Ross Stores to Pay $212,000 in Back Wages to Employees of Subcontractors for FLSA Violations

Friday, February 26, 2016

Ross Stores, one of the largest off-price retailers in the United States, will pay $212,000 in back wages to employees of its garment subcontractors for minimum wage and overtime violations according to a consent judgment.  In the last five years, the department’s Wage and Hour division officials in Southern California have concluded over 1,000 investigations in the garment industry, resulting in more than $11.7 million in back wages.

In the consent judgment for YN Apparel, the U.S. District Court for Central California in Los Angeles is requiring the company to pay 270 employees of its subcontractors $212,000 in back wages, and to ensure any of its subcontractors subject to garment registration requirements in California maintain such valid registration. The judgment also requires YN Apparel to hire an independent, third-party monitor to ensure all of its domestic garment contractors comply with the overtime, minimum wage and recordkeeping provisions of the Fair Labor Standards Act, and prevents them from entering into any contracts with those who do not.

The major consent judgment arises from Southern California Wage and Hour District Office investigations of 13 contractor sewing shops which found wide-scale violations of the minimum wage and overtime requirements of the FLSA while sewing clothes for manufacturer YN, including one case finalized in January of this year.

Evidence supporting the division’s findings in this case included detailed analysis conducted by investigators to determine whether prices YN paid to its contractors for their goods were sufficient to enable the contractors to pay their workers legally-required wages, when all overhead costs were taken into account. This analysis showed that, to pay their workers in compliance with the FLSA, the prices the contractors received from YN for their garments would have needed to be up to three times the prices they were actually paid. The analysis further showed that for YN to have paid these contractors amounts sufficient to pay their workers properly, YN would have needed to receive double the price it was paid by its retailer, Ross Stores.  

The consent judgment in this case requires YN to conduct this same analysis for every domestic contractor it uses in the future. If the price is not high enough to support legally required wages for workers, YN must renegotiate the contract.  

Wage and Hour officials have also been using pricing analysis when contacting major retailers selling goods in Southern California to inform them of the results relating to their own supply-chains, and then engaging them in formulating solutions to the consistent and systemic wage violations found in the industry.

The FLSA, enforced by the Wage and Hour Division, requires that covered, nonexempt workers be paid at least the federal minimum wage of $7.25 per hour for all hours worked, plus one-and-one-half times their regular wages for hours worked beyond 40 per week. Employers also must maintain accurate time and payroll records.

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