Reports earlier this month, strongly denied by Asos, of difficult working conditions in its contracted out warehousing operations illustrate a number of risks which arise for fashion businesses when it comes to staff and outsourcing issues. These reports come after the public spotlight was shone on Sports Direct.
But for ASOS, the problem, according to chief executive, Nick Beighton, stems from the ASOS’s distribution centre which is operated by XPO Logistics and what may be a campaign by one union to garner support and bring pressure to bear to be recognised. Distribution centres and warehouse operations are an area of particular vulnerability for the fashion industry because:
- As an area of the business with a higher density of employees – unlike individual stores which may have a smaller number of employees in each location – getting union recognition and with it increasing membership, is an easier win for a union;
- Due to the way in which trade union law works, a union can force an employer to recognise it (and so be required to negotiate on aspects of pay and terms) if sufficient numbers of employees at the location or in the particular employee job are in favour of and support the union in question. What is often not understood by the fashion industry is that an employer can be required to recognise a union for as few as 21 employees in a bargaining unit;
- Often these areas of the business have a distinct gender profile and may be predominantly male. As a result we are seeing equal pay cases being brought by staff working in the retail locations seeking equality in their rate of pay with those working in distribution centres/warehouses where the same employing entity or corporate group operates the different locations.
In Asos’s case it contracts out the distribution centre. Whilst that may avoid the equal pay risks, there remains potential responsibility and liability for workers there and as the reports illustrate, reputational damage. This in turn is because:
- Any failure in operating practices and breaches of employment obligations and rights (likely to come under greater scrutiny given our new Prime Minister who has already announced plans to tackle low pay and zero hours contracts) or health and safety (especially if the business owns the premises itself), will result in the business coming under sharp scrutiny.
- Commercially such liabilities can be addressed in the contractual terms, but a business should want to conduct its own audit to ensure compliance and may even want to carry out spot checks.
- Such arrangements will also be a demonstrable commitment to obligations under the Modern Slavery legislation; whilst strictly applicable to large businesses only (with an annual turnover of +£36m), there is evidence to suggest businesses in the fashion sector are early adopters and of organisations voluntarily committing to prevent modern slavery by publishing their Modern Slavery Statement of measure they are taking even though the businesses fall outside the strict legal regime.
- As a minimum in terms of employment related obligations, organisations must comply with or require their contractor (such as their warehouse or distribution centre operators) to ensure they meet working time obligations, holiday pay entitlement in law (28 days including bank holidays), living wage minima (taking particular care with deductions and any wage penalties which are levied), and anti-discrimination measures.
- Working practices around health and safety, security, searches conducted on staff, time keeping, rest breaks and absence management (including time off rights and around sick pay provision) can often be a source of discontent, so need to be handled not just legally but with sensitivity.
It is only by taking these measures that a business can have the confidence demonstrated by the Asos CEO of declaring it has “nothing to hide” and be firm on its position.