Friday, July 24, 2015

Business | An Internal Rebellion, Reimbursement for 62,000 Abercrombie Associates...

A new major lawsuit
strikes Abercrombie & Fitch Co. at a pivotal time
effort to rise remains an up-hill war...

         JUST BEFORE THE full transition is materialized complete in reformation of Company dynamics, a lawsuit earthquake of paramount magnitude has struck from a passing era that is Mike Jeffries' Abercrombie & Fitch. Based on key element from protocol of the era, the class action lawsuit, applicable to about 62,000 associates, asserts the illegality of coercing employees to purchase outfits for work ("AAA"s) strictly of A&F products - in compliance to the Look Policy and at benefit for Company profit pocketed at the expense of their paychecks - without being reimbursed for what is essentially work uniform. The lawsuit was certified by a judge in the state of California on July 16 and has analysts wondering how this new major legal blow will affect the already difficult effort of a once-leading, unchallenged champion to rise again.

Written in its initial form in the mid-1990s by the man, Michael "Mike" S. Jeffries, who was repositioning Abercrombie & Fitch then as a youthful fashion retailer, the Look Policy evolved across time in refining and upholding a strict, tailored appearance for Abercrombie & Fitch Co. associates as agents of representation of its brands in the Company's stores. Essentially, it basically rather much regulated aspects of an employee's being from all manner of details running grooming to dressing, and its likeability remained polarized among actual employees - some praising it for upholding clean, sharp, coherent and distinguished standards and image unparalleled in the industry while others finding it stiffing and problematic - while later becoming infamous, tied to controversy and lawsuits, in the media.

This particular lawsuit deals with the dressing aspect of the Look Policy. While Abercrombie & Fitch had in March of this year - while the suit was being looked over before being certified as a class action - stated that the plaintiffs had no grounds for such merit because the claims were being based on contradictory manegerial word and not on actual written Company policy (which nowhere explicitly forces employees to purchase A&F goods), it was an open secret for years that failure to wholly comply to the Look Policy got you shortened hours or none and even completely favored would be the associate who completely followed through all the way to the outlined looks. Thus, as is asserted by the lawsuit, employees were coerced into purchasing the Company's merchandise, for its benefit in running its business, by being placed in what was pretty much a catch-22 situation at expense of their paychecks: the Company may not have in policy explicitly instructed, forced employees into purchasing its goods for being able to work, but if you didn't follow through all the way religiously to the Look Policy on down to Company outlined looks comprised of its goods - what was essentially uniform for work - for the season, you wouldn't be seen in a favorable light and would place your employment in a precarious stance - borderline also being discriminated in comparison to those who did follow through all the way.

So what choice did you have to be inline with being a bonefide Abercrombie & Fitch associate; in corporate culture, it may not have been written out in policy, but among associates, as elephant in the room, you did have to look the part all the way - as dictated by the guide booklets released every season in accordance to the Look Policy - or you didn't fit in. And everybody knew that - with the majority of associates even happy to follow the guidelines as passionate associates and fans of the Company, but others who would only grudgingly so...for various personal reasons. And no one really made a fuss about it until now. By California law, wherein the class action lawsuit originates, it is illegal to coerce an employee, in any way, to incur expenses, for any benefit of the employer, without being reimbursed. Current Californian A&F associates Alexander Brown and Arik Silva came to the recognition of their beliefs in being abused as employees and decided to finally take action on the matter.

The two individuals had originally begun their legal action "over a range of allegations that would constitute widespread wage theft, including a failure to provide rest breaks and a failure to give workers accurate wage statements. The plaintiffs allege that the company failed to give workers a ten-minute rest period for every four hours of work or compensate them for the lack of a break in violation of California law. But the court only certified the claims that relate to buying the company's clothing on [July 16]." Furthermore, "[the] lawsuit also includes a subclass of minimum wage employees, who allege that by being made to essentially buy a company uniform out of their own pay without being reimbursed, their wages were driven below minimum wage and were essentially stolen by the company."

"The California Labor Code provides that '[a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer[.]'" - You Want Me to Pay for What?

Representing them in the class action lawsuit is attorney Reed W. L. Marcy (see profile) of Aiman-Smith & Marcy:

The development of this actually made widespread news only a week later after July 16 - prompting a cloud of talk of more woes for the Company (while it attempts to halt decline and pull off a rise), and even having release the title, "Abercrombie & Fitch Has 62,000 New Reasons to Worry About Its Future". ANF stock on the NYSE made a downturn that's so far become a third significant decline in 2015, a year which has witnessed the lowest performance of ANF stock in the entire decade so far.

ANF stock performance in the 2010s so far which began a dramatic decline
after Q2 FY2014 earnings release in August 2014 and has been at the lowest performance range
this decade since March 2015 when it hit a near six-year low.

Follow ANF stock with the intelligent, interactive chart by TradingView found at the bottom of the TSOF site.

For the record, this comes at a time when new senior corporate governance made it clear in the spring of this year - as the Company has been reforming dramatically since the December 2014 retirement of the founder of the modern Abercrombie & Fitch Co. - that it would no longer follow the rigors of the Look Policy originally instituted by said modern founder and former A&F Chairman & CEO Mike Jeffries: this made it explicit that, as one of the new aspects of reformation in the Company, now-called brand representatives would not be required or expected to wear merchandise by the Company's brands while working in its stores.

We shall see how this pans out...