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American Apparel Warns of Layoffs, Involved in Fabric Dispute

December 20, 2016

American Apparel, Los Angeles, has told nearly 3,500 Southern California employees they could lose their jobs in January based on the outcome of a likely sale to Gildan Activewear, Montreal, according to a Los Angeles Times report.

According to the California Employment Development Department, the warning of possible layoffs went to 332 workers in Garden Grove, Calif., 959 workers in South Gate, Calif., and 2,166 workers at the company’s headquarters. This year, the company has laid off at least 500 workers as it cut production.

American Apparel recently noted that the state-mandated notifications were “purely a legal precaution” and that “layoffs are not certain,” according to the Los Angeles Times report.

This all comes as new developments have emerged about a new legal battle that could threaten American Apparel’s bankruptcy sale. According to TheFashionLaw.com, the company is involved in a legal dispute with a creditor over 248,011 pounds of raw fabric that is being withheld by Tri-Star Dyeing & Finishing Inc. According to its court complaint, American Apparel says it needs Tri-Star to dye and hand over the fabric, which is being retained because of a debt predating American Apparel’s November bankruptcy.


American Apparel also said the fabric is “essential” for fulfilling orders for Gildan, and that American Apparel has been informed by lender Encina Business Credit LLC that its $30 million bankruptcy loan could be jeopardized because of the dispute. If Tri-Star does not turn over the fabric or if there is a debt payment to Tri-Star, there may be cause for a default on the loan, American Apparel said. Additionally, American Apparel said its manufacturing could be disrupted without the fabric. — J.L.


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