For American Apparel, sexual harassment costs become too high

Posted in Sexual Harassment on June 27, 2014

Sexual harassment always has a cost associated with it. The cost may be in the form of lawsuits and anti-harassment training. But the cost can also be in the form of low workplace morale, high employee turnover, decreased productivity and other consequences that have an impact on a company’s bottom line. At some point, these costs become high enough that the problem must be addressed once and for all.

That appears to be the motivation behind the firing of Dov Charney, the founder, president and CEO of American Apparel. According to a letter written by the board of American Apparel, Charney has cost the company untold sums of money by acting inappropriately and irresponsibly. Chief among his list of alleged offenses are numerous sexual harassment complaints against him.

In addition to the myriad of sexual harassment incidents he is alleged to have perpetrated, Charney is also accused of refusing to participate in mandatory sexual harassment training. He apparently also made it clear that he didn’t agree with his employees’ decision to participate.

Finally, the board accused Charney of using company money for his own purposes without permission or consultation. On several occasions, he allegedly paid off employees to prevent them from taking legal action, presumably regarding sexual harassment.

In response to these payouts, the board said: “None of these severance packages were discussed with or approved by the Board of Directors. These severance packages were material expenditures of Company funds that were not in the best interests of the Company and instead were to protect you from personal liability for misconduct.”

Charney reportedly plans to fight his termination, but it is unclear what leverage he has, if any. Throughout much of American Apparel’s history and rise to prominence, the sexual harassment allegations against Charney have heavily tainted the company’s reputation. The costs of Charney’s alleged actions may have finally become prohibitively expensive.

Source: The Washington Post, “So many sex, financial allegations involving American Apparel’s Dov Charney that company couldn’t afford the insurance,” Soraya Nadia McDonald, June 23, 2014