American Apparel to pay $1 million to settle suit over worker’s death

American Apparel Inc. has agreed to pay $1 million to settle a civil suit over a worker’s death.

The employee, Tuan Phan, died at age 49 in 2011 following an accident with a knitting machine at an American Apparel facility in Garden Grove.

The Los Angeles retailer failed to disconnect and lock the machine, which was undergoing maintenance at the time, according to the Orange County district attorney’s office, which prosecuted the case. As a result, the machine restarted when Phan went into the knitting machine cage; it subsequently “mangled and killed” Phan, the district attorney’s office said.

“American Apparel failed to properly train its employees regarding safety procedures and failed to maintain a safe and healthy work environment,” the office said.

American Apparel said it does not believe any safety laws were violated, but it settled with the district attorney’s office to avoid the costs of protracted litigation.

“In August 2011, an American Apparel knitting machine operator died in a tragic industrial accident,” the company said Tuesday. “American Apparel has been and continues to be absolutely committed to providing its employees with a safe work place and fair wages in a sweat-shop free environment.”

As part of the settlement, the retailer is now under an injunction that requires following workplace safety laws, providing employee safety training and accepting an annual audit of its facilities by the California Department of Industrial Relations Division of Occupational Safety and Health Administration.

Of the $1-million settlement, $150,000 will go to Phan’s daughter. An additional $566,000 will go to civil penalties, and $283,000 will pay administrative and investigative costs from Cal/OSHA, which had referred the case to the Orange County district attorney’s office.

American Apparel is dealing with a host of financial problems, including years of net losses. In June, its board ousted Dov Charney as chairman and suspended him as chief executive; he is a company consultant pending the results of an investigation into his conduct.

The company’s credit rating was downgraded last month by Standard & Poor’s amid concerns that it will be forced to restructure its debt. Analysts predict American Apparel will be unable to cover interest payments by 2015.

The company recently revamped its board and seated five new members, including its first two female directors.

The board overhaul was part of a deal with New York investment firm Standard General, which controls a nearly 44% stake in American Apparel.

Standard General committed up to $25 million in financial assistance to the clothing company. It subsequently purchased a $10-million loan from Lion Capital, helping the retailer from teetering into bankruptcy.

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