Tonight, Joe Razo, director of the concentrated enforcement program of the California division of labor standards and enforcement, will board an airplane in Los Angeles and fly across the country to attend a hearing at the U.S. Department of Labor in Washington the next day.
Tonight as well, David E. Putnam, the owner of a modest business that sells knitted ski caps and sweaters will drive from his home in Stowe, Vt., to Boston where he , too, will board an airplane and fly to Washington for the same purpose.
Razo and Putnam have never met, and their worlds are as different as the snow-covered mountains of Vermont and the sunny beaches of southern California. But they are both now characters in what is a permanent production of the nation's capital -- the Regulatory Follies.
For the Reagan administration, their saga, the reason that they and dozens of other people who have never met each other will gather Tuesday morning in Conference Room N-5437 A-D at the Labor Department, could be instructive. The new administration has pledged to lift the yoke of regulation from the American people. But the lesson here is that in the business of government regulation nothing is simple, even when it involves an abscure, infrequetly enforced edict that has mostly gathered dust for the last 40 years.
It started as a small matter, a seemingly classic case of an overbearing big government mindlessly threatening to enforce a regulation regardless of whom it hurt. Putnam is one of the visctims, an entrepreneur who two years ago founded Stowe Woolens Ltd., marketer of knitted ski wear.
Putnam does not manufacture his own goods. Rather, the hats and sweaters are produced by some 30 Vermont women working with their own machinery in their own homes who sell the goods to Putnam. This cottage-industry production system, Putnam argues, is good for him because because he could not afford to build and operate his own factory and good for his suppliers, who are able to supplement their families' incomes while remaining at home.
But there is one hitch, which Putnam was unaware of when he began his business on April Fool's Day, 1979. It is that his system of production is illegal. Specifically, it violates Title 29 Part 530 of the Code of Federal Regulations, which outlaws the use of such "homeworkers" in the "knitted outerwear" and six other industries unless the homeworkers are unable to adjust to factory work because of age or physical or mental disability or because they are responsible for the care of an invalid at home.
Appalled at the thought that the Labor Department could come swooping down on him at any moment, Putnam has been agitating for more than a year to have the regulation changed or eliminated. Cast in the role of persecuted small businessman, he easily won the publicity battle against the faceless bureaucrats in the Labor Department. There was an uproar in Vermont, where the issue attracted the attention of sympathetic state and local officials, and last summer The Wall Street Journal published a report about the dispute that attracted national attention.
In the face of all this, the Labor Department capitulated, at least in the Federal Reister a notice of intention to conduct the first full-scale review of the homeworker regulations in the almost 40 years that the regulations have existed. Hearings scheduled on the issue promised the possibility that Putnam and his happy band of Vermont home knitters would be freed from the hated federal regulations. Of course, it was also possible that the hearings would take the department in the opposite direction, prompting it to expand and tighten the regulations. No one could be sure in advance.
Enter here Razo, who knows nothing of the Vermont dispute but was given to understand by labor union officials that "some people in the industry want to loosen the restraints on homework." With considerable experience in enforcing state homework and minimum wage laws, Razo said he thought it important that California, a major garment center, have some "input" into the federal proceedings and that he testify that "all our experiences [with homework] have been unfavorable.
Enter here also Selma R. Gottlieb of the Apparel Industries of New England; Gerald R. Coleman of the United Hatter, Cap and Millnery Workers International Union; Alice S. Ruotolo of the Consumers League of New Jersey; John D. Bonito of the United Better Dress Manufacturing Association, and Billie Ann Pillling of the Illionis Labor Law Enforcement Division.
They are all scheduled to testify at the Washington hearings, along with Frederick Siems and 28 other members of the International Ladies Garment Worker's Union and Ellen Brown of the Small Business Administration, who, is acting under the authority of laws that set forth SBA's various missions, will urge the Labor Department to consider the circumstances and requirements of small business concerns in revising the regulations.
Clearly David Putnam's crusade for the home production of knit ski caps and sweaters in Vermont has gotten out of hand. It has already consumed two days of hearings in Burlington Vt., producing a transcript of 323 pages long. In one way or another, it has attracted the attention of big business, small business, big government, big labor, consumer groups, public interest law firms and officials of almost a dozen states. The cost, to all the parties involved, is impossible to calculate, and the end is not in sight.
Major apparel manufacturers, their trade associations and the unions that represent their employes are all of one mind on this question: they want more, not fewer, restrictions on homework, which they charge is used to exploit the poor, particulary in urban centers like New York and which they say leads to unfair competition.
The irony in all this is that no one seems interested in damaging Putnam or his business, including the Labor Department, where privately officials express sympathy for him. The department set off the whole controversy in 1979, when it filed suit against CB Sports, another Vermont concern that uses homeworkers to produce knitted ski wear. The suit, which has not come to trial, accuses CB Sports of failing to pay its homwworkers the minimum wage and seeks to recover more than $40,000 in back wages due the workers from the company.
Putnam's firm, which is just as clearly in violation of the homeworker regulations but which, according to Labor Department officials, has been paying the minimum wage, has not been sued.
Both Putnam and officials representing CB Sports insist that the women who supply them with goods are not employees but "independent contractors" not covered by the minimum wage and that all were perfectly happpy with their situations until the Labor Department butted in. At this point, the department too may regret having butted in.
But it is too late for those kinds of thoughts, for the regulatory wheels have been set in motion. The suit against CB Sorts was filed in the Carter administration, and the decision to open up the whole area of the homeworker regulations reached in the final days of the administration. But eventually, after all the testimony and letter writing, the whole question will end up in the lap of the Reagan administration's assistant secretary of labor for employment standards.
As of last week that person had not been appointed. But when he or she is and when the official finally makes a decision, that won't necessarily end it. There are always the courts . . .