American Apparel temporarily missed its payroll for US staff last week, according to two internal emails obtained by Business Insider. At least one employee complained about not being paid on social media, also.
We contacted the company for comment and will update this story if executives there have any statements they want to make.
“The attached email was sent to US district retail management on Thursday,” our anonymous source alleges. “AA advise they have ‘problem’ with payroll – as of today [Monday] there has been no resolution and US retail and Headoffice staff remain unpaid.”
A second communication, from CEO Paula Schneider, explains the delay to staff by describing a glitch at Deutsche Bank that held up payroll for several hours. “Deutsche Bank experienced a processing delay of a couple of hours and missed a critical midnight deadline to transfer the funds to the Federal Reserve. This delay caused the process to be stalled and delays to occur with the funds actually being received into your account,” Schneider told staff. Deutsche and American Apparel will compensate any employee who incurred charges due to the missed payroll, the note says.
The first internal email Business Insider obtained came from American Apparel general manager of global retail Christine Olcu. It is addressed to all its U.S. district managers, and cc’d to Jesse Palmer. The email, sent from Olcu’s Outlook mobile, describes Olcu’s rising panic as she realises that the payroll checks did not go out properly:
Guys something appears to have happened with the file transfer for pay cheques to be processed.
I am on it and getting an update ASAP.
No idea what happened however it will be resolved
Here is an image:
American Apparel has been financially troubled for a long, long time. The company flirted with bankruptcy for years, relying on a series of increasingly expensive bonds and credit facilities from investors and private equity groups.
It looked as if American Apparel might be about to get its act together last year. However, the board suddenly fired CEO and founder Dov Charney, alleging his personal relationships with models and employees had triggered a raft of expensive lawsuits. The company’s sales then went into a nosedive. The company filed for bankruptcy officially in October.
On Monday, Charney launched a $300 million to attempt to buy back the brand that fired him. He is backed by Hagan Capital Group and Silver Creek Capital Partners, and their private equity unit PressPlay Group, according to a release. The company’s current investors oppose the return of Charney.
Here is the letter from the CEO to AA staff in full:
January 11, 2016
Dear American Apparel Retail Colleagues:
In light of the payroll delay occurring on Friday, I wanted to reach out to you personally and express my regret for the situation, and to provide you with accurate information about what transpired with your delayed payroll payment.
First, the delay issue had nothing to do with our American Apparel payroll department personnel, who do a great job in preparing the payroll data. It also had nothing to do with our current bankruptcy protection. The delay was caused by the bank handling the financial transaction for ADP, our payroll partner.
Next, so everyone understands the process, I wanted to outline the various steps occurring with our payroll. Our AA payroll department internally processes the data and payroll information (deductions, hours, etc.) and transmits the information to ADP. ADP then collects the funds associated with the payroll directly from our company’s bank. After that, ADP uses a “channel bank”, in this case Deutsche Bank, to refer this money into the international banking system. Deutsche Bank then transfers the funds to the U.S. Federal Reserve, which is responsible for directing the money into the receiving banks — i.e. your bank account.
In this situation, Deutsche Bank experienced a processing delay of a couple of hours and missed a critical midnight deadline to transfer the funds to the Federal Reserve. This delay caused the process to be stalled and delays to occur with the funds actually being received into your account. Although this is an understandable occurrence, it still does not eliminate the effect it had on your account or budget.
Finally, in order to adequately address this situation, we have requested that Deutsche Bank pay for any fees or overdraft charges that you may have incurred in this delay. Please send information (screen shot, statement, etc.) showing the amount you have been assessed to either [email protected] or to [email protected] by Friday, 1/15/16, and we will reimburse you for the charges in your next paycheck.
In addition, we are also working with ADP to prevent this type of situation from occurring in the future.
Again, we certainly regret the anxiousness or concern this delay of payment caused you or your family. Please reach out to HR or the Retail Operations Department if you have any need for additional information about this subject.
We know how stressful this situation has been for some of you, and we appreciate your continued support of American Apparel.
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