American Apparel Factory Workers Given Notice of Layoffs, Hope for a Reprieve from New Owners

Hundreds of workers inside the American Apparel factory near downtown Los Angeles have been given written notice that they will have jobs until Jan. 7 and then they will be laid off unless the new buyer of the company decides to continue manufacturing in the building.

Workers seemed resigned to the fact that they might be losing their jobs. “We were told we have jobs until the 7th of January. After that, they are going to lay off people,” said Elvira Cabrera, who has worked at American Apparel since 2004, first as a sewing machine operator and now putting on labels and buttons.

Sarah Giron, who has been with the clothing maker for three years, said everyone is nervous because for months workers haven’t really known whether they would have jobs from one month to the next after so much turmoil, executive turnover and a second bankruptcy filing on Nov. 14, nearly nine months after American Apparel exited Chapter 11 bankruptcy protection for the first time in February.

Giron said she was told that workers have until Jan. 7 to work there. Ana Galeno, who started out as a sewing worker at American Apparel 14 years ago, also said employees were told that after Jan. 7, layoffs could start occurring unless the new buyers take over the manufacturing part of the company.

The American Apparel workers said they were told they would be eligible for unemployment benefits. The company would start giving them paperwork to fill out in January if manufacturing operations cease at the enormous 400,000-square-foot building that has been a symbol of one of the last major strongholds of U.S. apparel manufacturing.

The week before filing for Chapter 11 bankruptcy protection on Nov. 14, American Apparel filed a Worker Adjustment and Retraining Notification (WARN) document with the California Employment Development Department stating that nearly 3,500 workers could be laid off as of Jan. 6 because of a potential permanent closure of various facilities. WARN notices, which must be made 60 days before layoffs occur, are a precautionary measure in case layoffs occur.

An American Apparel spokesperson said layoffs will not be made if a deal with Gildan Activewear goes forward.

In a Nov. 17 letter to employees, American Apparel Human Resources Officer Craig Simmons said that it was unclear until the end of the year or early next year what will happen until a final auction of the company’s assets takes place.

Currently, Gildan has bid $66 million for American Apparel’s intellectual property, but other bids are being accepted in the upcoming weeks by the U.S. Bankruptcy Court in Delaware. An American Apparel spokesperson said the company is only ‘seriously reviewing bids that involve domestic manufacturing.”

If no one outbids Gildan, then the Montreal-based clothing company will be purchasing American Apparel’s name and some of its wholesale inventory. American Apparel executives said the agreement with Gildan also seeks to maintain manufacturing operations in Los Angeles.

American Apparel’s 110 retail stores in the United States will not be bought by Gildan but could be purchased by another entity or shuttered. But American Apparel stores have experienced dismal sales in the last year.

In 2015, the company had $497 million in net sales, with $167.42 million of that being wholesale sales. Currently, American Apparel has an outstanding debt of $215 million.

Since emerging from bankruptcy for the first time early this year, bankruptcy filings show that the company’s turnaround strategy, proposed by then-Chief Executive Officer Paula Schneider, had failed, with the company experiencing a 32.7 percent year-over-year decline in sales and a $40 million EBITDA decline over last year.

Schneider left in late September to take a new CEO position, heading up 7 For All Mankind, Splendid and Ella Moss, apparel concerns purchased this year by Delta Galil of Israel.

Human Resources Officer Simmons told American Apparel employees that for the near-term their pay would not change, no shift changes or schedule changes would be made and 401k benefits would continue to accrue.

“Keeping our stores open and keeping inventory selling is a key part of successfully closing the deal and beyond,” Simmons wrote. “There continue to be ongoing discussions about what the retail business will look like in the future.”

Gildan executives were given a tour of the manufacturing facilities in Alameda Square in mid-November after the company’s offer, Simmons said. “It was so gratifying to see the team’s efficient and high-quality operations and the true spirit of collaboration,” Simmons wrote. “We loved the beautiful smiles, spontaneous cheering and goodwill that you showed our visitors—great job everyone!”

Simmons said there will be additional tours of the operations over the next few weeks.

Bankruptcy filings show that an auction is hoped to be held on or about Dec. 21 and a sales transaction completed by the end of this year.

American Apparel, with 2,166 workers at its downtown location, 332 at a Garden Grove, Calif., plant and 959 employees at a South Gate, Calif., facility, is said to be the largest clothing factory in the United States.