On 22 July, the U.K. parliament issued its final report of the investigation into the working practices of scandal-ridden sporting goods retailer Sports Direct. Iain Wright MP, chair of the Business, Innovation, and Skills (BIS) Committee, said: “Evidence we heard points to a business whose working practices are closer to that of a Victorian workhouse than that of a modern, reputable High Street retailer.” If this can happen in a U.K. business when Britain is part of the European Union and subject to all its employment rules and regulations, it does not augur well for future employment conditions. During oral evidence, Mike Ashley, CEO of Sports Direct, admitted for the first time that workers had “effectively been paid below the national minimum wage” and that Sports Direct had got too big for him to control.
“It is like going out one day and you have got a tiny little inflatable and you are in control, then you wake up one morning and you are an oil tanker. You cannot be all over that oil tanker. It there is a problem on that oil tanker, you are still responsible. Ultimately I am always responsible for Sports Direct. I am aware of that,” Ashley said.
The report focusses on the employment practices of the two agencies who hire and pay staff at the Sports Direct Shirehouse warehouse in Derbyshire, The Best Connection and Transline Group. These agencies were reported to have “an improper understanding of basic employment laws and practices” and to have given false evidence to the Committee. Among the accounts of worker mistreatment are: “staff being penalised for matters such as taking a short break to drink water and for taking time off work when ill.” The report also revealed allegations of some workers being promised permanent contracts in exchange for sexual favours. Other evidence pointed to serious health and safety breaches, with repeated ambulance calls to the Shirebrook warehouse “including, in one case, for a woman who gave birth in the toilet.”
The report also calls on the Gangmasters Licensing Authority to look further into the legality and fairness of some of the “voluntary schemes employed by the agencies, such as pre-paid debit cards and insurance services.” Also highlighted are statements made by Transline about its practices to the BIS Committee, “which have subsequently been shown to be false by the Gangmasters Licensing Authority.” The Committee asks for Transline to clarify its misleading evidence “as a matter of urgency” as the firm is currently considered “in contempt of Parliament.”
“Mike Ashley had to be brought kicking and screaming to answer the Committee’s questions about working practices at Sports Direct.”
Iain Wright MP, Chair, Business, Innovation, and Skills Committee
News of the appalling working conditions at the warehouse first emerged in April 2015 when a Channel 4 Dispatches programme aired about them; although the Scottish Affairs Committee had already heard evidence on the practices in March of that year. A whole series of exposé documentaries then followed, and Ashley announced in December 2015 that he would lead a full review of agency staff work and conditions. The BIS Committee began to hear oral evidence in January 2016, but was repeatedly hampered by Ashley’s refusal to attend the Committee. Rather than cooperating, Ashley engaged in a written argument with the Committee over whether it had the authority to compel him to attend and give evidence, and only finally appeared in June 2016. “Mike Ashley had to be brought kicking and screaming to answer the Committee’s questions about working practices at Sports Direct,” Iain Wright has said.
Similarly, executives at the two employment agencies also delayed attendance, and the two CEOs never appeared, instead sending their subordinates to face questioning. In addition, Ashley has admitted that Sports Direct is also under investigation by Her Majesty’s Revenue and Customs. Unite the Union has represented direct workers at the warehouse since 2008, but has made little or no progress in negotiating terms and conditions because of the refusal of management to meet with them. It has, however, collected large amounts of evidence on the mistreatment of workers, which it presented to the Committee.
The warehouse has 200 permanent employees and over 3,000 agency workers. The majority of agency workers are Eastern European and were employed on contracts guaranteeing work for only 336 hours a year or around seven weeks’ work, although, in practice, “workers are typically engaged on 40 hours’ work a week for nine weeks at the start of the year, and subsequent to this period have no contractual rights to any guaranteed weekly hours and therefore to the associated payment of wages.” Under these arrangements workers were on zero-hour contracts for the vast majority of the year. Conditions were no better in Sports Direct’s retail outlets where, again, most employees were employed on zero-hour contracts and many were made to work beyond their contracted hours for no pay.
Even while at work, employees were not compensated for lengthy delays in “security” checks, to make sure that goods were not being stolen, resulting in wages below the minimum. Ashley has given assurances that these practices will stop and that back pay will be offered, though he has not been able to assure the Committee that this has actually happened yet. “We will be holding Mr. Ashley’s feet to the fire, so as to see what progress he has made on improving working conditions for workers at his premises,” Wright said.
Below is an excerpt from Parliament’s investigation into Sports Direct.
The BIS Committee were presented with a disturbing picture of the working practices and business model at Sports Direct. In evidence to the BIS Committee, Mr. Ashley admitted for the first time that workers had effectively been paid below the national minimum wage and that Sports Direct had got too big for him to control.
The Committee also heard a series of accounts of worker mistreatment, including staff being penalised for matters such as taking a short break to drink water and for taking time off work when ill—the ‘six strikes and you’re out’ policy. Allegations also surfaced of some workers being promised permanent contracts in exchange for sexual favours.
Other evidence pointed to serious health and safety breaches, with repeated ambulance calls to the Shirebrook warehouse including in one case for a woman who gave birth in the toilet.
Iain Wright MP, Chair of the Business, Innovation and Skills Committee, said:
“Whistleblowers, parts of the media and a trade union shone a light on work practices at Sports Direct and what they revealed was extremely disturbing. The evidence we heard points to a business whose working practices are closer to that of a Victorian workhouse than that of a modern, reputable High Street retailer. For this to occur in the UK in 2016 is a serious indictment of the management at Sports Direct and Mike Ashley, as the face of Sports Direct, must be held accountable for these failings.
It seems incredible that Mike Ashley, who visits the Shirebrook warehouse at least once a week, was unaware of these appalling practices. This suggests Mr Ashley was turning a blind eye to conditions at Sports Direct in the interests of maximising profits or that there are serious corporate governance failings which left him out of the loop in spite of all the evidence.
Mike Ashley had to be brought kicking and screaming to answer the Committee’s questions about working practices at Sports Direct. To Mr. Ashley’s credit, when he gave evidence he was open and willing to engage and he is now setting out some of the steps which Sports Direct needs to take to stop these practices recurring. The continual refusal to appear before our Committee is regrettable, because his public pledges whilst before the Committee to improve working conditions could have been made so much sooner.
The Business Committee will visit Shirebrook and will continue to hold Mr. Ashley’s feet to the fire, in as constructive a manner as possible, checking on the progress he makes on improving working conditions for workers at his premises.”
Furthermore, the agencies operated a “six strikes and you are out” policy. Under this policy, a strike can be given to a worker “if they spend too long in the toilet or chatting, or if they take time off when they are ill or when their children are unwell.” Workers were also docked for 15 minutes of pay if they were one minute late, either arriving for work or coming back from a break.
Health and safety issues were also found to be rampant at the warehouse, with 110 ambulance visits to the Shirebrook warehouse and 115 incidents between 1 January 2013 and 19 April 2016, with 50 cases classified as “life-threatening.” There were incidents of amputations and fractured necks; and twelve incidents were listed as “major,” with 79 injuries leading to absences from work of more than seven days. Officials from the local council noted that the lack of inspections—and therefore investigations—of the warehouse were due to cuts to local services and problems of communication between the national agency Health and Safety Executive and local environmental health agencies.
Ashley’s review of the working practices will cover most of the issues discussed, as well as a corporate governance review and a review of the company’s strategy for employing agency workers versus directly employed workers and the proportions between these two groups. His response to a Committee enquiry on the review, and the actions taken or to be taken, can be found here.
Not necessarily in response to this scandal, but of direct influence on future instances of employee mistreatment, the Immigration Act 2016 reformed the Gangmasters Licensing Authority, and, from October 2016, it will become the Gangmasters and Labour Abuse Authority. Its remit was extended and it “will have the capacity to study cases of labour abuse throughout the U.K. labour market, including retail.”
The report concludes that Sports Direct’s business model “involves treating workers as commodities rather than as human beings.” It continues: “There is a risk that this model—which has proved successful for Mr. Ashley—will become the norm. We will be considering the full implications of this business model in the context of our broader inquiry into the labour market.” The date and scope of this broader enquiry has not yet been announced, but would seem to be yet more important following Brexit.
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