Fashion/Retail Legislation Tracker

Fashion operates in a space with relatively minimal regulations, particularly when compared to other industries in the United States. In the absence of stringent rules, and in the face of a growing footprint thanks to increasingly complex supply chains and rising rates of consumption, and consumers that are increasingly demanding information about the environmental, social, and governance (“ESG”) elements of companies’ operations, fashion industry entities have largely turned to self-regulation. This has prompted an onslaught of mechanisms – from third-party certifications, such as B Corp. status, and controversial standardized measures like the Higg Index to the adoption of brand-crafted ESG-centric action plans – that are almost entirely devoid of legal consequences in the event that a company and/or its board fails to follow through.

As for the fashion and apparel-focused regulations that do exist, they are not without drawbacks and/or loopholes. Laws that aim to ensure the safety of consumers, for instance, have been enforced with “an undercurrent of caveat emptor,” according to Melissa Gamble, an assistant professor in the Fashion Studies Department at Columbia College Chicago – or in other words, the laws make it so that “buyers are responsible for checking the quality and suitability of goods before a purchase is made.” At the same time, federal wage and hour laws are “often rendered ineffective [at protecting garment workers] when manufacturers subcontract cut and sew work to other companies,” Gamble says, thereby enabling these brands to avoid liability by arguing that they cannot be responsible for what they – as the retailer and not the manufacturer – cannot control.

This has been the status quo for the industry for quite some time, but change appears to be afoot. Signals are coming by way of new government initiatives and new laws that are being implemented in Europe. As part of a more extensive climate bill, France, for example, enacted a law requiring a “carbon label” to be included on garments and textiles to help inform consumers about the impact of their purchases. This follows closely on the heels of an “anti-waste” law passed in 2020 by the French government that prohibits the destruction of excess inventory and samples, among other things, Gamble notes, saying that, taken together, these developments indicate that “fashion industry regulations and the larger regulatory environment is, indeed, shifting.”

All the while, the U.S. is seeing a rise in fashion-centric legislation that is worth keeping an eye on. With that in mind, here is a running list of key domestic legislation that industry occupants should be aware of – and we will continue to track developments for each and update accordingly …

PENDING LEGISLATION

(1) New York Fashion Workers Act

Introduced: March 23, 2022 by State Sen. Brad Hoylman and Assemblymember Karines Reyes

Snapshot: The New York Fashion Workers Act (S.8638-A / A.9762-A) aims to mandate registration of and impose duties upon model management companies and creative management companies,” and provide complaint procedures and penalties for violations by amending the New York state labor code. If enacted, the bill – which is co-sponsored by New York State Sen. Brad Hoylman and New York State Assembly Member Karines Reyes – will regulate management agencies and provide labor protection for figures designated as independent contractors, from runway models to makeup artists, stylists, and influencers, among others.

The legislation would create new compliance requirements for “retail stores, manufacturers, clothing designers, advertising agencies, photographers, publishing companies, or any other such person or entity that receives modeling services from a creative, directly or through intermediaries.” Such obligations center on things like payment (companies will be required to pay models/creatives within 45 days); contracts (companies will be required to provide models/creatives with copies of contracts and agreements; and contracts between a company and a model/creative will be limited to two years and cannot be renewed without affirmative consent); and disputes.

Civil penalties for failure to comply would include fines of up to $3,000 for the initial violation and up to $5,000 for each additional violation. Intentional failure to comply with registration constitutes a class B misdemeanor.

Potential Implications: “Construed broadly,” Morgan Lewis attorneys Leni Battaglia, Melissa Rodriguez, and Carolyn Corcoran state that the bill “could have massive implications not only for traditional model or creative management companies using fee-based structures, but also for retailers who directly hire models/creatives for studio photoshoots and ad campaigns.”

Status: The Fashion Workers Act advanced out the Senate Labor committee, but failed to receive a final floor vote in the final days of the session. It will be considered in the 2023 legislative session, which begins in January.

(2) Fashioning Accountability and Building Real Institutional Change Act

Introduced: May 12, 2022 to Senate by U.S. Sen. Kirsten Gillibrand (D-NY); Jul. 21, 2022 to House of Rep. by Rep. Carolyn Maloney

Snapshot: Aimed at “accelerat[ing] domestic apparel manufacturing and establishing new workplace protections to cement the U.S. as the global leader in responsible apparel production, the Fashioning Accountability and Building Real Institutional Change (“FABRIC”) Act (S.4213 / H.R. 8473) would “amend the Fair Labor Standards Act of 1938 to prohibit employers from paying employees in the garment industry by piece rate, to require manufacturers and contractors in the garment industry to register with the Department of Labor, and for other purposes.” The legislation would establish a nationwide garment industry registry through the Dept. of Labor to “promote transparency, hold bad actors accountable, and level the playing field;” create new requirements to hold fashion brands and retailers, as well as manufacturing partners jointly accountable for workplace wage violations; and set hourly pay in the garment industry and eliminating piece rate pay until the minimum wage is met. The bill would allow for fines of up to $50 million for violations.

Potential Implications: A key point of contention in this bill comes by way of the “Joint and Several Liability of Brand Guarantors” provision, which would hold brands accountable for violations that occur under the watch of their suppliers. Specifically, the FABRIC Act states, that “a brand guarantor who contracts with an employer of an employee … for the performance of services in the garment industry shall share joint and several liability with such employer for any violations of the employer under this Act involving such employee.” This has prompted pushback from the American Apparel and Footwear Association and the Council of Fashion Designers of America, which called for a more limited approach to joint liability. The bill writers included a clause on joint liability. Thus, brands (including licensors) as well as subcontractors will share joint liability for any violations, including the payback of lost wages and additional damages, where applicable.

Status: Sept. 14, 2023 – Sen. Gillibrand (D-NY) reintroduced the FABRIC Act, which she says “proposes major new manufacturing investments and world-leading workplace protections with the aim of ramping up domestic apparel production and creating more dignified jobs in the United States. The federal bill builds on key elements of California’s landmark Garment Worker Protection Act, combined with major incentives to expand domestic production.”

As of Sept. 14, the bill has 5 cosponsors: Senator Cory Booker (D-NJ), Senator Elizabeth Warren (D-MA), Senator Bernard Sanders (I-VT), Senator Alex Padilla (D-CA), Senator, and Senator Dianne Feinstein (D-CA). “More are expected to sign on in the next few days,” according to a release.

(3) New York Fashion Sustainability and Social Accountability Act

Introduced: October 8, 2021 by State Sen. Alessandra Biaggi

Snapshot: Focused on establishing sustainability reporting requirements for large fashion industry entities, the New York Fashion Sustainability and Social Accountability Act (S.7428 / A.8352), if enacted, would require fashion retail sellers and manufacturers of a certain size – namely, global apparel/footwear manufacturers and retail sellers that “actively engag[e] in any transaction for the purpose of financial or pecuniary gain or profit” in New York and that whose global annual revenue exceeds $100 million – to map portions of their supply chains and disclose environmental and social due diligence policies.

The legislation would mandate that companies that do business in New York and that meet the annual revenue threshold: (1) Map a minimum of 50 percent of their supply chain across all production tiers; (2) Publish a social and environmental sustainability report that addresses the due diligence policies, processes and activities conducted to identify, prevent, mitigate and account for potential environmental and social risks, as well as the results of each; (3) Disclose their actual and potential negative ESG impacts including greenhouse gas reporting, impacts on water and chemical management, volume of production replaced with recycled materials, and the monitoring and improving of labor conditions; and (4) Set and meet annual targets to reduce their environmental footprint, specifically greenhouse gas emissions, including estimated timelines and quantifiable benchmarks for improvement. Failure to comply could subject companies to fines of up to 2 percent of their annual revenues over $450 million.

Potential Implications: As drafted, The Fashion Act would have “a very far reach that would impact and require compliance from nearly every major fashion brand,” according to Dentons’ Matthew Clark, Babette Marzheuser-Wood, Jessica Argenti, and Larissa Sapone. At the same time, Ropes & Gray stated in a note earlier this year that “given the potentially onerous nature of some of the proposed [reporting] elements” at play, “there is significant opposition in some quarters to the bill in its current form.”

Status: Dec. 2022 – After being referred to the Consumer Protection Senate Committee in January 2022, the bill was amended in Dec. 2022 to include “stronger requirements for chemical use and climate targets, more specific due diligence criteria and expanded enforcement provisions,” per Vogue. It also now provides for joint and several liability between fashion companies and garment workers, and “instead of creating a new set of sustainability standards, the amended Fashion Act uses existing initiatives like Science Based Targets, Zero Discharge of Hazardous Chemicals and the Organization for Economic Co-operation and Development mandatory due diligence framework as minimum requirements for brands to build upon.”

(4) Responsible Textile Recovery Act of 2023 (CA SB 707)

Introduced: Feb. 16, 2023 by Sen. Josh Newman, Sen. Nancy Skinner, and Sen. Scott Wiener

Snapshot: The Responsible Textile Recovery Act (CA SB 707) would enact the Responsible Textile Recovery Act of 2023, which would require apparel and other textiles producers to implement and fund an extended producer responsibility (“EPR”) program that would enhance recycling and increase reuse in the sector. The legislation would define a “covered product” to include any apparel or textile article that is unsuitable for reuse by a consumer in its current state or condition, except as specified. The bill would require a program operator, as defined, to submit a complete stewardship plan to the department for review and approval, disapproval, or conditional approval. The bill would require the program operator to review the plan at least every 5 years after approval. The bill would also require a program operator to submit an annual report to the department. The bill would require all reports and records provided to the department to be provided under penalty of perjury.

Potential Implications: “Though many people don’t realize it, the clothing and fashion industry currently accounts for fully 10 percent of the world’s carbon dioxide output,” says Newman, Democrat from Fullerton, California. “The rise of ‘fast fashion,’ which revolves around the marketing and sale of low-cost, low-quality garments which tend to go out of style with increasing speed, threatens to have a long-lasting and devastating impact on our planet. By employing an EPR approach, SB 707 will enroll industry participants as partners and stewards to create an end-to-end framework that will reduce textile waste in California while supporting a second-hand clothing market that can continue to thrive.”

Status: Jun. 3, 2023 – From committee with author’s amendments. Read second time and amended. Re-referred to the Committee on Natural Resources. (May 31, 2023 – The bill passed the Senate (Y: 32 and N: 8), and is now before the state Assembly, where it was read for the first time on June 1, 2023.)

(5) Import Security and Fairness Act (S.2004)

Introduced: June 15, 2023 by Sens. Sherrod Brown (D-OH) and Marco Rubio (R-FL)

Snapshot: S.2004, a bill to amend the Tariff Act of 1930 relating to de minimis treatment under that Act, would “close a key loophole” that foreign companies exploit to avoid paying duties and fees to unfairly compete in the U.S. marketplace.

Potential Implications: “Right now, packages under $800 in valuation are exempted from U.S. duties, taxes, and fees. The number of packages using this loophole to avoid duties has exploded in recent years, to more than two million packages per day. Competitors will often split large shipments into many small packages to cheat the rules and evade the duties they owe, gaining an unfair competitive advantage,” Rep. Brown said in a release. The “bipartisan, bicameral legislation would ensure low-value shipments from non-market economies, such as China, are no longer exempt from paying any duties, taxes, or fees to the U.S. Government.”

“China exploits our capital markets and uses slave labor to undercut American businesses,” said Sen. Rubio. “It is bad for our country to let China flood our country with duty-free packages using the de minimis exception. The Import Security and Fairness Act will close this loophole and take another critical step to stop China from cheating on trade.”

Status: Jun. 15 – Read twice and referred to the Committee on Finance.

(6) De Minimis Reciprocity Act of 2023 (S.1969)

Introduced: June 14, 2023 by Sens. Bill Cassidy (R-LA) and Tammy Baldwin (D-WI)

Snapshot: S. 1969, a bill to amend the Tariff Act of 1930 to require reciprocity with respect to de minimis entries of articles, would bar Chinese exports from entry via the expedited “de minimis” channel and reduce the threshold for duty-free imports into the U.S. to an amount that matches the threshold our trade partners use, ensuring reciprocity and increasing transparency at our borders. The De Minimis Reciprocity Act would also: (1) Exclude untrustworthy countries from using the ‘trusted’ de minimis channel; (2) only allow express carriers to facilitate de minimis imports into the U.S. to help better at stop counterfeits and fentanyl at the border; (3) Require more information on every package entering the U.S.; and (4) Use the revenue proceeds to establish a fund for reshoring industry from China.

Potential Implications: “Our customs laws are outdated. China is taking advantage of that by importing billions of dollars of cheap goods into the U.S. with no oversight. This bill will allow U.S. manufacturers to compete fairly for U.S. store shelves and counter those who wish to use our trade system to launder money or smuggle counterfeits and drugs,” said Sen. Cassidy.

“A trade loophole is allowing Chinese companies to import goods in the U.S. with no oversight – letting them bring in cheap, counterfeit goods that undercut American manufactures and traffic drugs into our communities,” said Sen. Baldwin. “Our bipartisan bill will close this loophole to create a level playing field for our Made in America manufactures, curb the illicit drugs like fentanyl from coming into the country, and help ensure Americans are not supporting goods made with forced labor.”

Status: Jun. 14 – Read twice and referred to the Committee on Finance.

(7) The Climate Corporate Data Accountability Act (SB 253)

Introduced: First introduced in 2021 and then re-introduced on January 30, 2023 with other bills (including the Climate-Related Financial Risk Act) in California’s Climate Accountability Package.

Snapshot: SB 253 would require all public or private entities that: (1) have total annual revenue that exceeds $1 billion, and (2) conduct business in California (i.e., that “engag[e] in any transaction for the purpose of financial gain within California, being organized or commercially domiciled in California, or having California sales, property or payroll exceed specified amounts: as of 2020 being $610,395, $61,040, and $61,040, respectively,” per the Senate Floor Analyses) to report GHG emissions (Scopes 1-3) annually.

Scope 1 and Scope 2 reporting will be required starting in 2026, whereas reporting on Scope 3 emissions – those that result from the activities of entities not owned or controlled by the reporting organization, but that indirectly affects in its value chain – will be required beginning in 2027. Companies’ disclosures would need to be independently verified by a third-party auditor that has expertise in GHG emissions, and the disclosures would be housed on a publicly available digital registry administered by an organization contracted by the California State Air Resources Board.

Potential Implications: The California bills go beyond the proposed SEC rules in several ways, which would make the Climate Corporate Data Accountability Act, in particular, the strictest corporate emissions disclosure law in the country in the evant that it is passed. For example, unlike the SEC’s proposed rules, which would apply only to public companies, the proposed California legislation would apply to public and private entities, alike. More than that, as distinct from the SEC’s rules, which require Scope 3 reporting only where the emissions were material or were included in a GHG emissions reduction target or goal of the company, SB 253 lacks a materiality threshold and would also require all reporting entities to report Scope 3 emissions.

Status: SB 253 passed the State Senate earlier this year and is in the Assembly Appropriations Committee, which has until September 1 to consider and report bills to the Assembly floor.

(8) Climate-Related Financial Risk Act (SB 261)

Introduced: January 30, 2023 with other bills (including the Climate-Related Financial Risk Act) in California’s Climate Accountability Package.

Snapshot: SB 261 would require companies with $500 million or more in annual revenue to disclose their climate-related financial risk in accordance with Task Force on Climate-Related Financial Disclosure framework, and describe what measures they have adopted to reduce and adapt to that risk. In addition to submitting these climate-related financial reports risk reports to the California State Air Resources Board, covered entities would need to make the reports available on their websites.

Status: SB 261 passed the State Senate earlier this year and is in the Assembly Appropriations Committee, which has until September 1 to consider and report bills to the Assembly floor.

ENACTED LEGISLATION

(1) New York PFAS Apparel Ban

S.6291A Introduced: April 20, 2021 by State Sens. Hoylman, Bailey, Cleare, Mannion, Myrie, Rivera, and Sepulveda

S.1322 Introduced: Jan. 11, 2023 by State Sen. Brad Hoylman-Sigal

The New York state legislature has passed a bill (S.1322/A.994) to modify legislation that was previously passed by the New York State Senate in the spring of 2022 and signed by Governor Kathy Hochul in December (S.6291A). Both bills are aimed at banning per- and polyfluoroalkyl substances (“PFAS”) in clothing and apparel.

Snapshot: The new bill expands the scope of the state’s ban on PFAS chemicals in clothing and apparel by including additional categories, such as outdoor apparel, which were previously excluded. Now, the ban broadly applies to “apparel and outdoor apparel for severe wet conditions,” and specifically defines “apparel” as meaning “clothing items intended for regular wear or formal occasions including, but not limited to, undergarments, shirts, pants, skirts, dresses, overalls, bodysuits, vests, dancewear, suits, saris, scarves, tops, leggings, leisurewear, formal wear, OUTDOOR APPAREL, onesies, bibs, and diapers.”

The amended bill also The new bill also adds penalties and creates timelines for banning the use of PFAS in most clothing. “In terms of penalties, the bill requires the state Department of Environmental Conservation to set a threshold for PFAS, including unintentionally added chemicals, which would take effect by 2027,” Kelley Drye’s Joseph Green and Zachary Lee stated in a recent note. “Initial violations would be subject to a civil penalty of up to $1,000 a day, and continued violations would be subject to a penalty of up to $2,500 per day.”

Potential Implications: The legislation comes amid a nation-wide push by regulators to ban these “forever chemicals,” with roughly two dozen states either enacting or proposing PFAS-specific legislation as of December 2022.

Expected Effective Date: December 31, 2023

(2) California Garment Worker Protection Act

Intended to prevent wage theft, mandate fair pay and improve working conditions for the roughly 45,000 garment workers in the state of California, The California Garment Worker Protection Act (SB 62) was signed into law by California Governor Gavin Newsom on September 27. Among other things, the law requires that employees engaged in garment manufacturing must be paid an hourly rate not less than the minimum wage, and cannot be paid a piece rate.

Snapshot: The Act: (1) prohibits piecework pay; (2) creates joint and several liability for unpaid wages for “brand guarantors,” along with manufacturers and contractors; and (3) creates new record keeping requirements for manufacturers and brand guarantors. Employees may seek to recover unpaid wages and associated penalties by filing a claim with the Labor Commissioner against the contractor, garment manufacturer and brand guarantor, and the Act may also pursue other applicable remedies under California or federal law.

Potential Implications: Although SB 62 may “ultimately curb the practices of some ‘bad actors’ in the garment industry,” Sheppard Mullin’s Robert Foster and Morgan Forsey have claimed that “the more immediate impact of the new law’s requirements will likely be that some companies contract with garment manufacturers outside of California, thereby decreasing the number of garment manufacturers and workers in California.”

Effective Date: January 1, 2022