Wednesday, branded fashion basic apparel retailer American Apparel, Inc. (APP) said it received a notification from U.S. Immigration and Customs Enforcement or ICE that approximately 1,800 current employees of the company appears to have no authorization to work in the United States.
Los Angeles, California-based American Apparel said unless these employees, within a reasonable time frame, 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.
The notification from the ICE follows an inspection on January 3, 2008 to determine American Apparel's compliance with Section 274A of the Immigration and Nationality Act. The company stated that it is not able to accurately assess what impact the loss of these employees will have on its operations.
However, the company added that even if it were to lose substantially all of the employees identified by ICE, which represent approximately one-third of the 5,600 employees 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.
The company believes that its current surplus levels of inventory and production capacity will lessen the adverse impact of any disruption to its manufacturing activities that may potentially result from the loss of these employees. Further, the company added that it may need to hire only a fraction of workers to replace employees who would be terminated.
Dov Charney, chief executive officer of American Apparel, said, "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."
The company said it intends to cooperate with ICE to determine an appropriate timetable to complete an orderly verification of these employees' identification and employment eligibility documents.
APP is trading at $3.35, down $0.29 or 7.97%, on a volume of about 231 thousand shares.
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