The company based in Los Angeles announced that its board of directors had voted to oust Charney at the company back in June, citing misconduct allegations.
He at that time was put on suspension but still served as a company consultant.
American Apparel announced on Tuesday that it terminated Charney’s position for cause following the company’s internal investigations into allegations against him.
Legal counsel representing Charney was not available to make a comment.
American Apparel, which was founded by Charney in 1998, manufacturers clothes as well as sells them in 245 of its retail stores across 20 countries. The clothing maker has close to 10,000 employees worldwide.
American Apparel is well known for selling goods that are American made and for having risqué advertising.
Charney has been a target for lawsuits that allege the former CEO had inappropriate sexual conduct with employees at the business.
He claims the sexual relationships with female employees were all consensual.
On Tuesday, American Apparel reported that a special subcommittee of its board of directors, based on the outcome of an internal investigation carried out by FTI Consulting that it was not appropriate for Charney to be reinstated as the CEO or any officer or employee.
The business has been suffering financially. Annual losses have been recorded since 2010. This year there have been three quarterly losses and its stock has lost 53% of its value during 2014.
Schneider, who will officially start on January 5 as the CEO, has experience of many years as a senior executive in clothing and retail companies including Gores Group, Warnaco and Maz Azria.
Since the ouster of Charney, American Apparel has been operating under two interim Chief Executives. Most recently, it has been Scott Brubaker, who will remain at the helm through year end.
American Apparel stock was up 5 cents or approximately 8.5% to reach 63 cents in trading Tuesday afternoon.