Well if you're not wearing something that says "hey i'm with the empire" They can't actually do anything.
I guess it is a lot of work, but it can be done, just like they did it for Gray Fox cowl(also hides your ID) in Oblivion, or for lev 4 vampirism in skyrim.
None of that is what I'd call a "proper implementation" for reactions on clothing. There had to be done much more.
In Skyrim people comment, if you go around naked.
With a proper implementation, every piece of clothing has to have hidden values like "valuable look", "faction", "cloaking", "face-cloaking", etc.
And then people have to react to properly.
- Let's say you go up to a character and say you're a mage from the college of winterhold ... he should say "You don't look like one." if you're walking around in heavy armor.
- Or if you're walking around in usual clothes/armor, people shouldn't really notice you ... if you're walking around in Dragon Armor everybody should remember you. People should guess, that you're that Dragonborn, some people are talking about.
- If you walk around in Thieves Guild or DB armor, people should be suspicious, angry or hostile at you.
- If you are a wood elf, orcs should make fun of you, if you walk around in orcish armor.
- If you are wearing forsworn armor, people in Markarth should be hostile.
- If you're wearing Falmer Armor, people should call you a sicko.
There should also be quests, where you have to play a certain role, and you should have to wear proper clothing for it to make it work. And I don't mean like that one in the main-questline, where everything is set up for you already.
You can always implement a
few things, and then crap out a phrase like "people will react to your clothing" in marketing. But a proper implementation is a lot of work and something we won't ever see in a Bethesda game.