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American Apparel announces developments regarding inspection by ICE

01
Jul '09
American Apparel Inc announced that it received notice from U.S. Immigration and Customs Enforcement (ICE) that ICE has been unable to verify the employment eligibility of approximately 200 current American Apparel employees because of discrepancies in these employees' records. Additionally, ICE notified the Company that based upon its review of government databases, approximately 1,600 other current employees of the Company do not appear to be authorized to work in the United States.

The notifications were the result of a previously disclosed inspection that ICE conducted on January 3, 2008, to determine American Apparel's compliance with Section 274A of the Immigration and Nationality Act. American Apparel cooperated fully with the ICE inspection and had previously indicated in its filings with the Securities and Exchange Commission that results of the inspection were still pending. ICE's notice provided no indication that American Apparel knowingly or intentionally hired any unauthorized immigrants.

Unless these employees, within a reasonable timeframe, are able to resolve the discrepancies in their work records, or present valid identification and employment eligibility documents that are subsequently verified by ICE, such employees will not be able to continue their employment at the Company. Because of the uncertainty regarding how many of these employees will have their work authorization ultimately verified by ICE, the Company is not able to accurately assess what impact the loss of employees will have on its operations.

However, even if the Company were to lose substantially all of the employees identified by ICE (which represent approximately one-third of the 5,600 employees the Company employs in its manufacturing operations in the Los Angeles area), the Company does not currently believe that the loss of these employees would have a materially adverse impact on its financial results.

“Many of these employees, some of whom have worked at American Apparel for as long as a decade, have been responsible, hard-working employees who have made significant contributions to the Company's growth and success,” said Dov Charney, CEO of American Apparel.

“As a company that prides itself on being one of the last major apparel manufacturers still making clothing in the United States, at a 'sweatshop free' factory where we pay our garment workers some of the highest wages in the industry, it is the Company's hope—and my personal hope as an immigrant myself—that these employees are able to confirm their work authorization so that they may continue to work at American Apparel. The Company remains very proud of its track record as an advocate for the comprehensive reform of the country's immigration laws.”

It has been the Company's policy to fully comply with its obligations to establish the employment eligibility of prospective employees under immigration laws, and the Company intends to continue its cooperation with the ICE inspection in all respects. Howard Shapiro, outside immigration counsel for American Apparel at Mitchell Silberberg & Knupp, stated: “In early 2008, our review of the Company's policies and procedures with respect to the immigration laws found American Apparel to be in substantial compliance.”


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