Boohoo : ‘beyond boohoo’ – the annex to Sir Brian Leveson’s fourth report

Beyond boohoo

Report to the Board: Annex A

1. In my Annex to the March report, I sought to explain the legal framework and some of the challenges faced by law enforcement in relation to the garment industry in the UK in general and in Leicester in particular. I also provided some insight into the problems created when that is combined with the endemic social issues. I also sought to identify the reasons why complaints may not be made and the number of agencies potentially involved in seeking to uphold appropriate standards. I did so in an Annex because it was important to provide the context within which boohoo is operating and, without seeking to minimise the role that boohoo has to play, to underline the wider issues which boohoo alone cannot address.
2. In the last year, there has been considerable activity from state agencies. This has first taken the form of Operation Tacit which is a multi-agency initiative (which includes the National Crime Agency) led by the Gangmasters and Labour Abuse Authority ('GLAA') operating as a government and local authority response from a regulatory and enforcement perspective to the issues raised1. Although there is a will to use certain enforcement powers to protect workers and bring about change2, there have been very few prosecutions.
3. There are a number of reasons for this. First, the only offences of labour exploitation available relate to modern slavery; the sector is not regulated so there is no gangmaster and no offence of aggravated labour exploitation. Offences related to the national minimum wage, tax, VAT and health and safety fall to different investigators and different prosecutors: joining up is, at present, not straightforward. Second, exploitation has taken place behind closed doors; there are limited powers to enter and very real difficulty obtaining admissible evidence not least because of worker unwillingness to complain (or, when they do, the complaint is more likely to be anonymous and, thus, of limited evidential value). Given these difficulties, it is not surprising that the most intervention by way of enforcement has been in more visible forms of labour abuse such as that seen in car washes, agriculture and construction.
4. Non-paymentof the minimum wage falls within the remit of HMRC although it appears to be the policy of the unit to pursue offenders by arbitration and civil action aimed at obtaining reparation for the victim, with prosecution being used only in the most serious

1. In August 2020, the first report on visits by Operation Tacit to factories in Leicester found no issues of compliance and 'good evidence' by the businesses in taking proactive steps to protect workers from COVID 19.
   It is important to underline, however, that such visits were reliant on permission to enter the premises being granted by the manager.
2. See August 5 inews articlehttps://inews.co.uk/news/leicester-sweatshop-scandal-one-year-on-exploitation-abuse-prosecutions-1134805. "The GLAA has visited more than 250 factories since July 2020, HMRC has been to more than 100 and between mid-Mayand mid-Julythis year the HSE carried out 94 inspections and 25 complaint follow-upvisits. HMRC says that of 140 cases it opened between July 2020 and January 2021 into textile businesses not paying the minimum wage, more than 110 were based in Leicester. More than 30 VAT cases are also under way."

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cases. Such prosecutions as there are take a considerable time (and corresponding effort) to move through the system. Further, there is the challenge of lack of investigatory capacity and capability to satisfy the criminal standard of proof. There is little reward for a whistle- blower and reparation offers insufficient reward contrasted to the risk of social exclusion in a close knit community which exhibits strong cohesion. Thus, the risk of detection and prosecution of those who prey on a vulnerable workforce (which is the real deterrent) is low.

1. As I explained in my previous Annex, the legislation in this area requires review with powers of entry, search, seizure and arrest made available to an agency that encompasses the GLAA (to include issues of modern slavery), the HMRC Minimum Wage Unit and the Employment Agency Standards regime. It will not be sufficient merely to join the present organisations together: there will have to be a new operating model with clear objectives and an articulation of the capabilities which it is required to deliver. That will lead to an exercise in strategic capacity planning. Conscious of the very real fiscal challenges facing the country, it is important to recognise that it will need appropriate funding and enforcement capability, seeking to gain the confidence of vulnerable workers.
   Unless sufficient steps are taken, there is a risk that the 'Made in Britain' brand will be damaged by headlines of unethical working practices in British industries (not limited to the textile industry). I doubt that the present funding of these organisations is anything like sufficient to tackle this real problem.
2. In that regard, concerns should be noted in relation to the accuracy, completeness and policing of the data held on companies registered in the UK, predominantly through Companies House. As I have previously commented, there does not appear to be significant monitoring of disqualified directors and phoenix companies which have been found to proliferate in Leicester. I accept that challenge of changing the processes of and policing by Companies House within the present fiscal climate: a more appropriate procedure may be found within the Legal Entity Identifier global initiative which is designed to provide verified data to companies and thereby improve the exercise of due diligence. Amongst other validations, companies would fund the forensic investigation to identify owners of companies and others with significant control through local LEI service units. To assist that process, it would not be difficult to legislate to require all registered companies in high risk industries identified by the GLAA strategic risk assessment to be members of the LEI scheme, thereby speeding up on-boarding processes and, over time, improve the data held by Companies House.
3. Quite apart from this change of approach, there are challenges both for boohoo and for the government. For boohoo, the spotlight on working practices in its supply chain has not only led to a substantial decrease in the number of businesses now authorised but it has encouraged several new and enthusiastic leaders to take up the reins and implement systems such as facial recognition or other biometric clocking on and off procedures, proper record keeping, payslips and contracts. This is to be applauded and encouraged not least because suppliers help themselves by improving their processes, their operations and the service they can provide buyers.
4. The first challenge will be to maintain oversight of those that are in the supply chain and ensure that bad practices do not re-emerge. The second challenge concerns zero hours contracts which are not illegal but pose significant challenges. Those that work more than the permitted hours to comply with universal credit are removed from benefit; if that work then does not materialise, there is a period before access to universal credit becomes

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possible and an increased reliance on food banks has been evident for those in that situation. This issue is being addressed by training within the boohoo buyers so that they understand and appreciate the significance and importance of maintaining a steady order book where that is possible.

1. The third challenge for boohoo concerns those businesses that are in the supply chain. If they sell to retailers other than boohoo, requests for audits from each of their customers creates frustration, unnecessary and duplicated bureaucracy and real expense not least because the audits are uncoordinated. To try to deal with this problem, boohoo is joining the Fast Forward programme run by a not-for-profit NGO which supports businesses and conducts social audits. Retailers and suppliers who join the scheme (paying a fee to do so) gain access to training and audits which are then available to all members. This offers a voluntary regulatory hub to reduce the cost of proving compliance by removing duplication. Further, as a consequence of the oversight introduced following the Review, boohoo have developed investigative interventions which could be made available to Fast Forward (and, in consequence, all its customers) thereby enhancing its penetration, allowing it to develop and better respond to variants of labour abuse. By passing this learning to Fast Forward, boohoo will be enhancing oversight of the industry generally and improving the efficiency and efficacy of audit for suppliers who will only have to submit to one audit rather than one for each of their customers.
2. Turning to the challenges for government, quite apart from the difficulties at Companies House, the spotlight exercised by boohoo has led to significant permissions for and acceptance of unannounced audit visits, along with the completion by persons with significant control of onboarding questionnaires and interviews. This gave far greater entry and insight capability than afforded to enforcement agencies and was permitted because suppliers wished to maintain their relationship with boohoo. Those businesses that have been excluded from the supply chain, however, have now moved back into the shadows with many still operating albeit with diferent retailers. This presents a challenge for the regulators and is, at least, one of the reasons for the necessary increased powers referred to above.
3. There is also the challenge of responding to the uneven work flow. Although boohoo can help to even out its buying practices, many of these businesses work for other retailers and I recognise that there it is not possible to guarantee orders to ensure that every supplier has sufficient work to keep all of its workforce busy all the time thereby allowing the supplier to abandon the practice of zero hours contracts. The difficulty which has to be addressed, therefore, is the delay in obtaining universal credit for those who are eligible for support so that earnings can be evened out.
4. This brings me to the very real challenge of empowering the workforce, enabling them to raise concerns confident in the knowledge that they will be heard and helped. For a non- English speaker, earning little, with low (or non-existent) job security, the requirement to retain employment may well be a necessary choice - if choice it is - however bad the treatment that has been received. At risk workers (particularly those drawn from South Asian communities) may well be recent entrants to the UK, living within strong cultural rules and boundaries which could include honouring previous assistance offered on arrival as a debt, leading to an unwritten code of silence; there will also be concerns surrounding immigration status and right to work. The needs of these workers are obvious: English language, education in rights and privileges, access to technology (with language often a barrier undermining understanding of rights and expectations at work). It is obviously

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critical that those who are prepared to come forward to complain or expose abuse should have confidence in the economic protections offered both in relation to employment but also remediation.

13. To that end, as explained on the GLAA website, some of Britain's biggest fashion retailers have joined forces with enforcement bodies through the Apparel and General Merchandise Public and Private Protocol (AGM PPP) which committed signatories to work together to raise awareness to prevent worker exploitation, protect vulnerable and exploited workers and disrupt exploitative practices and help bring criminals to justice. The website goes on to explain:

"In October 2020, recognising the need to act together, particularly to address unethical practices in UK fast fashion, a wider group of stakeholders came together to work collaboratively within the AGM PPP structure. While there have been initiatives taken by a number of stakeholders, there has not to date been a coordinated approach that brings together the industry, from manufacturers to retail, workers and those that represent them, government both national and local, with others such as community groups and associations.

The labour market enforcement bodies make no comment as to the current state of participating organisations employment and/or supply chain practices. Being a signatory to the protocol does not prevent enforcement action being taken should exploitative behaviour subsequently come to light.

The AGM PPP Mission is - We will work together to improve employment and working conditions and eradicate slavery and exploitation in the Apparel and General Merchandise supply chain in the UK by:

• Raising awareness to prevent the exploitation of workers
• Protecting vulnerable and exploited workers
• Disrupting exploitative practices and bringing criminals to justice
• Protecting the rights of all workers and promoting decent work, ensuring the inclusion of worker and community voice

The AGM PPP Group Objectives

• Develop an integrated approach to tackle the underlying problems and promote good practice
• Enhance co-operation and collaboration between stakeholders
• Identify and work collaboratively on jointly agreed policy and strategic workstreams
• Develop a 'Protocol Accord' to update and replace the current Protocol. The 'Protocol Accord' will be an enforceable agreement with accountable commitments signed by stakeholders committing to our joint mission."

14. Its intentions are to create effective partnerships to develop strategies to deliver the objectives and ambitions and it comprises the statutory agencies, local authorities, NGO charities pursuing change and many retailers. The efforts of the co-chairs are to be applauded and supported. Unfortunately, the environment in which it operates has become somewhat confrontational with NGOs demanding specific and specified actions from retailers with threats of exposure and adverse publicity. This approach and the competitive nature of some of the attendees has meant that the AGM PPP is hampered in its ambition of being an effective engine for change. Thus, retailers are by the nature of their business competitive and cautious of sharing data with competitors; charities compete for funding with each having its own agenda; at this stage, unions without presence in the Leicester garment industry may well have difficulty obtaining the trust of a non-English speaking workforce whose knowledge of rights is low. On the other hand, strong local community spirit is often based around community centres that have supported the community in

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difficult times. These centres are willing to be recruited and, if supported, will be invaluable in delivering services to garment workers; once established, the climate for the involvement of unions will be much improved.

1. It is necessary to draw these strands together. First, it appears that there are too many in positions of control in the garment manufacturing industry in Leicester who will take advantage of vulnerable workers. It is undeniable that boohoo has removed many from its supply chain and has put in place mechanisms to monitor those who remain and who may seek to hide labour abuse; this has been demonstrated and the list published in March 2021 has already been modified as labour abuses have subsequently been exposed whether through audit, whistle-blowing activity or otherwise. The building of the factory at Thurmaston Lane (which itself will create secure employment in the area) and the training and development of workers at their places of work (outlined in the report) will undoubtedly help but constant vigilance will be necessary to ensure that there is no slippage in the oversight regime.
2. What is critical, however, is that no supplier should believe that, over time, the spotlight will move and there will not be the same focus on labour abuse: that can be achieved by effective deterrence. That is not a criticism of those presently involved but, rather, an observation that the legislation is too diffuse in its involvement of many different bodies each with its own area of responsibility. There is an absence of a legislative mandate for effective investigation: this should include the creation of a single entity across operating the various bodies concerned with law enforcement in this space with sufficient resource to pursue labour abuses whether in relation to minimum pay, VAT, national insurance, health and safety and other rights which, taken together, may mean that a case can be advanced of modern slavery. Sufficient resource will similarly be essential so that there is a significant increase in the likelihood of abuses being caught and prosecuted.
3. Second, the priority must be to focus on the workers. They are used to people imposing things on them and it is therefore essential that interventions use trusted networks that already exist. Key, therefore, are outreach workers, based within the relevant established community centres, supported with funding provided by industry charitable trusts (such as has been created by boohoo and is outlined in my Report), able to speak the necessary languages and capable of accessing local authority sites and immigration assistance in a safe environment. Interventions should include practical English lessons, support to secure immigration status (with help with the necessary paperwork) and instruction on individual rights. There would have to be protection for those that stepped forward to expose abuse in the same way that there are protections for the victims of crime. I have no doubt that, with help, community centres can deliver while, at the same time, preserving the dignity and honour of those involved.
4. Finally, despite valiant efforts, I am concerned that, in its current form, AGM PPP will struggle to find a collective voice due to the nature of the relationships between those involved which can create mistrust and a defensive approach. Having said that, I am sure that many actors in the garment industry have a very real desire to make effective change and to develop compliance monitoring along with investigation to enable, ensure and sustain it. It is not for me to dictate a solution, but I believe that a better approach will require a shift away from the current emphasis within partnerships of enforcing compliance through challenge and threat and a move towards voluntary compliance through sharing ideas and developing strategies aimed at achieving the common purpose. There should be an independent body that manages a robust audit and due diligence programme (with

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