The Fashioning Accountability and Building Real Institutional Change Act (FABRIC Act) has been described as world-leading and labeled a “landmark” bill, the “first-ever” of its kind, and transformative and groundbreaking. We’ve heard this type of rhetoric before about other federal and state legislative proposals purporting to revolutionize protections for supply chain workers — and we’ve been quick to counter that those bills, while disguised as human rights legislation, failed to deliver systemic change, did not provide for victim agency, and ultimately perpetuated the status quo of corporate impunity.
However, the FABRIC Act — despite some limitations and a very narrow applicability — is significant. The bill’s importance and potential impact “just can’t be overstated,” says Thulsi Narayanasamy, Director of International Advocacy at the Worker Rights Consortium (WRC). We agree.
In recent years, civil society and policymakers in the US and Europe have been increasingly focused on legislation and regulations that would incentivize companies to mitigate the risk of abuse by performing human rights and environmental due diligence on at least part of their supply chains (often referred to as mandatory human rights due diligence, or mHRDD). In Part I of this two-part blog series, CAL commented on the weaknesses of the European Commission’s most recent draft Directive on Corporate Sustainability Due Diligence. Our primary objection to the EU draft directive is its focus on process, rather than outcome. (In other words, it requires companies to try to be better — or at least look as though they are trying — rather than actually to be better.) We see weaknesses in the FABRIC Act as well, but we are excited about the precedent it creates for outcome liability.
In this blog post, we provide an overview of the FABRIC Act — what it does well, where it falls short, and why (weaknesses and all) we think it’s an important step forward.
What the FABRIC Act Does Well: Prohibits Piece Rate Payment & Establishes Brand Liability for Wage Violations in the US Garment Sector
The FABRIC Act was introduced by Senator Kirsten Gillibrand (D-NY) on May 12, 2022 and has since been co-sponsored by Senators Booker (D-NJ), Warren (D-MA), Sanders (I-VT), and Padilla (D-CA), and endorsed by 90 brands, retailers, and NGOs (including CAL). The bill amends the Fair Labor Standards Act of 1938 to, among other things, prohibit employers from paying employees in the garment industry by piece rate and to establish joint and several liability on brand guarantors for wage violations.
Holding brands — which contract with suppliers to produce, manufacture, and assemble the materials and products sold to consumers — jointly and severally liable for wage violations by contractors and subcontractors is no small thing. This model of liability directly connects large multinational corporations to instances of abuse, regardless of whether supply chain due diligence (real or performed) occurred. Brand liability for existing violations correctly centers the facilitator of harm best positioned to stop the abuse: companies that profit when labor costs are low, benefit from the contrived naivete created by deliberately opaque supply chains, and have the resources and the market influence to enforce supplier codes of conduct. As Narayanasamy explained in Vogue Business just after the bill’s introduction, “It’s not just about addressing loopholes in US labour laws, but also understanding how to address a fundamental power imbalance within the apparel industry between suppliers and brands.”
Legislative proposals that focus on mHRDD often allow brands to outsource compliance with due diligence standards by relying on third-party social auditing and certification schemes. But social auditors frequently fail to uncover labor and human rights abuse in the supply chains they certify, and in some of the world’s most active manufacturing regions these schemes are unable to function at all. Moreover, mHRDD is often focused on the steps taken by companies to prevent supply chain abuse. While we certainly hope to see companies invest in prevention, this focus confuses effort with outcome, and invites companies to shrug off ultimate responsibility. Under the FABRIC Act, the mere existence of a wage violation within a brand’s supply chain creates liability; and although the FABRIC Act does create an affirmative defense for brands that can show they had “no knowledge of the violation,” the burden of demonstrating this lack of knowledge — after an instance of abuse has already been uncovered — is placed squarely on the defendant. In other words, the FABRIC Act provides no credit for effort and only limited protection for ignorance. While we would prefer the bill be stripped of any safe harbors, this remains an important step toward outcome-based accountability.
The American Apparel & Footwear Association (AAFA) and the Council of Fashion Designers of America (CFDA), both industry lobbying associations, actively oppose the bill. In a joint statement, the AAFA and CFDA argued that “joint liability provisions should be structured so that they focus only on the work for which brands are directly responsible.” This argument has no merit. Labor abuses often occur in the least visible parts of a supply chain. Legislation that codifies a lack of accountability for wage violations committed by indirect suppliers, such as those that sew and cut the material that is later assembled and dyed by more direct suppliers, will further conceal these abuses from view and incentivize companies to form increasingly tenuous supplier relationships. Moreover, brands are directly responsible for violations throughout their supply chain; suppliers are responsible too (hence joint and several liability), but it is brands — the ultimate buyers and sellers of final products looking to make a profit — that dictate and enforce the level of wages paid out by suppliers.
“Labour cuts straight to the bottom line… it's a real pain point for large brands,” says Vanessa Barboni Hallik, co-founder of Another Tomorrow, a small clothing retailer that supports the FABRIC Act. Rather than subscribe to the view that industry regulations must sit comfortably with fashion companies — at the expense of worker comfort, safety, and dignity — we at CAL believe labor and human rights abuse will only stop when the cost of compliance is more than the price of paying a living wage and providing basic rights. That’s why the precedent set by the FABRIC Act, which allows for civil penalties up to $50 million, is one worthy of celebration. Brand liability for wage violations by domestic suppliers in the garment sector is a narrow, but notable, tug on the corporate incentives that keep factories unsafe, union activity stifled, and wages low.
What the FABRIC Act Does Not Do: Protect International Workers, Enforce the Full Slate of Labor & Human Rights, or Expand Beyond the Garment Sector
The FABRIC Act enforces a limited set of rights belonging to a relatively small population of workers. The US garment sector employs nearly 100,000 workers – a tiny number compared to the 75 million workers employed in the garment sector worldwide. Domestic garment workers make as little as $2.68 per hour, while garment workers in less wealthy and more marginalized regions earn as little as $0.15 per hour. Forced and child labor is unnervingly common throughout the global garment sector.
The FABRIC Act’s specificity — protecting only domestic garment workers from wage violations — is likely what makes the bill politically viable (to the extent that it is; at this time, no Republican legislator has offered to co-sponsor). Political viability is essential for progress, but progress that excludes at least 74 million garment workers is, at best, deeply incomplete.
CAL, along with others, urges Congress to enact legislation holding companies active in the US liable for violating the labor and human rights of international supply chain workers across all sectors. A step forward — even one that establishes strong precedent for a more effective model of corporate accountability than mHRDD — can only be understood in context:
The opportunity to close this particular loophole is exciting. It is, however, one loophole among many and one mode of corporate accountability within an ocean of impunity.
Conclusion
In Part I of this blog series, we described our dissatisfaction with — and ideas for improving — the EU draft Directive on Corporate Sustainability Due Diligence, which requires covered businesses to comply with human rights due diligence standards. We hope that this Directive will not become merely a box-ticking exercise for companies. The FABRIC Act offers a different model for holding corporations accountable for supply chain abuse, one we are eager to see implemented and expanded. Whether and how the Directive and the FABRIC Act move forward, one thing is certain: companies that exploit vulnerable workers as a means to squeeze additional profit are liable for the abuse committed and the suffering caused by that exploitation. The more direct and the more expensive that liability becomes, the sooner victims will be safe from harm.
Reynolds Taylor is a Legal Fellow at Corporate Accountability Lab.
