workplace compensation.
  • Soon Ae Park has been charged with two felony counts for wage theft from two separate employees. The LA District Attorney has appealed for further potential victims to get in touch.
  • In addition to criminal charges, prosecutors have also raised claims under the new Garment Worker Protection Act (in force from 2022).
• This legislation specific to the garment sector applies civil liability to wage theft issues in the industry. It prohibits paying workers by the piece or unit; instead, they must be paid at an hourly rate and not less than the applicable minimum wage.
• It also introduces a legal status of Brand Guarantor – a “garment manufacturer or brand guarantor who contracts with another person for the performance of garment manufacturing operations”. The Brand Guarantor shares joint and several liability with any manufacturer and contractor for the full amount of unpaid wages, any other compensation, or damages.
• According to the LCO, in this case, the garment manufacturer, which also acted as the Brand Guarantor, and the contractor:
  • Failed to pay workers the minimum wage and overtime.
  • Paid workers an average of US $350 in cash for more than 50 hours’ work per week.
  • Failed to provide workers with pay slips.
• The manufacturer also failed to provide workers with workers’ compensation insurance coverage and information about paid sick leave.

Context

• On 6 September, the Los Angeles District Attorney’s Office announced the creation of a new Labor Justice Unit within the office to focus on enforcement of the new wage theft laws. This is likely to lead to an increase in wage theft cases in California in the coming months.
• According to a 2022 survey of 50 Southern California garment suppliers and manufacturers by the US Department of Labor, 80% of suppliers were non-compliant with the US Fair Labor Standards Act. 64% of suppliers did not keep accurate time and pay records, while 32% of suppliers continued to pay piece rate even after this was made illegal. The lowest hourly wage found was US $1.58, which is only 22% of the US minimum wage and 10% of California’s minimum wage. The US Department of Labour recovered US $10 million in back wages for over 6,000 workers as a result of the investigation.