Iconoclastic clothes retailer American Apparel (APP) has been accused by U.S. immigration officials of employing hundreds of illegal workers at its Los Angeles headquarters.

As many as one-third of the company’s Los Angeles employees, or 1,600 workers, are not eligible to work in the U.S., according to allegations by U.S. Immigration and Customs Enforcement.

American Apparel is no stranger to controversy. Its founder and Chief Executive Dov Charney uses racy advertising to draw attention to its clothing lines aimed at young consumers.

In May, the company agreed to pay $5 million to filmmaker Woody Allen to end a lawsuit accusing the retailer of unauthorized use of the director's image in an ad campaign.

The latest accusation was included in a filing with the Securities and Exchange Commission made by American Apparel late Tuesday.

The company said the employees were hired apparently after providing false documentation.

In addition to the 1,600 employees cited by ICE, an additional 200 were also found to be suspect due to discrepancies in their employee records.

The filing said ICE representatives conducted an inspection at American Apparels’ offices in January.

American Apparel responded to the charge by saying it will let go any employee that cannot provide proper documentation, and that losing the employees would not significantly impact is operations.

The company was not accused of knowingly hiring illegal employees.

CEO Charney, an outspoken advocate for immigration reform who has condemned American “sweatshops,”  said in a statement: “It is the company’s hope -- and my personal hope as an immigrant myself -- that these employees are able to confirm their work authorization so that they may continue to work at American Apparel.”

American Apparel was hit hard by the recession and nearly defaulted on lines of credit, but was helped back on its feet earlier this year by an $80 million capital infusion from private-equity firm Lion Capital LLP.