There was once an employee who was concerned about the revealing clothing of some of his associates and told them that the anatomy course was not appreciated. Their response was that the anatomy course was not required.
At the same time, if you believe that the way your employees are dressed or not dressed is causing problems within the department, you should discuss the situation with your manager. Tell your manager you are confused about the dress code, while adding that the current situation seems to be rather distracting and even disruptive. Sometimes managers can get so caught up doing their jobs that they tend to overlook something as visible as the employees' attire, and then one day it hits them. Perhaps they make the discovery on their own, or perhaps it comes from questions by a concerned employee. Either way, such managers suddenly look around and say, "Enough!" or, in this case, "Not enough!"
In terms of the big picture, it might be reassuring for you to know that the pendulum regarding attire at the workplace is swinging back. As a result of significant recent changes in the economy and society at large, there is a more formal and businesslike state of mind at work, and that is leading to more formal and businesslike attire.
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