When denim company DSTLD launched in 2014, the fashion world and celebrities like Jennifer Lopez and Bella Hadid flocked to the brand. Founded by Corey Epstein and Mark Lynn, the brand’s mission was to create ethically produced, quality denim sold directly to the consumers without a massive retail markup. Beyond that, the founders wanted to truly democratize denim, allowing customers to invest in the company following the passing of Regulation A+ by the Securities and Exchange Commission in 2012, which allows anyone to invest in startups. In 2017, DSTLD reported it had tripled revenue from $3 million in July of 2016 to $9 million.
While DSTLD painted a picture of creating a company for the people, three former employees shared a different picture of the culture inside the brand that has bubbled up over the last two years as the company has transitioned from a DTC brand to a holding company, Digital Brands Group. Per LinkedIn, DSTLD has between 11 and 50 employees. Several employees who spoke to Glossy asked to remain anonymous. Another former employee, eventually declined to comment for this story due to ongoing litigation against DSTLD.
“It’s not the fabulous startup dream you’d imagine,” one former employee said. “Some of us left because of the shady business practices, some because payroll was getting dicey, and some were pushed out. [There is a] vindictive nature of leadership now, and why we’re doing this under the cover of anonymity is because we’re scared. Almost all of us during our time at DSTLD had heard leadership openly speaking badly about other employees. Even some investors have seen it on webinars during the crowdfunds.”
Some of the key allegations against DSTLD that former employees shared with Glossy include an internal culture of fear, a lack of transparency from leadership to employees and consumers, and a withholding of 401(k) money. DSTLD parent company Digital Brands Group said in a statement to Glossy that the issues former employees called out were largely due to “growing pains” as the company shifted from a direct-to-consumer denim company to a large-scale holding company.
“If we wanted to succeed at the vision, we couldn’t just be a startup anymore. We’ve had growing pains, and this restructuring was one of them among many changes we made, small and large,” the statement said.
Part of this change included moving the company from Los Angeles to Austin. A spokesperson for Digital Brands Group said employees were given three months notice of the relocation, “much more than large corporations,” and that only four employees opted in to that move. Employees who did not choose to relocate were allowed to interview during that three-month period during work hours while still being paid in full, the spokesperson said. The company continued to pay health care benefits for employees during this time, as well.
One former employee, who left in June 2019, said they were not aware of these terms but recalled “a time when we were encouraged to look for other employment in or around May 2019, but it was not due to relocation. That hadn’t been confirmed and was only a possibility,” the former employee said. “The reason was because there was concern about whether or not the company could continue to make timely payroll.”
Digital Brands Group markets itself as a curated collection of digital-first brands. Another brand in its portfolio is a company called Ace Suits. The group also made its first acquisition at the end of February, women’s contemporary brand Bailey44, and has plans to acquire more fashion brands in 2020. LA-based DBG is privately held and has been using crowdfunding platform Start Engine and Seed Invest to fundraise, tapping its customers and everyday people to grow the brand. Minimum investments start at $500. Digital Brands Group holds regular webinars for investors to introduce them to new team members and give them updates on an IPO timeline and on fundraising goals.
At the end of January, the company closed its latest round of crowdfunding, sharing the brand has raised over $8 million from 4,100-plus investors to date. At that time, one employee said roughly 80% of the people listed on the company’s “our team” page shared with potential investors had quit or been let go.
In 2019, employees said the company stopped using a paycheck processing system — like ADP — to run payroll and instead were manually cutting checks. Beginning in March, employees began to notice that their 401(k) contributions and taxes were being pulled from their paychecks, and contributions were not put in their retirement accounts.
“Taxes have still not been paid off, which is why we still have not received our W-2s,” one employee said.
Digital Brands Group told Glossy the company had worked with proper authorities to disperse the 401(k) contributions accordingly.
“The company will pay any and all fees or penalties resulting from this delay,” the company said in a statement provided to Glossy. Employees are expected to receive their W-2s in digital or paper form in the next seven to 14 days.
In April 2019, Davis sent an email to 13 members of the DSTLD staff about how the company planned to move forward with paying out overdue 401(k) contributions and when it planned to pay out that money to each employee.
In the email, obtained by Glossy, Davis wrote: “Below are the options for the amount we owe you for your 401(k). The below is broken into two sections: The past amount due. From [Dec. 24] to any payroll received before [March 31], our goal is get this paid back by the end of April. [Going] Forward. For any paycheck received after [April 1], our goal is to get back to the normal payment ASAP.”
For past due amount, Davis wrote: “Let us know if you prefer for this amount to be sent to your 401k account when we pay it back or paid to you as cash.”
As of March 1, several employees Glossy spoke to still had not received missing 401k contributions. On March 7, a spokesperson for Digital Brand Group said all retirement funds had been paid. A former employee said DSTLD let employees know funds have been released, but that employees are still waiting for the full amounts to hit their bank accounts.
Another former employee who asked to remain anonymous said CEO Hil Davis regularly spoke openly with them about his dating life, showing conversations he had with women on various dating apps. The employee said Davis made inappropriate comments. “[They were] not directed at me, but things that should not be mentioned to a colleague,” she said. On one occasion, the employee stated Davis asked them to read various conversations he had with women on apps: “He urged me to scroll up in one particular conversation where there was talk about ‘penis enlargement’ and flirtations on that topic.”
The employee approached a former executive at the company about these conversations to express discomfort and was told to document everything that happened and keep a record. DSTLD did not have an HR department at the time. Both the executive and the employee are no longer with the company.
In a statement to Glossy, a spokesperson for DSTLD said: “We take claims like this very seriously and have a system in place for reporting misconduct, including the option to reach out anonymously. No one has reported any such incident or concern through that channel, and we have no reason to believe that such a concern has ever been flagged with a manager or colleague.”
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DSTLD wanted to bring denim to the people, but burned employees in the process - Glossy
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