By nearly all accounts, the last year has been a great one for Kate Spade, the handbag designer of choice for chic girls at private schools on the Upper East Side and ladies who lunch at Barneys.

She sold the majority of her eponymous company to Neiman Marcus for $33.6 million. She redesigned her West 25th Street showroom as well as her boutique in SoHo. And she and her partner and husband, Andy Spade, plunked down more than $2.6 million for a nine-room Park Avenue palazzo.

But even as her trademark understated bags have been flying off the shelves of upscale department stores in New York and across the country, one of her main contractors has been embroiled in a bitter labor battle that has brought the world of fine leather and well-manicured nails face to face with that of immigrant workers barely making the minimum wage.

In a tale as old as Ellis Island, workers at Veje Leather -- a garment district factory that makes only Kate Spade bags -- have complained of harsh working conditions and have said they believe that they have been exploited because they are new to the country and do not speak the language.