American Apparel Confidential: A Million-Dollar Penalty for WhistleblowersS

Last week we brought you internal documents and employee testimony about American Apparel's hiring practices and work environment. AA CEO Dov Charney wasn't happy with our reporting! And for AA employees, leaking to us carries a $1 million penalty. Seriously.

Responding to Dov Charney

Let's get this out of the way first. After we posted our reports last week, AA issued a statement saying it based hiring on "style," rather than "beauty." Our editor spoke to AA Founder and CEO Dov Charney at length on the phone last week, but Charney declined to go on the record or give us a formal interview. He did, however, give interviews to various outlets in which he tried to refute our reporting. Since our reporting is based on AA's own internal documents and testimony from the company's own current and former employees, we'll let it speak for itself.

But at least twice, Charney alleged that we somehow altered or fabricated an email. He told TheGloss.com (without specifying which email he was talking about), "The e-mail was inauthentic! It's not even a real e-mail!...Someone changed it! I can alter an e-mail in five seconds." And he told Signature9, "Some of the emails [from Gawker] were doctored." (Signature9 added the editor's note, "I asked Charney to elaborate on which emails were doctored or false, but he couldn't recall a specific message. He did insist that on at least one unspecified email words not in the original were inserted").

We altered nothing. We doctored nothing. We published the emails and internal documents exactly as we received them, except for adding our logo. That's all there is to it. As with all forwarded emails, it would in theory be possible for the person who sent it to us to alter it somehow; if Dov Charney has some proof that that happened, he should come to us and say so, on the record.

The Million Dollar Confidentiality Agreement

A tipster sent us a copy of American Apparel's "new hire packet," which all new US employees are required to sign. Besides the normal job application documents, it includes an "At Will Employment Confidentiality Agreement"—a full-page document that spells out, in extraordinary detail, all the things that employees are not allowed to disclose or "cause to be published." Remember, AA employee: you work for a major celebrity.

You understand that the Company is a high profile publicly traded company that is vulnerable from a media perspective. You also understand that that the Company's Chief Executive Officer, Dov Charney, is considered an international business celebrity and has become one of the most recognized CEOs in the fashion industry.

How serious are they? Employees are forbidden to ever speak to the media—and are under orders to whisper when discussing their job in public:

Without limiting the generality of the foregoing, you agree not to photograph or record Dov Charney or any of his residences and/or publish or distribute the same unless Dov Charney consents thereto in writing prior to any such disclosure or publication. In the event that you are contacted by a journalist, a representative of the media or other third party who requests an interview or requests that you disclose or confirm or deny the veracity of any of the Confidential Information, you shall reject said request and/or issue a "no comment" statement, and you shall immediately advise the Company thereof. Further, you agree not to disparage the Company or Mr. Charney in public or online on blogs or any other similar media. Further, you understand and agree that all communications concerning Confidential Information in public, even with fellow employees of the Company, that are or reasonably could be overheard by a third party (e.g., and without limitation, in bars and restaurants) shall be deemed a breach of this Confidentiality Agreement.

And the kicker: any employee who dares to tell the tale of their time at American Apparel owes the company a million bucks.

In the event of any breach by you (or your agents) of this Confidentiality Agreement, you shall pay as liquidated damages, and not as a penalty, the sum of One Million Dollars ($1,000,000) for each such breach, which the parties agree represents reasonable compensation for the harm incurred as a result of such breach.

Sorry, Dov—the intimidating legalese isn't working too well. The full Confidentiality Agreement is below. Click to enlarge.

American Apparel Confidential: A Million-Dollar Penalty for WhistleblowersS

[Update: Out of curiosity, we had a lawyer do a cursory review of the language in this document. He concluded that if AA actually wanted to enforce this, it would have to prove in court that a $1 million penalty was "fair compensation for the loss sustained" by whatever the violation of the Confidentiality Agreement was. So, it's probably "unlikely" they could enforce it—but theoretically possible. Just one lawyer's opinion, for your enlightenment. Indemnity! Etc!]

Previously

Life at American Apparel: The Employees Speak
American Apparel's Complete Guide to Grooming
American Apparel: Internal Documents Reveal Uglies Not Welcome
American Apparel Has a 'Full Body Head to Toe' Employment Policy