News shines light on modern slavery risks for businesses

Out-Law News | 16 Jul 2020 | 6:49 am | 2 min. read

There are potential reputational, commercial and legal implications for businesses that fail to properly manage the risk of modern slavery risk in their supply chains, an expert has said.

Alistair Wood of Pinsent Masons, the law firm behind Out-Law, highlighted the risks for businesses after recent allegations of modern slavery and exploitation in the textiles industry were reported in the UK media and investigation by the UK's National Crime Agency (NCA).

On 5 July, the Sunday Times reported on an undercover investigation conducted by one of its reporters which it said had found that workers at a factory in Leicester were being paid just £3.50 per hour, which is under the UK national minimum wage of £8.72 per hour that applies to people aged 25 and over. Jaswal Fashions has raised a legal complaint against the article published by the newspaper.

The Sunday Times reported that the clothes in the factory were to be supplied to fashion outlet Boohoo. Boohoo opened an investigation into the allegations. It said it had identified "some inaccuracies" with the report and had "not found evidence of suppliers paying workers £3.50 per hour". However, Boohoo said it had chosen to terminate relationships with two suppliers after finding "other evidence of non-compliance" with its code of conduct. The company has also, among other actions it has committed to, commissioned an independent review of its UK supply chain by a prominent QC.

On 13 July, Glasgow-based fashion business Quiz announced that it has opened an investigation of its own into alleged non-compliance with minimum wage requirements in a factory making Quiz products in Leicester in response to media reports. The Times reported that an undercover journalist was told she would have to work unpaid for two days prior to being moved on to a rate of £3-£4 per hour at the factory. Quiz said the allegations "if found to be accurate are totally unacceptable" and said it has "suspended activity with the supplier in question pending further investigation".

The NCA said last week that tackling modern slavery is one of its "highest priorities". The NCA also stated that it had visited business premises in the Leicester area as part of an investigation into allegations of modern slavery and exploitation in the textile industry, and said those visits "are likely to continue".

"These stories highlight the importance for corporates to understand their supply chain and reinforces the fact that a failure to do so can have profound reputational and commercial, as well as legal, implications," Wood said. "Indeed, the emergence of these stories resulted in large reductions in the share prices of both Boohoo and Quiz indicating that good corporate governance and supply chain transparency are seen as essential by investors."

"The UK government’s recent guidance, which states that companies can delay publishing their modern slavery statements by six months due to the Covid-19 pandemic, should not encourage companies to take their foot off the gas in relation to eradicating modern slavery risks in their operations and supply chains. Modern slavery statements require companies to set out the steps they have taken in the preceding year to combat modern slavery risks. It is clear from the government’s guidance that they expect businesses to continue to identify and address modern slavery risks in their operations and supply chains regardless of the current pandemic," Wood said.