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Insights

22 July 2020

Labour compliance without tears: Modern slavery, Boohoo and the construction industry

Introduction

If the summer of 2020 is remembered for anything other than lockdown, social distancing and the search for a vaccine, it may be for the anti-racism protests around the world, triggered by the controversial death of George Floyd in police custody.  This provoked angry protests and the tearing down of statues of slave traders from previous centuries. These scenes were reminders of how the evils of the historical slave trade are remembered (particularly among BAME communities) and continue to provoke strong revulsion today. 

Although slavery was abolished and outlawed by the UK in 1833, the phenomena of slavery and human trafficking have continued, in a clandestine form, both here and abroad. It is estimated that there are around 48 million people globally living in conditions of slavery today, with up to 13,000 in the UK. The Modern Slavery Act 2015 (“MSA”) has been enacted to help address the problem. 

The focus on forced labour was intensified further this summer when a Sunday Times investigative report revealed modern slavery in the supply chain of Boohoo plc, a listed UK company. The scandal is discussed below. Whilst it would be easy for those in construction trade to dismiss the relevance of the Boohoo saga to their own business, I explain below why that attitude could prove a costly mistake. I also explain how the law has changed, what this means for construction businesses and the steps they can take to protect themselves from this pervasive problem.     

What is the Boohoo scandal?

Boohoo is an online fashion retailer, which largely targets the 16-30 female demographic. It owns popular lines such as PrettyLittleThing, Karen Millen and Nasty Gal. The Sunday Times’ undercover investigation revealed a garment supplier within the Boohoo supply chain, Jaswal Fashions, was paying its factories workers £3,50 per hour, considerably less than the UK minimum wage of £8.42 (for workers over 25). Jaswal’s Leicester based workforce had also been required to work throughout the COVID-19 lockdown period without social distancing measures.    

The impact on Boohoo’s business was immediate and adverse. A number of electronic platforms – notably Amazon - announced that they would cease selling Boohoo’s goods. Boohoo’s share price fell by around 23% on the day of the announcement. 

Boohoo responded, saying it was shocked and appalled by the reports of modern slavery in its supply chain. It emphasised that Jaswal was a sub-supplier rather than a direct supplier to its business. Nevertheless, it ceased all business with the associated company and announced its intention to conduct an investigation of its supply chain, to be led by Alison Levitt QC. Ms Levitt’s terms of reference will be announced at the end of July 2020.

Why does Boohoo matter to the construction industry?

Whilst construction and fashion are worlds apart, they share certain common features making them prone to modern slavery and human trafficking. These include the labour intensive nature of the work, the complexity of supply chains and a large number of foreign workers involved in output, who have either migrated to the UK or supply goods and services from overseas. In construction, the reliance on migrant workers is accentuated by a shortage of labour generally (both skilled and unskilled) and a need for workforce flexibility.

The construction sector ranks sixth in terms of UK industries most affected by slavery. Press reports in recent years have highlighted its vulnerability. For example, a BBC undercover investigation revealed in December 2019 the ease with which an unscrupulous contractor could hire an Eastern European construction crew available for work for seven consecutive days without a break for as little as £4.50 per hour.   

Internationally, there have been serious documented incidences of forced labour in infrastructure projects, including the Qatar 2022 World Cup. Qatari project leaders are reported to have imported labourers from poorer Asian countries such as Nepal and Indonesia. Amnesty International alleges that workers were in some cases tempted to Qatar with false promises of office jobs, only to find they had fallen prey to “bait and switch” and been forced to work on construction sites. They could not leave easily, as employers would remove their passports and departing the territory would require an exit visa. Concerns were also raised of workers being forced to operate in extremely hot conditions without adequate protection. Several deaths on site were reported.   

Changes to UK Law and the fight against slavery

The MSA went some way to strengthen the law against modern slavery within Britain. The Act consolidated slavery related offences in a single statute and increased penalties for infringements. It was accompanied by the creation of the office of Anti-Slavery Commissioner which in itself has raised the profile of slavery and trafficking. 

The Act reflected a recognition that combating slavery was not the role of government exclusively. For that reason, Section 54 of the MSA introduced an obligation for businesses above a certain size (£36 million annual turnover) to publish an annual statement disclosing the steps they took to ensure there was no slavery or trafficking present within their organisation or supply chain.   

The MSA has been backed up with enforcement measures. Prosecutions have been brought against gang-masters accused of controlling forced labourers. In 2018, two successful prosecutions were brought after forced labourers were found to be working on housing construction sites and for a demolition contractors. Raids at addresses where Eastern European site workers have been held by gangmasters have also culminated in convictions for ringleaders in other cases. The Metropolitan Police told Construction News in 2019 that there has been a significant increase in allegations of labour exploitation and modern slavery in the construction industry.

What can construction businesses do to protect against the risk?

Construction businesses need to steer clear from allegations of forced labour or trafficking for many obvious reasons. First and foremost, the business ought to care about how it is perceived by its customers and the public at large. The effect of a prosecution could be devastating. Regulation 57 of the Public Contracts Regulations 2015 also entitles public bodies to debar companies from public contract tenders if they have infringed the MSA (e.g. through failing to disclose as required under S 54 MSA). 

Having an effective compliance program can certainly help minimise the risk and preserve the reputation of your business. The following are key steps that can form part of such a program:

  • Conduct a thorough risk assessment: a good risk assessment will help you identify those areas of your business which could be weak spots and to take appropriate steps to avoid exposure. Projects overseas, for example, may be a risk if these are being carried out in jurisdictions with high incidences of slavery.
  • Get to know your supply chain: ask sub-contractors about their hiring practices and also their own standards and auditing practices. In the case of Boohoo, the problem arose from a supplier of a supplier.  Similarly complex supply chains exist in construction projects but this does not relieve businesses from their responsibility to understand whether they are indirectly supporting or facilitating slavery. 
  • Ask labour agencies relevant questions: labour agencies are known to be a source of risk. Rogue intermediaries can entrap vulnerable workers by forcing them to take debt connected to placements (e.g. travel or visa costs) and removing their travel documents. A responsible business must ask agents about their labour sourcing practices and the terms of engagement with workers. 
  • Exercise on-site vigilance: for example, consider keeping a record of workers on site. Ensure you are aware of contractors. Ensure posters are available in several languages warning staff about the dangers of slavery and help to anyone who is a victim. Random spot checks of labourers on-site are also a useful means of detecting potential problems. 
  • Train your staff: asthe “eyes and ears” of the organisation, it is imperative your people are trained to spot red flags which may indicate workers are the victims of slavery. That could include, for example, groups of workers who appear dishevelled, unable to speak English and/or reluctant to engage with outsiders.    
  • Internal governance: have in place clear policy documents, underlining the support of the highest levels of management for anti-slavery complianceStaff must be aware of a “zero tolerance” culture in order to ensure they do not unwittingly engage contractors or source labourers who are a risk.  Appropriate reporting structures should be in place (possibly a whistle-blower hotline) to ensure that staff are able to report. They should also be reassured that they will not face sanctions for making a report in good faith which ultimately proves unfounded. 
  • Negotiate appropriate contractual provisions: an effective compliance strategy will require the buy in from suppliers. Include clauses within your agreements with them to compel them to co-operate with your compliance efforts (by providing responses to information requests, for example).
  • Have a protocol to assist investigating authorities: would you know what to do if the police attended one of your sites to pursue reports of slave labour?  Procedures should be in place to ensure the company’s rights are protected while co-operating with an investigation. Given the potential reputational damage, the organisation is likely to have some shared interest in getting to the bottom of the origins of the report.
  • Satisfy disclosure requirements.  These include ensuring that the business publishes an annual slavery and trafficking statement where required to do so under the MSA. It should also be prepared to fulfil reasonable information requests from customers carrying out their own supplier due diligence measures. 

This list provides a useful roadmap of an effective slavery compliance strategy.  Successful implementation of many of these steps will often be assisted by professional advisers. An outsider – particularly one with the requisite expertise – may be better placed to identify vulnerabilities in the practices of a business with regard to its procurement and hiring strategies. Too often, an organisation can become blinded to its own faults. 

Aside from minimising the risk of enforcement action, there are other benefits to an effective compliance program. For example, the company may itself become subject to a slavery audit by one or more of its customers, who will expect it to show clear evidence of a commitment to compliance, appropriate levels of monitoring and ethical labour practices, both within the organisation and its supply chain. Falling short of these expectations could result in the loss of client relationships. On the other hand, clients may be impressed by efforts made to avert the occurrence of forced labour and this could enhance confidence for future collaboration.  

Conclusion

Warren Buffett, CEO of Berkshire Hathaway, once advised his workers: “If you lose money for the firm I will be understanding. If you lose reputation I will be ruthless.” The reputation of any business can take decades to build but be demolished in a day.  A failure to adhere to responsible governance and ethical hiring practices is one rapid and sure-fire method for tarnishing the good-standing of a corporation, perhaps irreparably. 

Construction has a number of features which make it inherently vulnerable. Tight margins, a need for labour flexibility and the shortage of labour (which may soon be exacerbated by a “no deal” Brexit) number amongst them. Unfortunately, in the court of public opinion these provide no defence to a charge of being complicit in modern slavery. The Boohoo experience illustrates how brightly the spotlight will shine on any incidence of modern slavery, wherever it occurs. Construction businesses cannot afford to allow Boohoo’s fate to become their own. They should take proactive steps to ensure that it does not. 


For more information, please do not hesitate to contact Paul Henty or your usual Charles Russell Speechlys contact.

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