Sports Direct’s employment law headaches

People protest against zero hour employment contracts outside a branch of Sports Direct in Hastings.
People protest against zero hour employment contracts outside a branch of Sports Direct in Hastings.

Sports Direct has been received significant press coverage this year. The leisure retailer hit the headlines this summer when reports stated that over 90% of staff work on ‘exploitative’ zero-hours contracts and working conditions in its stores and warehouses are poor.

Most recently though, concerns have been raised that extra time taken for ‘rigorous’ compulsory searches means that workers are paid less than the minimum wage. Undercover reporters found that it was taking fifteen minutes to search staff leaving the warehouse at the end of their shifts. Workers were not paid for this time.

The law on payment of the National Minimum wage is complex. However, where work is hourly-paid, the worker should generally receive the national minimum wage for all time spent actually working (minus any unpaid rest breaks). There is a strong argument that, even though these workers technically ‘downed tools’ at their scheduled finish times, they were required to remain on their employer’s premises for an additional 15 minutes each day and therefore should receive extra pay accordingly.

This alleged shortfall in pay has caused outcry partly because reports suggest that Sports Direct enforce working time very strictly in other ways, to the detriment of workers. For example, allegedly, being just one minute late for work in the morning can result in the loss of 15 minute’s pay. An extremely stringent approach to working time seems inherently unfair unless it ‘cuts both ways’.

As part of the July 2015 Budget the Government announced that it will introduce a ‘National Living Wage’ in April 2016. This is effectively a premium over and above the existing National Minimum Wage for workers aged 25 and over. Whilst this has largely been greeted positively by the business community, many employers will undoubtedly look to ‘tighten up’ working time and to make savings wherever possible. Instances like this, of employees being asked to undertake mandatory activities (such as pre or post shift checks) in their own unpaid time are likely to become increasingly common.

Employment lawyers predict that complaints about pay and arguments about what does and does not constitute working time will explode when the new statutory minimum is introduced. It is important to remember however that, since the introduction of fees in the employment tribunal system, the cost of bringing a claim may mean that pursuing an employer for unpaid wages is prohibitively expensive.

As well as concerns over pay, compulsory searching of staff throws up a raft of other employment law risks. Although it seems that all members of staff are subject to searches, an individual employee or group of employees might bring a claim of discrimination if they felt they were being unfairly targeted or searched more intensively or aggressively than their colleagues. Newspaper accounts suggest that the searches are very intrusive, requiring staff to ‘strip to a single layer’ above the waist and expose the waistband of underwear. Whilst it would be very risky practice for male staff to search female employees, or vice versa, this type of very personal interaction clearly puts an employer at risk of a sexual harassment claim.

Perhaps most importantly, while a business is obviously permitted to protect its interests by guarding against theft, such rigorous searches will certainly have a negative impact on employee morale. Staff who are not trusted are unlikely to be happy and poor employee engagement will inevitably impact on the bottom line.

If reports are accurate, other aspects of working life at Sports Direct warehouses may present legal risk. Public chastisement of staff for underperformance and disciplinary warnings handed out for chatting and lengthy toilet breaks might well combine to create the kind of intimidating and hostile environment that gives rise to successful claims for harassment (when linked to a ‘protected characteristic’ such as sex, race disability or age).

A group of Labour MPs have petitioned HMRC to investigate pay practices and working conditions at Sports Direct, with former business Secretary Chuka Umunna branding the company ‘a bad advert for British business’.

This says a lot about the current employment law landscape. As well as complying with ‘the letter of the law’ businesses are also expected to promote best practice. For example many employers have committed to pay the impending National Living Wage ahead of time, to advertise their credentials as ‘employers of choice’.

Even in tough economic times we find that employers want to know not just what they are legally compelled to do, but what will be viewed as the ‘right’ or socially responsible course of action. In the current climate, commercial advantage is as important as legal compliance. Motivated employees deliver results and discerning customers may well choose the retailer with a reputation for paying properly and treating staff well.

Stuart Jones is head of employment, pensions and immigration and Louise Singh is a  professional support lawyer at Weightmans.