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Wednesday, July 16, 2014

American Apparel and Arbitration Clauses

It's been hard for me to avert my eyes from the train wreck happening at American Apparel.  Yes, I heard the rumors about the shocking behavior of its former CEO, but the revelations of some of the past accusations by former employees are news to me.  But, as Steven Davidoff Solomon points out in today's NYT, it's not surprising that the public didn't hear about the most egregious employee claims.  American Apparel required all its employees to sign agreements containing arbitration clauses.  Davidoff Solomon writes:

"The purpose of these clauses was clear: to ensure that any dispute was kept quiet and protect the company from excessive damages. It certainly didn’t appear to benefit employees.

American Apparel required that the entire proceeding — including the outcome — be kept confidential. Employees were also contractually barred from disparaging or otherwise say anything bad about Mr. Charney or American Apparel. As if this were not enough, employees also were required to agree not to speak to the news media without the approval of American Apparel."

It wasn't just employees - models had to sign egregious, one-sided contracts, too. These contracts also contained arbitration clauses and very broadly worded non-disparagement clauses. 

As Davidoff Solomon notes, American Apparel's board could ignore their CEO's misconduct because there was not much public outcry about it, and there was not much public outcry because the employees and models who brought claims, couldn't discuss what happened to them - their contracts prohibited it.  My guess is that these "contracts" were also "at will." 

All from a company whose public image was based, at least in part, on fair pay for workers

 

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