The Memo: Boohoo facing £100m damages claim from investors following revelations about its employment standards

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Boohoo facing £100m damages claim from investors following revelations about its employment standards

Emily Dunham - 24 June 2024

You’ve likely seen documentaries about sweatshops and the poor working conditions associated with the manufacturing of products for fast fashion brands, but you might not have realised just how close to home the issues are. In 2020, a Sunday Times report of labour rights violations at Boohoo’s suppliers’ factories in Leicester exposed them for underpaying workers, with some earning just £3.50 an hour. Clearly, this is significantly below the legal minimum wage and caused outrage. Though the company initially denied the allegations, an independent report conducted by Alison Levitt QC on behalf of Boohoo found that there was substantial truth about the company’s poor employment practices.  

Now, a legal claim is being made on behalf of 49 investors of the company. The claim filed against Boohoo in May alleges that the company made statements to investors that were untrue or misleading. The claimants have also accused Boohoo of failing to disclose or delaying the disclosure of its material information about the issue. If this is found to be the case, the company will have breached the obligations placed upon them by the Financial Services and Markets Act 2000. It's worth noting that the California State Teachers’ Retirement System has joined the group of claimantsand has more than $300bn in investment assets 

The group is reported to be seeking £100m in damages from the retailer, as well as any legal costs involved and interest accrued, which could potentially add millions of pounds to the claim. The group says that those who bought shares before the 2020 report suffered huge losses as a result, which led to a fall in share prices. The value of the company’s shares then dropped further after the conditions were initially exposed, with a BBC panorama report also exposing the factories of Boohoo’s suppliers. 

The claim follows protests from shareholders which forced Boohoo to make a U-turn regarding a decision that saw its top three bosses handed £1m in bonuses despite the company’s reported loss of £160m. Ultimately, the case is set to explore the legal framework of securities law while considering the subsequent environmental, social, and governance (ESG) responsibilities that come with it.