Boohoo hires QC to look into minimum wage claims
Boohoo has appointed a top lawyer to look into allegations that factories in Leicester involved in the supply of its clothes were paying below minimum wage and breaching safety rules.
The Manchester-based fast fashion group said that Alison Levitt, a QC, would be reviewing its supply chain in a bid to find out whether its factories were meeting minimum wage and COVID-19 safety rules.
Boohoo said it was “shocked and appalled” by the allegations, which were aired in the Sunday Times last weekend.
An undercover reporter for the newspaper said that staff at Jaswal Fashions had told him to expect a salary of as little as £3.50 an hour, while the minimum wage for someone over 25 is £8.72. While there the reporter saw clothing branded for Boohoo and its subsidiary Nasty Gal.
Boohoo said it had found “some inaccuracies” with the report last Sunday. It said that the clothes had been made in Morocco and were just being repackaged in Leicester at a premises formerly operated by Jaswal Fashions.
However Jaswal has never been a supplier to the company, Boohoo said. The order was instead placed with Revolution Clothing, which outsourced the order to Morefray Limited. Morefray made the clothes in Morocco and repackaged them in Leicester.
“Our investigation to date has not found evidence of suppliers paying workers £3.50 per hour,” Boohoo said.
However the company said it had found other areas where the suppliers did not comply with Boohoo’s code of conduct, so cut them both off.
Levitt will now review how compliant suppliers are with minimum wage and COVID standards. She will also look into working hours and record keeping, as well as staff’s contracts. It had previously been reporting by the Financial Times that some suppliers in Leicester got around the minimum wage by not paying for all hours worked.
In September, Boohoo will publish an update on her review alongside its half-year results, with a second update due in January next year.
When asked if the company would commit to publishing the full findings of Levitt’s review, the company said that it would be her decision, but added that Boohoo would welcome transparency.
Boohoo has also said that experts from Verisio and Bureau Veritas will audit its supply chain, and carry out other work that the QC gives them.
CEO John Lyttle said: “As a board we are deeply shocked by the recent allegations about the Leicester garment industry.
“We wish to reiterate how seriously we are taking these matters and we will not hesitate to terminate any relationships where non-compliance with our Code of Conduct is found.”
Boohoo’s share price was sent into a tailspin this week despite a statement from the company on Monday trying to fight the fire.
By Tuesday the company’s shares were down by a third compared to where they had been on Friday with around £1.5bn in value wiped out.
Last week top directors at the company revealed they were in line to share a £150 million bonus package if they can add two thirds to the company’s share price in the next two years.
Analysts at Liberum, who had been sceptical over the company’s original response on Monday, said: “All these steps we commend and should start to help re-build confidence that Boohoo intends to do the right things.
“They fully acknowledge that further investigations will be ongoing and have committed to their full co-operation with the Home Secretary and local authorities.
“While serious questions will remain for some time, today is the first positive step forward in transparency.”
Nonetheless Boohoo’s shares dropped another 8.5% on Wednesday morning to 239.1p.