Bosses at under-fire fashion company Boohoo have appointed a top lawyer to look into allegations that factories involved in the making of its clothes were paying below minimum wage and breaching safety rules.
The fashion chiefs said that Alison Levitt, a QC, would be reviewing its supply chain in a bid to find out whether factories were meeting minimum wage and Covid-19 rules.
The board 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 he saw Boohoo and Nasty Gal branded clothes in boxes. Nasty Gal is owned by Boohoo.
It is not the first time serious questions have been raised about the Leicester garment industry where Boohoo is a major customer.
Before the Sunday Times report, Channel 4, the Financial Times, the BBC and the Guardian had all highlighted the issue, as early as 2017.
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 it had found other areas where the suppliers did not comply with Boohoo’s code of conduct, so cut them both off.
In 2018 the Financial Times reported that employers were getting around minimum wage rules by not paying workers for all the hours they put in.
Ms 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.
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 Ms 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.
Chief executive 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.
It is bad news for the company’s top bosses, who are set 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.”
However, shareholders seemed less impressed – Boohoo’s shares dropped another 10% on Wednesday morning.