Fast fashion retailer Boohoo is facing a £100 million lawsuit from investors after modern slavery allegations wiped more than £1 billion from its company value.
As reported by the Telegraph, the retailer is being sued by shareholders who faced losses after the allegations forced labour in Leicester factories in July 2020.
Barrister Alison Levitt KC verified the claims, finding that “allegations about poor working conditions and low rates of pay in many Leicester factories are not merely well-founded but substantially true.”
“Boohoo’s monitoring of its Leicester supply chain was inadequate, and this was attributable to weak corporate governance,” she added.
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“Senior Boohoo directors knew for a fact that there were very serious issues about the treatment of factory workers in Leicester and while it put in place a programme intended to remedy this, it did not move quickly enough.”
While no claim has been filed against the retailer, class action against Boohoo could end up in High Court if settlement is not reached.
The retailer is preparing for legal backlash and has instructed Herbert Smith Freehills lawyers to keep off litigation, which involves around 100 institutional investors.
A spokesman for Boohoo told the Telegraph: “A formal claim relating to this matter has not been made. If any proceedings are issued in relation to this matter, they will be robustly defended.”
Is the Modern Slavery Act doing enough?
Stevens and Bolton partner Nicola Broadhurst said the threat of a class action from Boohoo stakeholders is “not surprising” and highlights “the inadequacy of the current Modern Slavery Act to ensure appropriate transparency and accountability on the part of large organisations to take full responsibility to reduce the risk of modern slavery in their supply chains.” and
“There is an onus on these large organisations to report annually on what they are doing to combat these risks,” she added.
“This annual statement should be signed off at Board level, with a view to ensuring buy in for ethical activity from Boards and drive good behaviour from the top down,” Broadhurst advices.
“However, the Act still lacks the teeth to effectively sanction qualifying organisations who fail to report on what they’re doing to combat against modern slavery,” Broadhurst said, adding it is acceptable for companies to report it even when they are taking “no steps at all to combat modern slavery in this regard.”
“It seems many companies are doing little more than paying lip service to a reporting requirement and even fewer actually have a modern slavery strategy in place,” she added.
“With two previous attempts to amend the Modern Slavery Act being scrapped it remains to be seen if the current proposed Modern Slavery Bill will have more success.”
“In any case, it is sorely needed. Reputational risk alone will not change behaviours quickly enough,” Broadhurst concluded.
