Southern California’s garment factories are facing scrutiny for underpaying workers who make clothing for some of the nation’s top retailers, including Nordstrom Inc. and Dillard’s Inc.

A new US Labor Department investigation of more than 50 garment-sewing contractors and manufacturers found labor violations in 80% of the cases. Half the time, workers were paid off the books, with records either deliberately forged or not provided, the department said.

The most egregious example was a contractor paying as little as $1.58 an hour, it said.

“This report speaks to the ongoing exploitation in the fashion industry, even in the United States,” said Maxine Bedat, director of the New Standard Institute, a sustainable fashion think tank. “No fashion company should benefit off of exploited labor.”

The findings come from the department’s first probe since California’s Garment Worker Protection Act took effect last year, mandating a minimum hourly wage for workers and holding brands more accountable for wage theft. Lawmakers in New York state and Congress are exploring similar initiatives to increase transparency in the industry’s supply chain.

Read more: Workers’ Rights Push Threatens Last of ‘Made in the USA’ Fashion

California’s law also banned a long-standing industry practice of paying garment workers by how many pieces they work on over a certain period of time. The Labor Department probe discovered that a third of contractors defied the rules by giving workers piece-rate compensation.

Nordstrom said it has taken steps to address any issues stemming from the report. “We expect all Nordstrom suppliers to adhere to the standards outlined in our partner code of conduct in addition to applicable laws and regulations,” according to a statement. Dillard’s didn’t respond to requests for comment.

The hub of the US garment industry is Los Angeles’s fashion district, which employs 46,200 people, mostly immigrant women from Mexico and Central America, according to the nonprofit Garment Worker Center. The group bemoans the scant progress in ensuring fair wages, citing 2016 data from a Labor Department investigation that showed pay violations in 85% of the places they checked.

“Many people shopping for clothes in stores and online are likely unaware that the ‘Made in the USA’ merchandise they’re buying was, in fact, made by people earning far less than the US law requires,” Ruben Rosalez, an administrator for the Labor Department, said in a statement.

To contact the reporter on this story:
Olivia Rockeman in New York at orockeman1@bloomberg.net

To contact the editors responsible for this story:
John J. Edwards III at jedwardsiii1@bloomberg.net

Sarah McGregor, Robert Jameson

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