Written evidence from Unite Union
1.1 This submission is made by Unite, the largest trade union in the UK with 1.4 million members across the private and public sectors. The union’s members work in a range of industries including across manufacturing and transport sectors, in financial services, print, media, construction, local government, health, education and not for profit organisations. Unite welcomes the opportunity to provide evidence to the Business, Industry and Skills committee on Sports Direct.
1.2 With a turnover of £2.832 billion and profits before tax of £313.4 million Sports Direct has its headquarters and main warehouse in Shirebrook Derbyshire, with a second facility in Wigan. There are approximately 200 permanent workers at this facility and a further 3,000 plus agency workers employed through two employment agencies called The Best Connection and Transline Group.
1.3 Sports Direct reportedly pays an estimated £50 million per year to The Best Connection and Transline to supply and manage warehouse staff who are typically paid just above the minimum wage and are predominantly recruited from Eastern Europe.
1.4 Unite secured statutory recognition from the Central Arbitration Committee for directly employed warehouse workers in a Declaration of Recognition dated 10th September 2008. Despite this only limited negotiations have taken place with no meaningful negotiations despite requests for meetings since 2012 in response to claims submitted on behalf of the union to the company. As a direct response, we believe, to Unite securing statutory recognition, agency staff now make up the predominant workforce in the warehouse and while many are members of Unite and are represented under their statutory rights on an individual basis, agency workers are not covered by collective recognition.
1.5 Despite requests for positive engagement with the union, a refusal by the agencies concerned, The Best Connection and Transline, to engage with Unite at the Shirebrook site means warehouse workers have no collective voice or mechanism to voice concerns over health and safety and working conditions without serious fear of repercussions by the employer.
1.6 This combined with an unwillingness by Sports Direct to address concerns when raised by Unite has led to a proliferation of ‘Victorian’ work practices in the warehouse, with workers telling Unite of being in constant fear of losing their job and likening conditions to a ‘gulag’ and a ‘labour camp’.
1.7 Unite has been working hard to support these workers and encourage them to organise collectively for better terms and conditions as part of an ongoing campaign to improve conditions at Shirebrook.
1.8 As a consequence these working practices have increasingly come under the spotlight resulting in mounting investor and public concern. Mike Ashley’s Sports Direct has achieved a rare thing in uniting the Institute of Directors, Unite and major investors like Crispin Odey in their condemnation of the retailer’s employment practices and corporate governance.
1.9 Since the company’s AGM in September the retailer has fallen out of the FTSE 100 and its share price halved. As of 31st May 2016 the share price was down 46 per cent in six months trading at £3.73.
1.10 Criminal proceedings have also started against Sports Direct’s chief executive David Forsey over the collapse of the firm’s fashion retailer USC. Forty-nine year old Forsey is accused of failing to notify authorities of plans to lay off warehouse staff in Scotland, around 200 of whom were given just 15 minutes notice by USC’s administrator that they were losing jobs. The charges relate to an offence contrary to section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992.
1.11 Brought by the UK Insolvency Service, the charges are part of an investigation into the conduct of the retailer’s directors. Mr Forsey unsuccessfully attempted to get the case thrown out which is due to be heard later in the year.
1.12 Unite believes that unless Sports Direct takes urgent steps to address serious malpractice in the workplace its reputation will be tarnished further and a reputation as the ‘poster boy’ for ‘bad British business’ will become entrenched.
1.13 A summary of working practices and concerns are detailed below.
2.1 Sports Direct’s business model is predominately built on cheap, disposable labour.
2.2 Across its stores zero hours contracts are the norm. In the parliament before the 2015 general election the Scottish Affairs select committee accused Sports Direct of behaving like a “backstreet outfit.”
2.3 Appearing in front of the committee Keith Hellawell the chairman of Sports Direct, admitted that about 79 per cent of workers in its 420 stores are on zero hours contracts. Unite believes this is both exploitative and unnecessary, the companys stores open fixed hours, seven days per week, fifty two week a year. The company monitors footfall peaks and could introduce a range of guaranteed hour’s options (both part-time and full-time) to staff with ease.
2.4 At Shirebrook, the majority of Sports Direct’s agency workers are employed on what is called a ‘336’ contract, meaning that a worker is only guaranteed 336 hours work for a 12 month period. In practice this leads to workers typically engaged on 40 hours work a week, losing their contractual rights to on-going weekly hours and associated payments nine weeks into the year. This effectively, leaves workers on site operating on zero hours contracts for the remainder of the year. As with zero hour contracts in-store, this practice is both exploitative and unwarranted. The employer clearly has the option of both direct employment by Sports Direct and a range of part-time and full-time contracts easily constructed. Copies of The Best Connection terms of engagement and Transline employment contract can be found in Appendix A.
2.5 Some workers however, are employed by these agencies on contradictory contracts (Appendix A) that on the one hand define the worker as being self-employed and on the other as temporary. Many workers also report to Unite that they have never been given a contract.
2.6 Termed ‘temporary’ these workers are anything but. Many have been employed for more than a year, with some having been on an agency contract for over six years under the continuous promise of being made ‘permanent’.
2.7 Workers are paid weekly and typically told what days and the number of hours they are working a week in advance. Rotas are often changed at short notice with workers telling Unite they are unable to plan family and social life because of shift changes just one or two days in advance.
2.8 Most workers are expected to work at least part of the weekend. The embargo of holidays and parental leave during half-term and Easter holidays in addition to final weeks of the summer holidays mean families have very little time together.
2.9 At the start of the year Mike Ashley announced a pay rise for all staff employed directly by Sports Direct or through The Best Connection and Transline Group.
2.10 The move followed a barrage of criticism and calls for HM Revenue and Customs to investigate after undercover Guardian reporters and Unite revealed they were paid £6.50 per hour on average for their shifts at the Shirebrook warehouse after compulsory searches were taken into account. Additionally, workers have been deducted 15 minutes pay for clocking in just one minute late on arrival or on return from a break.
2.11 The average figure of £6.50 meant workers were being paid 20 pence below the National Minimum Wage. This unlawful deduction was rectified by adding an additional 20 pence per hour to the hourly rate paid although the issue of back payments owed to workers remains unresolved.
2.12 The pay rise meant staff aged over 21 saw their pay increase from the national minimum wage of £6.70 per hour to £6.90, while those aged between 18 and 20 received an increase from £5.30 to £5.50 per hour. The 20 pence ‘premium’ also took effect for over 25s when the national living wage rate of £7.20 was introduced in April. Workers receive no premium payments for either overtime or weekend working.
2.13 However holiday pay for workers employed by Sports Direct via The Best Connection and Transline at Shirebrook is at a lower rate than full pay as detailed in the payslips in Appendix B. Unite recognises that this may be correct if holiday pay is being calculated as an average over a period time which includes a lower rate of pay, but is yet to receive assurances from The Best Connection or Transline.
2.14 Additionally workers employed via The Best Connection and Transline are effectively ‘taxed’ if they do not have a bank account for their wages to be paid into. The Best Connection and Transline charge workers a £10 one off fee for a pre-paid debit card onto which their wages are paid. Workers are then charged a monthly management fee of £10 per month (we are unsure who benefits financially from this ‘fee’) and additionally 75 pence for cash withdrawals by the card issuer. Charges also include 10 pence for a text notifying the holder of any transactions and a paper statement cost £1.50. See Appendix C for a Best Connection worker’s statement of charges and a schedule of charges for Transline workers.
2.15 Unite estimates that several hundred workers could be using the cards.
2.16 Workers employed by The Best Connection also have a fee for ‘Insurance Services’ deducted from their wages as seen in the payslips in Appendix B. The figure and frequency of the deductions vary ranging from 45 pence to £2.45 a week. Unite has spoken to numerous workers who deny giving consent to such deductions or being given a proper explanation of what the deduction covers. Workers tell Unite that Transline operates a similar scheme.
2.17 Unite has raised this with The Best Connection, but is yet to receive an adequate explanation as to what the deductions cover and views them as potentially illegal.
3.1 In response to mounting anger over ‘Victorian’ work practices, Mike Ashley announced on the 18 December 2015 that he would be personally overseeing a review of working conditions experienced by agency workers.
3.2 Unite contacted Mike Ashley requesting input into his review with the offer to share our concerns and evidence of poor working practices. Despite repeated written representations Unite is yet to receive a response.
3.3 Unite therefore has no confidence in Mike Ashley’s review and seriously questions the sincerity of his claim for Sports Direct to be an ‘exemplar’ employer, second only to John Lewis on high street.
3.4 Behind the gloss of recent PR stunts, Unite sees little evidence of working conditions improving. We have direct testimony from workers that up to 2000 workers were removed from the warehouse during the recent media visit to site on 21st March 2016 and aside from a general clean-up operation, a range of remedial repairs were made across the location including the placing of doors on toilets.
3.5 A ‘six strikes and you are out’ rule is still in operation and a culture of fear is still pervasive.
3.6 Under this rule workers can receive a strike for a range or ‘offences’, including taking too long in the toilet, talking or being off sick. Appendix D details the six strikes table.
3.7 The fear of losing your job under the six strikes rule has led to workers sending their children to school sick because they would receive a strike if they stayed at home to look after them.
3.8 This is borne out through conversations between Unite and workers, anonymous testimony detailed in Appendix E and observations by local school teachers see Appendix F for Guardian article.
3.9 Unite believes a culture of presentism is rife among the workforce with workers attending work when they are ill for fear of getting a strike and being fired.
3.10 Despite Mike Ashley’s denials, a name and shame culture is still in existence in the warehouse with workers shouted out over a tannoy for talking or not working hard enough.
3.11 Unite is also aware that ‘picking rates’ in the warehouse have increased since Mike Ashley announced the ‘pay rise’ and review into working practices. We have no evidence of progress being made on any review and in any event, no discussions have been held with Unite as the recognised union for directly employed warehouse staff, or the company established ‘Staff Forum’ which we understand has only met once since its conception.
3.12 Searches at the end of a shift on exiting the facility are also still in place, along with a proscribed list of 820 branded items of clothing which workers aren’t allowed to wear.
4.1 Unite has major concerns over health and safety at Shirebrook and would urge the Health and Safety Executive to support the local authority in investigating as a matter of urgency. Workers have raised concerns about crowded isles, defective warehouse equipment and products stacked dangerously high.
4.2 The photographs in Appendix G show the conditions workers are expected to work in.
4.3 A total of 110 ambulances or paramedic cars were dispatched to the Shirebrook warehouse’s postcode between 1 January 2013 and 19 April 2016 with 50 cases classified as ‘life-threatening’, including chest pain, breathing problems, convulsions, fitting and strokes.
4.4 The figures which came from a Freedom of Information request made by Unite to East Midlands Ambulance Service (Appendix H) also revealed the service received five calls about women suffering pregnancy difficulties, including one woman who gave birth in toilets at the site.
4.5 According to a Freedom of Information (Appendix I) request made by Unite to Bolsover District Council, there were 115 incidents from 1 January 2010 to 19 April 2016. These included an amputation of a finger down to the first knuckle, a fractured neck, a crushed hand numerous hand, wrist, back and head injuries. Twelve of these incidents were listed as ‘major’ injuries with 79 of injuries leading to absences from work of over seven days.
4.6 There were 80 accidents reported during the same period covering the Freedom of Information for ambulance call outs between 1 January 2013 and 19 April 2016.
5.1 The Best Connection group describes itself as ‘one of the UK’s most successful independent job creating companies who provide flexible workplace solutions to the industrial, driving and warehouse and distribution markets throughout its national network of branches.’
5.2 With its registered office in Bromsgrove, latest accounts for the company show a turnover of £272,583,423 for 2014 and a pre-tax profit of £13,798,488. Profits after tax were £11,377,739.
5.3 According to the latest accounts, the company acts as an ‘agent’ for Bestex Limited ‘which provided expenses verification services to temporary workers’.
5.4 The latest accounts for Bestex list The Best Connection Directors, Andrew Sweeney, Neil Yorke, Martin Recci and as shareholders of Bestex along with a fourth individual I S Yorke.
5.5 The accounts for Bestex show that income more than doubled over a three year period from £1,430,040 in 2013 to £3,679,043 in 2015.
5.6 Unite is unclear as to what services Bestex provides, but in addition to deductions from workers for ‘insurance’ and charges for payment cards, is aware of a travel and subsistence salary sacrifice scheme that was operated by The Best Connection and Transline.
5.7 The salary sacrifice scheme effectively meant that workers were being paid part through wages and part through expenses and enabled the agencies to minimise their and the employee’s national insurance contributions. Unite understands that the loophole was closed by HMRC on 6 April 2016.
6.1 Transline is registered with Companies House under the name of Qualitycourse Limited.
6.2 Registered in Halifax, latest accounts for the company show a turnover of £178,571,000 for 2014 with an operating profit of £1,082,000. Profit after tax amounted to £98,000.
6.3 According to the company’s latest accounts, the firm holds an investment in ‘film partnerships’. Following a HMRC review of tax avoidance schemes, the Transline Group has been issued with advance payment notices totalling £370,000.
6.4 In 2014 the Gangmasters’ Licensing Authority removed Tranline’s license to supply labour the food industry, where it traded as Transline Resources Group following an investigation that found its directors ‘not fit and proper’ persons to hold a GLA license.
6.5 Following the GLA investigation Transline attempted to circumvent the ban by reincarnating the business and applying for a license as Transline Europe. The GLA were not fooled and refused its licence application. A timeline of events is detailed in Appendix J following a Freedom of Information request.
6.6 In addition to Sports Direct, Transline supplies labour to a number of other national corporations including Argos warehouses. Unite has spoken to workers employed by Argos via Transline and found similar evidence of poor treatment and the travel and subsistence salary sacrifice scheme in operation.
6.7 Unite has also received evidence of Argos workers employed by Transline being paid sick pay by Sports Direct. When the worker raised the issue with Transline they were told that was how things were done. While it’s possible it may be an administrative error, Unite is investigating further.
7.1 It is clear from the conditions at Sports Direct in Shirebrook that the remit of the Gangmasters Licencing Authority should be extended across all sectors of the economy and a more vigorous licencing, regulatory and enforcement regime put in place beyond that currently restricted to the Food and Agricultural sectors.
7.2 Unite finds it incomprehensible that an employment agency deemed unfit and barred from operating in one sector of the economy can be allowed to carry on employing the same employment practices in another part of the economy unchecked.
7.3 The use of agency workers is strictly governed in many EU member states and Unite believes that similar regulation and restrictions on the use should be introduced in the UK. In Belgium agency workers can only be utilised to cover exceptional peaks of work or work of an unusual nature while in France, the Netherlands and Italy the length of any agency assignment is limited to 18 and 36 months respectively before workers are entitled to a permanent contract.
7.4 Unite believes the UK should follow the lead of legislators in New Zealand and bring forward a package of measures to regulate precarious and insecure work.
7.5 Zero and short hours contracts, short term contracts and mutations of self-employment are increasingly becoming a feature in the UK economy. Unite believes that if left to their own devices, major companies like Sports Direct and employment agencies such as The Best Connection and Transline will continue to stretch the law and engage in what we believe to be wholly exploitative work practices.
7.6 On the 1 April 2016 the New Zealand parliament unanimously passed legislation ended the use of zero hours contracts. The legislation means that employees must be given guaranteed hours which are specified and written in a contract.
7.7 If an employer wants workers to be available in addition to the guaranteed hours then these must be specified in number, with the reason as to why they cannot be part of the regular guaranteed hours. An employer has to give ‘reasonable compensation’ for availability on the part of the employee – whether required to work or not.
7.8 Trade unions since their formation have played a central role in enforcing health and safety and workplace regulations. It is a fact that workplaces with an active trade union working positively with an employer are healthier, more productive and safer.
7.9 However trade unions cannot fulfil this vital role if they don’t have a ‘right to access’ workers. Sports Direct’s Shirebrook site is a prime example of a work environment with hostile employers where joining a trade union is actively discouraged and onsite access to agency workers denied.
7.10 Unite would recommend that legislation be amended to provide trade unions with a statutory right to access to workers. A right to physically visit a workplace and gain direct private access to the employees. This right should extend to the right to speak to all workers either individually or collectively and for this to be facilitated by management on site.
7.11 In New Zealand where the right to access has been introduced trade unions are required to give notice when seeking to access a site but this right is absolute. The right to access workers at the place of work has precedence over trespass and other common law rights that are commonly used to decline access to an employer’s premises.
7.12 Finally Unite would urge Mike Ashley to be true to his promise of making Sports Direct an exemplar employer. Our repeated offer to work with Sports Direct management to end ‘Victorian’ work practices stands and we stand ready to work with him and his team to repair the retailer’s tarnished reputation.
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