Shein (pronounced She-in) is a fast-fashion company. It boasts the ability to produce a dress in a week, ship it anywhere in the world relatively quickly for rock bottom prices. The company has risen quickly, overtaking H&M, Zara, and Forever 21 as the biggest fast-fashion retailer in the U.S. It is particularly popular among Gen Z shoppers.
Great. What does that have to do with employment law? No, I haven’t decided to become a fashion blogger, I’m coming to my point. Take away the glitz and the hype. To do what it does, Shein needs employees. That means Shein is an employer (I know, “Thank you, Captain Obvious). As an employer’s attorney, I found some recent investigative reports on Shein’s employment practices of great interest. As you may know, I’m a big believer in learning from other employers, whether from their successes or their failures as employers. You can probably guess in which category Shein’s practices fall. Read on…
“Shein is fully committed to upholding high labor standards across the entire supply chain and to improving the lives of workers in the global supply chain by supporting national and international efforts to end forced labor.”
-Statement from unnamed Shein company spokesperson
Most employers have issued similar statements at one time or another, whether in an Employee Handbook or in response to allegations. Unfortunately, the above statement is very much at odds with findings from multiple investigations. Here are some findings:
Public Eye researchers visited the city of Guangzhou (where Shein is headquartered) and where one can find its key suppliers. They located 17 out of 1,000 suppliers, finding many “informal workshops” with barred windows and no emergency exits, an obvious death trap in the event of a fire. All the employees hailed “from the provinces” worked 11-12 hour days and 75-hour work weeks and received one day off each month. Their maximum pay: 10,000 yuan a month. That amount translates into $1565.90 a month, which divided by 600 hours, comes out to approximately $2.60 an hour. These practices alone violate Chinese labor law and Shein’s own Supplier Code of Conduct. Not surprisingly, no worker was found to have any kind of written employment contract, and most of the suppliers don’t have written contracts with Shein either. Many of them do not even have direct contact with Shein. Researchers found similar conditions in its main warehouse, located about a one-hour drive away.
Why is Shein’s relationship with its suppliers relevant to employment law or workers’ rights? The sheer number of small suppliers (many of whom were found to be illegal businesses) makes it hard to verify whether the workers are treated well. In fact, many of the workshops are known for flouting Chinese labor laws.
Some other general findings from the Public Eye investigation into its corporate structure and business model revealed a number of offshore entities that appeared to be set up to disguise ownership and avoid paying taxes (admittedly a common practice in China) and to ensure as much control over value chain as possible, with it assumed as little responsibility as possible.
An investigation by Sixth Tone included similar revelations. In particular, investigators learned that Shein recruits many of its order pickers via dispatch agencies in which workers are employed temporarily to meet tight production deadlines, and do not enjoy the same rights and benefits as full-time staff, which in turn makes it even harder for workers to defend their rights.
OK, I think you get the picture. You may be thinking, “OK, this is deplorable, but it’s happening in China. What does it mean for me as an American (or other) employer? What am I supposed to do with this information, and why should I care beyond agreeing that it’s horrific?” Fair question. These practices would raise legal issues just about anywhere in the world — particularly in the US. What are some of those issues and what are some takeaways for the rest of us? Here are some:
- Wage and hour: The wages are substantially below the federal minimum wage in the US, and even more so in states with higher minimum wages, especially if you consider that 75-hour workweeks at $1565.90 a month maximum means they would be entitled to overtime pay, and, in some states, meal and rest breaks. It’s pretty clear these workers receive nothing close to any of that.
- Migrant worker rights: A fair number of workers apparently are migrant workers. I can’t say how that works in China, but here in the US that usually means exploitation of illegal immigrants, which opens up a whole other legal can of worms. This practice alone can lead to the government shutting down a business.
- OSHA and Workers’ Comp: In the US, the Occupational Safety and Health Act requires employers to “furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees”. The exitless workshops with barred windows alone is a blatant violation, which could lead to serious fines and citations, and worse. Moreover, employers here are required to carry workers’ compensation coverage for employees incurring work-related illnesses or injuries. Assuming there is any similar requirement in China, I strongly doubt these workshops carry such coverage.
- Discrimination and Harassment: I think it’s a safe assumption that this type of environment is a breeding ground for discrimination and harassment, whether based on sex, age, disability, or any other category generally protected under anti-discrimination laws here.
Some of you may still be thinking “OK, I get it, those would be some of the legal issues in the US, but the shops are not in the US. Again, why is this relevant to me?”
Just because Shein is based in China, doesn’t mean it can’t serve as an example for us. Shein, according to the investigative reports, took some shortcuts. Shein has done its best to avoid the laws it’s supposed to be following. Shein has apparently done its best to avoid accountability, and it also seems to have overlooked a crucial (potential) asset: its employees. A company needs good employees to succeed. A company that treats its employees poorly — particularly when it doesn’t even comply with its legal obligations to its employees– may succeed initially but ultimately risks serious implosion. Shein needs its employees in order to be able to produce its goods quickly and inexpensively. When the law catches up with a business, the costs more than outweigh the savings enjoyed up until that point.
Yes, Shein has a Supplier Code of Conduct. Yes, it has made beautiful statements. Many companies have. But Codes of Conduct, policies, and statements, without more, are meaningless. If you have no other takeaway from this post, let it be this: Walk your talk. Back your statements, policies, and Codes of Conduct with real, consistent, on-message action and commitment, starting from the top if you want to succeed in the long term.
OK, I’m stepping down from the soapbox now…
See you next time.
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