Guess? Inc., sued Wednesday by garment workers who claim the maker of casual clothes ignored sweatshop conditions, is fighting back, defending its labor record and claiming it is being set up by a union.
The allegations - and attendant publicity - come at a particularly bad time for Guess, which has had difficulty launching a sale of its stock.
Underwriters on Wednesday priced the offering of 7 million shares at $18 each. The sale had been delayed twice and the size of the offering was reduced from original plans of 9.2 million shares and a price of at least $21 a share.
At issue is whether Guess turned a blind eye to sweatshop conditions in its contract shops, an allegation that has particular sting since Guess has prided itself as an industry leader in contractor oversight.
The dispute played itself out Wednesday on the steps of a downtown skyscraper housing the offices of one of the underwriters of the stock. Here, labor interests announced the lawsuit against Guess and 16 of its contractors.
“The workers who have made Guess owners rich have been cheated. This is an outrage,” said Della Bahan, attorney for the workers.
But Guess lead attorney, Daniel Petrocelli, who watched the news conference from the sidelines, disputed the allegations.
“Guess has been on the forefront in eliminating sweatshops, not using them,” he said.
Petrocelli is no stranger to the media from his role in the O.J. Simpson civil trial, representing Fred Goldman. Goldman’s son, Ron, was killed in 1994 when Simpson’s ex-wife, Nicole Brown Simpson, was slain. Simpson was acquitted of the killings last year but is being sued for damages by the victims’ families.
The debate began after a series of raids last week in Southern California by state labor officials, who found Guess labels or clothing, or both, in seven homes of contractor employees. So-called home work is illegal in California, and is considered one of the most troubling - and undetected - forms of labor abuse.
Investigators then raided one of the Guess contractors itself, Kelly Sportswear of El Monte, and found additional evidence of illegal home work, as well as other alleged violations. The company was fined $66,000 on the spot, and Guess severed its ties. The contractor then closed up shop, putting workers on the street.
Labor activists responded by filing the class-action lawsuit against Guess and 16 contractors, alleging labor code violations, unfair business practices, retaliation against whistleblowing workers and negligent supervision.
At the news conference, three contractor employees, all speaking Spanish, took the microphone and denounced Guess and the people with whom it does business. Among the allegations were that Guess contractors paid sub-minimum wages, withheld overtime and participated in home work.
“This home work was known to the Guess inspectors, and that we as workers could not … speak of the violations because we were afraid of reprisals or being fired by our boss,” said Enrique Flores, who lost his job as a sewing machine operator when Kelly shut down.
Petrocelli denied that Guess condones labor violations among contractors. He noted Guess was on the U.S. Labor Department’s “Fair Labor Trendsetters” list of retailers actively engaged in eliminating garment industry sweatshops.
Petrocelli contended that the Union of Needletrades, Industrial and Textile Employees, or UNITE, is using the case to gain a foothold in Southern California.
He said the addresses of the raided homes were provided by UNITE and that some of the workers found with Guess materials were recent hires.
“We didn’t need this lawsuit to do our job,” Petrocelli said. “This is a lawsuit by and for the benefit of UNITE.”
Attorney Bahan denied that the union orchestrated the raids.
“We did not invent this evidence. Dan Petrocelli knows me better than that,” she said.
Rick Rice, acting deputy director of the state Department of Industrial Relations, the agency that handled the raids, confirmed the raids were conducted on tips from UNITE.
But, he said, “There is no evidence that Guess knew about this” home work. Indeed, he added, there was also the possibility Guess was being victimized by counterfeiters, who apply Guess labels to non-Guess clothes to be sold at swap meets.
Guess’ retail sales - mostly jeans - totaled $440 million last year.
Getting to the bottom of the home work, he said, will be difficult.
“Industrial home work is being hidden typically from the manufacturer, the retailer and the government,” said Rice. “It’s simply a very clandestine activity.”
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