Ensuring the rights of workers and working conditions in supply chains should be a core part of corporate compliance with the Modern Slavery Act 2015 (the "Act"). However, investigations highlighting poor pay and dreadful working conditions of workers have been the subject of sensational newspaper headlines over the last six months.
We look at the far-reaching consequences for businesses of such reports which go beyond the commission of offences under the Act. Investigations may uncover other offences such as fraud, tax evasion, health and safety breaches and immigration offences to name but a few. Damage to a brand following such allegations is likely to last long after the headlines.
Efforts to Drive Slavery and Human Trafficking out of our Supply Chains in the UK?
The Modern Slavery Act came into force on 29 October 2015. The Act sets out three criminal offences, namely, slavery, servitude and forced or compulsory labour (s1); human trafficking (s2); and committing any offence with the intent to commit human trafficking (s4).
It is important to be aware that often the phrase ‘modern slavery’ is used to include a wide range of issues including poor working conditions and low rates of pay. However, these are not necessarily offences identified under the Modern Slavery Act itself.
The transparency in supply chains provision in Section 54 of the Act seeks to address the role of businesses in preventing modern slavery from occurring by requiring larger businesses to publish a Slavery and Human Trafficking Statement each year. The guidance sets out those elements which should be included in the statement including, the nature of the business and supply chains, due diligence in place and how effective the business has been in preventing modern slavery in the supply chain. Recent press coverage alleging failings in this area demonstrates the need for businesses to demonstrate that they are taking these issues seriously and that they have effective procedures in place to monitor compliance.
The Court of Public Opinion
On 22 December 2020, The Guardian published an article alleging that Boohoo was selling clothes made in a factory in Pakistan where workers were earning as little as 29 pence an hour. This is the latest in a series of allegations dating back to a Dispatches program in January 2017 where program makers alleged that factories making clothing for New Look, River Island, Boohoo and Misguided were failing to pay the minimum wage.
Boohoo Group’s Modern Slavery Statement dated August 2019, maintains that they have a “zero tolerance” approach to modern slavery. The statement goes on to say that all suppliers are expected to adhere to a code of conduct that includes a requirement that a living wage should be paid to all workers.
However, despite those assurances, serious failings in the supply chain were alleged in December and in The Sunday Times article on 5 July 2020 entitled "Boohoo sweatshop suppliers they only exploit us. They make huge profits and pay us peanuts". An undercover reporter alleged that he found squalid and poor working conditions in addition to wages as low as £3.50 per hour in a factory in Leicester producing clothing for the Boohoo group. Just days later, £1.6 billion was reported to have been wiped off the value of the company.
Investigation by National Crime Agency
The Sunday Times article in July also prompted the NCA and other agencies such as HMRC, the Home Office and Health and Safety Executive to work together to investigate the Leicestershire factories. The NCA said its “primary focus is on the protection of vulnerable people and safeguarding them from harm”. In addition to modern slavery, investigators continue to look at other possible criminal offences including tax evasion, immigration offences, health and safety offences and fraudulent claims under the Government job retention scheme.
Supply Chain Failings
In the days following the article in July, Boohoo instructed Alison Levitt QC to consider whether allegations about working conditions and low pay were well-founded. It is well-publicised that she concluded that the allegations of poor working conditions and low rates of pay in the Leicester factories were “substantially true".
Alison Levitt QC also found that Boohoo's monitoring of its Leicester supply chain was inadequate. In her report, she details exchanges with Boohoo that concluded with them being unable to furnish her with a list of its entire supply chain during her investigation. It is reported that Boohoo has since appointed retired judge, Sir Brian Leveson to provide independent oversight of improvements planned for its supply chain and business practices.
The Importance of Early and Preventative Action in Rebuilding Confidence
The response to the above articles illustrates the importance of robust policies and procedures which are carefully monitored for compliance throughout the supply chain.
In response to the latest allegations Boohoo issued a statement that independent compliance and auditing specialists were on the ground in Faisalabad to immediately investigate. If mistakes are made, taking advice at an early stage from those with experience of investigations is vital. Mistakes made during internal investigations can be costly and may fail to uncover all of the problems. The wrong approach can also hamper official investigations. Businesses need to demonstrate that they have taken allegations seriously and investigated matters promptly in order to limit longer term damage. We can advise and assist at short notice with internal investigations, should the need arise.
The UK Government is planning to toughen up reporting rules following a review of the Act. The proposed reforms include six keys areas of focus that are currently included in the Government Guidance but may become mandatory requirements in statements. These include the actions that they have taken to prevent slavery and human trafficking in its supply chains, the organisational structure and supply chains, training in modern slavery for staff, risk assessments, due diligence and policies. Consideration is also being given to imposing financial sanctions for breaches under the Act.
The Government will also require all statements to be published on a new centralised, Government run reporting service. This single register is likely to enhance public scrutiny and those entities which are not compliant will be named and shamed.
Please do not hesitate to contact us if you wish to discuss any of the above issues or if you are considering carrying out a review of your statement, policies and other measures.