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American Apparel continues to make headlines for all the wrong reasons. Business Insider is reporting that its US staff did not receive their paycheck last week after the company "temporarily missed its payroll." An American Apparel spokesperson confirmed that the employees were eventually paid by Monday of this week.
The brand's CEO Paul Schneider is putting the blame on Deutsche Bank. "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," Schneider writes in an an-staff email obtained by BI. "This delay caused the process to be stalled and delays to occur with the funds actually being received into your account."
Schneider also says that American Apparel is working with Deutsche Bank to reimburse employees for any fees related to the delayed paychecks.
The company's CEO also makes it very explicit that "the delay issue had nothing to do with our American Apparel payroll department."
American Apparel it declared bankruptcy last year, and the brand has been working through restructuring its business. An investor group backed by Dov Charney have also put in a $300 million bid recently to take control of the company.
You can read the entirety of the letter below.
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 RetailHR@americanapparel.net or to firstname.lastname@example.org 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.
Update: In letters obtained by Racked, both ADP and Deutsche Bank take full responsibility for the pay delay at American Apparel. You can read both the letters below.