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Abercrombie Fitch has agreed to pay $2.2 million in a first of its kind settlement over allegations that it forced its employees to buy and wear the company’s clothes on the job.
The settlement with state labor regulators signals a potential shift in dress code rules for clothing salespeople at stores around California and the nation.
The terms of the deal, obtained Monday by The Chronicle, apply to nearly 11,000 people who worked at Abercrombie Fitch, abercrombie and stores in California from Jan. 1, 1999, through Feb. 15, 2002.
The $2.2 million settlement, in which Abercrombie agrees not to force workers to buy its clothes, will reimburse former employees for company branded outfits purchased for working in California stores during that period.
Abercrombie, a clothing chain based in Ohio with $1.6 billion in sales last year, is the target of a race discrimination lawsuit filed last week in San Francisco. The company denied the claims. Last year, the company was lambasted for selling T shirts, which it eventually pulled from its shelves, featuring caricatured faces with slanted eyes and rice paddy hats.
The company also has grabbed headlines in recent years for its racy, teen targeted catalogs and billboards.
Abercrombie also faces a pending civil lawsuit, separate from the state action, over its dress code policies. Other retailers, including San Francisco’s , face similar civil lawsuits related to their employee dress code rules.
The state’s settlement with Abercrombie could set a precedent in the growing debate over who employer or employee must pay for retail workers’ on the job clothes when bosses mandate specific styles, colors or brands. Retailers, as a rule, want workers portraying what they’re selling.
That’s fine, except that California employees don’t have to foot the bill
even with an employee discount, said , a attorney who said the Abercrombie settlement came out of a three year investigation.
In its findings, the accused Abercrombie of violating state worker uniform rules. The state also claimed that mandatory clothing purchases pushed some workers’ hourly wages below the legal minimum.
“These are workers who, by and large, may have been making more than minimum wage,
but not a lot more,” Locker said. Abercrombie, he added, “required them to purchase items of clothing from their employer to act as living models.”
An Abercrombie spokesman declined to comment late Monday. In the settlement agreement, and in past interviews, Abercrombie has denied all allegations that it ever had an illegal dress code.
But the state said that up until February 2002, the company’s “Appearance/Look Policy” was enforced in a way that required store employees to buy Abercrombie branded clothing.
The state settlement is separate from Abercrombie’s pending civil dress code lawsuit. The settlement also is unrelated to the lawsuits against Gap Inc. , Polo Ralph Lauren of New York and Chico’s FAS Inc. of Florida. Those cases seek class action status on behalf of current and former California employees.
All of the targeted retailers have denied that they require employees to buy their clothing as a condition of employment.
In previous interviews with employees of Gap Inc. and other retailers not named in the lawsuits, The Chronicle found that store managers often enforce stricter dress codes than are mandated in handbooks.
That’s a continuing concern, Locker said. Several national retailers must change their policies in order to comply with California law, he said.
California carries a great deal of weight in the industry because of its size and spending power. Retailers who change dress code policies here are likely to follow course in other states, potentially affecting their bottom line, said trends analyst of New York’s .
“If I’m a retailer, I’m going to ask, ‘How am I going to outfit my staff?’ The minute you get above the casual market, it’s a big deal.”
Logistically, retailers struggle to keep employees “uniformed,” in industry lingo. Many workers work one season only; others put in minimal part time hours or flit from job to job.
Many employees choose jobs in part so they can buy clothes at discount, retailers say.
Companies could dig themselves a financial hole buying new outfits for every short timer, and “at the end of the day, this is about being profitable, ” said of .
Abercrombie’s settlement will go into a fund for distribution to former employees under the supervision of a third party, Locker said.
, a Walnut Creek attorney representing workers in the civil uniform lawsuit against the company, said he will continue to pursue that case.
Workers spent larger amounts on mandatory clothing purchases than the state settlement allows with its reimbursement formula, he said. Abercrombie is “paying pennies on the dollar for the money they took out of employees’ pockets,” Evans said.
The state settlement does not prevent civil actions against the retailer, Locker said. However,
recipients of settlement payments must waive further claims for damages for purchases during the period covered by the deal.