Congratulations! You started your garment business producing finished pieces all by yourself, cutting and sewing from start to finish, and now your merchandise has become so popular you need to hire another cutter, sewer, or finisher to keep up with demand. Taking the step from making garment or apparel items entirely by yourself to needing to hire outside help is very exciting, but it is also a step that carries you and your business into a new legal world. When your garment manufacturing business grows to be more than just you, California law expects you to act like the business and employer you now are, which means following applicable California, Federal and local employment, tax, safety, and insurance laws and regulations, including the California Garment Manufacturing Act.

This article is going to focus on a few of the questions a garment maker might have about California regulations and employment law when going from working totally alone to producing garments with the help of others.   The California, local, and Federal laws specific to the garment industry, like the Garment Manufacturing Act and the requirements of the California Garment Registration Certificate, are intended primarily to protect garment industry workers. Sweatshops – garment factories operating in violation of wage and hour laws (no breaks, no overtime pay, no minimum wage, etc.), health and safety codes, and/or other labor and employment laws – still exist in the US and in California, and garment workers are often vulnerable to these abuses. As anyone who has cut patterns or sat at an industrial sewing machine for a length of time can tell you, making clothing is physically demanding, the dust and chemicals can cause health problems, and the machines are potential safety hazards. Some requirements seem onerous when applied to a small company, but these requirements are imposed across all of California’s garment manufacturing industry. As always, your business is unique and this article is a general overview of a small part of the law; we recommend you consult with an attorney when setting up and growing your garment manufacturing business. To reach Law On The Runway, please email [email protected]

What work and types of garments are covered by the California Garment Manufacturing Act and related regulations?

“Garment manufacturing” means sewing, cutting, making, processing, repairing, finishing, assembling, or otherwise preparing any garment or any article of wearing apparel or accessories designed or intended to be worn by any individual, for sale or resale by any person, or anyone contracting to have those operations performed (Cal. Labor Code § 2671(b)). The California Code of Regulations § 13621 expands the definition of “garment manufacturing” even further to include “every process, either hand or machine, involved in the manufacture of any or all garments for wear upon the human body, whether such process be applied to fabric, textile, fur, leather, or leather substitute, or other material of a similar nature, and also means to prepare, alter, repair, or finish in whole or in part.” Hand knitting, interestingly, is exempt. So if you are producing apparel meant to be worn by animals, non-apparel items, or hand knitting, or if you are not producing goods to be sold, you are not part of the “garment manufacturing industry” and not governed by this part of the law. If you are otherwise making clothes or apparel to be sold, your business is included under these regulations.

What if I’m making my garments entirely by myself in my home?

“Every person [as defined in Labor code section 2671a] engaged in the business of garment manufacturing must register with the Labor Commissioner” (California Code of Regulations, Title 8, § 13630). “Person” means any individual, partnership, corporation, limited liability company, or association, and includes any person or entity engaged in the business of garment manufacturing (Cal. Labor Code § 2671(a)). However, “person” does not include anyone who manufactures garments by himself or herself, without the assistance of a contractor, employee, or others (Cal. labor Code § 2671).   So if you are truly a one-person shop, you are not governed by the California Garment Manufacturing Act. Also, if you don’t have any employees, the Labor Code (which protects employees) does not apply to you, although you still need to follow all other applicable local, state, and Federal laws in operating your business. And it is still important for the now-solo garment manufacturers to be aware of the laws governing the garment manufacturing industry, so they can be prepared and in compliance when their businesses are ready to grow. Some of the legal requirements placed on new garment industry employers must be met before a business can lawfully hire people to construct the garments.

Many solos are surprised to learn about California’s extensive and strict regulations and requirements under the Labor Code when they go to hire an employee or contract with another shop to produce their garments, putting themselves under California and federal garment manufacturing regulations. Every business that engages in garment manufacturing must register with the California Division of Labor Standards Enforcement (DLSE) before it can begin operating. Additionally, registering with the DLSE requires having set up your business in other ways, such as obtaining both a state and federal tax ID number, and being able to show the business’ gross revenues. Because you will need this documentation to file for a Garment Registration Certificate, and must register before your business can legally operate as a garment manufacturer (as defined by the law and discussed below), having these elements of your business set up before registering removes the risk of having to either stop operation while the paperwork is processed or operating in violation of the law (which won’t help your application to register).

The Garment Registration Certificate System

In garment manufacturing regulation law, there are Manufacturers and Contractors. Manufacturers are the people or businesses actually cutting, sewing, and otherwise processing a garment for sale. Contractors are the people or businesses who are primarily engaged in manufacturing garments with the assistance of employees or others, which includes a third party shop that does all the actual cutting, sewing, finishing. Both Contractors and Manufacturers must obtain a Garment Registration Certificate and register with the California Labor Commissioner. The registration process involves an application, annual fee, and a written test on California’s labor and health and safety laws. Official information is available here and here, and this post covers the Garment Registration Certificate registration process and requirements in more depth.

In California, it is unlawful for anyone who has not registered with the California Labor Commissioner to hire others to manufacture garments. Conversely, it is illegal to be hired by an unregistered contractor. Everyone in the garment manufacturing industry as defined by the laws (which exempt solo one-person do-it-all shops) must have a Garment Registration Certificate. The requirement that every garment manufacturer employer (either hiring your own workers or outsourcing the work to another manufacturer) be registered, and that registered employers only contract with each other, is an attempt to close the loop on compliance with labor, wage, and health and safety laws throughout the garment manufacturing industry. There are no exceptions to registration based on size, age, or good intentions, so even a new business with only a couple of people employed to make clothing, or a Contractor sending out a small order to a production shop must have a Garment Registration Certificate.

It is important to verify that a garment manufacturer or contractor has a valid Garment Registration Certificate before entering into a contract with that person or business (you can check that here), because both parties are liable for the unregistered employer’s labor law violations, including back wages and civil penalties, which are often substantial. The garments made by an unregistered manufacturer can also be confiscated by the DSLE, meaning you might also lose your production order, as well as be jointly liable for fines and penalties.

Can I have my employees manufacture garments in my home studio?

No. While other retail goods – “industrial homegoods” – can be made in residences, garments produced for sale are specifically prohibited from being made in residences by employees. Even if this state restriction did not exist, your local zoning laws would likely disallow you from having an industrial or commercial manufacturing space in your residential-zone home.

Can I have an independent contractor work in his or her home producing garments?

There are two parts to that question: the first is whether your garments can be produced in someone else’s home studio. The answer to that is, as discussed above, that garments for sale cannot be manufactured in a home by an employee, and an employer cannot manufacture garments in an employee’s home. Under California Labor Code § 2651, it is strictly illegal for an employer to hire an employee to make, prepare, alter, repair, or finish any articles of wearing apparel – in whole or in part – at home. The fine for doing so is between $1000 and $30,000, or imprisonment. (Cal. Code of Regulation § 13620). Moving production to someone else’s home studio does not get around the law.

The second part of the question is whether the law is different if you are employing an independent contractor.   There is a difference between the laws governing independent contractors and the laws governing employees; independent contractors are not covered by wage and hour laws, and employers don’t have to pay payroll tax, social security tax, or worker’s compensation insurance for independent contractors. The term “independent contractor” is legally defined in California statute, and requires, among other factors, a high level of independent judgment and decision making on the worker’s part. Whatever the particular facts of a worker’s tasks, the employer can’t just declare someone an independent contractor to circumvent the labor laws, or avoid payroll taxes. A person who cuts and sews as you direct, using your tools and materials, very likely does not qualify as an independent contractor. And because all aspects of the manufacturing can only be done in a commercial space – because no one can employ people to manufacture garments in a home – likely everyone working to manufacture your garments is an employee of someone (either you or the third party manufacturer you’ve contracted with), and not an independent contractor. Also, in the garment industry context, a person can meet the definition of an independent contractor in some aspects, and of an employee in others. In order to play it safe, consult legal counsel to determine whether a worker qualifies exclusively as an independent contractor, define the relationship with that person in a written contract, and monitor the person’s work-tasks for changes, or else operate as if everyone who produces garments for your business is an employee and covered by the Labor Code.

What if I only hire an administrative assistant to handle orders and email, but still make the clothing entirely by myself?

The California laws governing the garment industry only govern the employment of people involved in making garments, so your administrative assistant is not covered by the Garment Manufacturing Act and related regulations. However, this person is still an employee covered by other laws, which you must follow.

What if I only have interns working for school credit in my manufacturing business?

A contractor under the garment Manufacturing Act is a person or business that produces garments with the help of employees or others. Using interns does not remove you from the industry’s regulations, although it does change the record keeping, as there are no wages to report. Whether or not to work with interns, and what your responsibilities are if you decide to, are discussed in more depth in this article.

Do I have to change other aspects of my business when I manufacture garments using more than just my own labor?

When it was just you, working as a sole proprietorship, your record keeping might have been a little loose; maybe you didn’t register your business with the state, and you reported income from your business on your individual tax return. Once you make the jump to being an employer or a contractor, however, you will have to act more like the business you really are. These legally required tasks include: Keeping exact wage, hour, insurance, and tax records; possibly registering as a business entity with the state; meeting local and city ordinances regarding taxes, wages, safety, and registration; entering into contracts with other parties in the garment manufacturing industry; setting up separate banking and credit accounts for your business; and if you are employing workers, complying with the employment tax laws, registering with the California Employment Development Department, and obtaining a state employer identification number – as well as a federal employer identification number from the IRS, keeping employee records under Cal. Labor Code section 2673, and supplying employees with all the tools necessary for their jobs – bobbins, scissors, sewing machines. Although the process may seem daunting, and the regulations may feel burdensome, the exchange is to be able to run and grow your own garment manufacturing business legally in California, and you can and likely should call a lawyer for help in setting up these aspects of your new garment manufacturing business.

This was a guest post written by Elif Sonmez. Elif is a San Francisco attorney.  She is interested in civil litigation and helping artists run their businesses.  Before she became an attorney, she worked nationally as the Head of Props and Wardrobe for the John F. Kennedy Center for the Performing Arts’ KCTYA On Tour program.