HOMEWORK -- not the kind that your kids are supposed to do after school, but the industrial kind -- is one of those red-flag issues for organized labor. It is obviously much more difficult for workers to protect themselves against unfair dealing by an employer if they are isolated in their homes rather than working in a factory. Homeworker exploitation was so widespread 40 years ago that the Labor Department decided then to ban it altogether in the apparel industries, except in individual hardship cases.

Times change, however, and with more mothers and other home-bound people wanting jobs, homework has been cropping up again not just in the old-time apparel industries but in jet-age fields as well, such as electronics and data processing. When the Labor Department last year closed down a seemingly idyllic ski-cap knitting arrangement in Vermont, many people thought it was time for a new look at the issue.

Now after some hearings, Labor Secretary Ray Donovan has proposed removing restrictions on homework altogether. That isn't right either -- he went too far. Properly regulated, homework could offer convenient, low-cost opportunities for mixing job and home responsibilities. Operating without regulation, as it now does illegally in many areas, homework often becomes a domesticated form of sweatshop. With no organized protection, many homeworkers are now gulled into buying equipment and supplies from contractors who then refuse to purchase the goods produced except at rates far below the minimum for the hours worked. Encouraging this sort of fly-by-night operation is no improvement.

What is needed is a more flexible employer certification than was provided under the old "individual hardship" rules. Local conditions should be taken into account and minimum payment rates set, and enforced, for each type of goods. Finding out whether Mrs. Jones takes so many hours to finish knitting a cap that the amount she is paid is less than the legal minimum isn't really necessary. All that matters is that employers can't buy goods from Mrs. Jones at a rate that unfairly undercuts factory wages.

Establishing such a program will take some thought, and enforcing it will require more resources than the department now devotes to policing either the present ban or the operation of those factory sweatshops that Secretary Donovan has vowed to eliminate. But the effort is worth it.