Revealed: how Sports Direct effectively pays below minimum wage

Guardian undercover reporters find world where staff are searched daily, harangued via tannoy to hit targets and can be sacked in a ‘six strikes and you’re out’ regime

Sports Direct warehouse, store and distribution centre at Shirebrook, near Mansfield
The Sports Direct warehouse, store and distribution centre at Shirebrook, near Mansfield, England. Workers are kept onsite at the end of each shift to undergo a compulsory search by security staff.
Simon Goodley and Jonathan Ashby
Wednesday 9 December 2015 21.56 GMT Last modified on Thursday 10 December 2015 01.00 GMT
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Temporary workers at Sports Direct, the booming retail chain controlled by the billionaire Mike Ashley, are receiving effective hourly rates of pay below the minimum wage, an investigation by the Guardian can reveal.

Warehouse staff at the group, which is controlled by Britain’s 22nd richest man, are required to go through searches at the end of each shift, for which their time is unpaid, while they also suffer harsh deductions from their wage packets for clocking in for a shift just one minute late.
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The practices contribute to many staff being paid an effective rate of about £6.50 an hour against the statutory rate of £6.70 – potentially saving the FTSE 100 firm millions of pounds a year at the expense of some of the poorest workers in the UK.

The discovery of the low pay being received by Sports Direct workers comes on top of a string of criticisms of the working conditions within the retailer’s warehouse in Shirebrook, Derbyshire, where more than 80% of staff are on zero hours contracts. Workers are also:

Harangued by tannoy for not working fast enough.
Warned they will be sacked if they receive six black marks – or “strikes” (see document below) – over a six-month period for offences including a “period of reported sickness”; “errors”; “excessive/long toilet breaks”; “time wasting”; “excessive chatting”; “horseplay”; and “using a mobile phone in the warehouse”.
Banned from wearing 802 separate clothing brands at work.
Have to go through rigorous searches – down to the last layer of clothing, asked to roll up trouser legs and show top of underwear – which typically takes 15 minutes, because management is so concerned about potential theft.

Daily body searches: workers are banned from wearing 802 brands
Meanwhile:

Local primary schoolteachers have told the Guardian that pupils can remain in school while ill – and return home to empty houses – as parents working at Sports Direct are too frightened to take time off work.
Union officers say the strict culture in the warehouse has resulted in workers being afraid to speak out over low pay and conditions as they fear immediately losing their jobs.
The criticisms of Sports Direct – which have also included questions about whether its pricing policies are misleading, as well as the influence Ashley has on a company whose shares are held by many UK pension funds – come as the public company continues to dominate the UK sports retailing market and its trading performance flourishes.

The retailer is expected to announce more positive results to the City on Thursday – part of a financial success story that is almost entirely credited to the unconventional retailing nous of Ashley, a self-made man whose fortune amounts to £3.5bn, according to the Sunday Times Rich List.

Transline rules for Sports Direct workers.
By placing two undercover reporters inside Sports Direct’s warehouse, as well as interviewing former employees and speaking with workers about their roles while the journalists were employed on the site, the Guardian has established that many workers are in effect receiving less than the minimum wage per hour, over the total time they are required to spend in the warehouse and after financial penalties.

All warehouse workers are kept onsite at the end of each shift in order to undergo a compulsory search by Sports Direct security staff, with the experience of the Guardian reporters suggesting this typically adds another hour and 15 minutes to the working week – which is unpaid.

The discovery raises questions of whether such practices are within the law relating to the minimum wage. Lawyers said that paying workers for going through compulsory security checks had never been specifically tested under European law, but they added that a recent ruling by the European court of justice on the working time directive, which related to technicians travelling to customers’ premises to install equipment, appeared applicable to the policies employed in Sports Direct’s warehouse.
Clocking out: staff are penalised for logging off early
That ruling stated that as the workers’ travelling time could “neither be shortened nor used freely by the technicians for their own interests” then they were “at the disposal” of their employer. Therefore, their time is covered by the directive and counts as working time.
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Zoe Lagadec, a solicitor at Mulberry’s Employment Law Solicitors, said: “Given that the employees are not free to leave their place of work until and unless the security check has been completed, this time should be considered ‘working time’ and therefore paid in accordance with the national minimum wage provisions.”

Furthermore, Sports Direct workers are docked 15 minutes of pay for clocking in as little as one minute late – even if they have arrived on the site on time. Conversely, staff are not paid extra for clocking out late, even when they have been finishing a job.

Literature handed to one of the reporters by The Best Connection employment agency, used by Sports Direct, said: “If you do not clock in by your shift start time then you will be recorded as LATE for that day and your hours and pay will be reduced by a minimum of 15 minutes.”

Lagadec added that docking 15 minutes of pay for clocking in slightly late is “arguably a breach of the national minimum wage, which carries both criminal and civil sanctions”.

The legal basis of her views was also confirmed to the Guardian by an employment law barrister at one of London’s top legal chambers.

The Guardian’s undercover reporters were employed during November by the two main agencies used by Sports Direct to supply temporary warehouse staff – Transline Group and The Best Connection.
Menial tasks, nine hours a day: inside the warehouse
The Best Connection worker was docked 15 minutes’ pay after arriving at the warehouse on time, but clocking in about five minutes late. Meanwhile, the Transline worker was not paid extra after clocking off five minutes later than the official end of the shift, when he had been finishing a job.
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Overall, the reporters’ pay was 3% lower than it would have been without the penalty and including the time spent on the retailer’s compulsory searches. It averaged about £6.50 an hour over all the shifts the reporters worked in November.

Other workers also confirmed that these practices were longstanding and commonplace. If calculated over the whole workforce, the savings would amount to millions of pounds on the annual wage bill of a warehouse, where up to 5,000 workers are thought to report for work each day. At busy times, wages have hit £1m a week within the facility, which is currently being almost doubled in size.

A Transline spokesperson said: “We do not breach national minimum wage legislation. Like many other retail warehouse operations throughout the UK, Shirebrook also has a policy of searches for all warehouse employees, office staff, senior management, directors and visitors. As with all policies, these are constantly under review. The searches are conducted in accordance with employment contracts and are completed as quickly as possible.”

He added that docking 15 minutes’ pay for being one minute late was “not standard procedure”.

Sports Direct said the Guardian’s findings contained “inaccuracies” but declined to comment further. The Best Connection agency declined to comment.

Unite union members dressed as Dickensian workers protest against zero-hours contracts outside Sports Direct. Facebook Twitter Pinterest
Unite union members dressed as Dickensian workers protest against zero-hours contracts outside Sports Direct. Photograph: Matthew Taylor/Rex Shutterstock
Luke Primarolo, regional officer at the union Unite, said: “HMRC needs to urgently investigate what looks like a breach of the minimum wage. The majority of these workers are on precarious agency contracts, which while not illegal, make it virtually impossible for them to challenge unfair treatment for fear of losing their job. The culture of fear at Sport Direct’s Shirebrook depot is more akin to a workhouse than a FTSE 100 company. It needs to change with agency workers being given permanent contracts by Sports Direct and paid a decent wage.”

The findings that Sports Direct workers are receiving less than the minimum wage follows recent controversy over redundancies at one of Sports Direct’s fashion chains, USC.

In October, Sports Direct’s chief executive, David Forsey, pleaded not guilty to a criminal charge of failing to give 30 days’ notice for redundancies at the subsidiary. The case’s next hearing is scheduled for the spring.

Frances O’Grady, general secretary of the TUC, said: “It will surprise no one that Sports Direct is hitting the headlines for the wrong reasons again. All workers should be paid at least the minimum wage for every minute they are required to be on company premises. If the allegations against Sports Direct are found to be true, the government must make sure all their staff receive the full pay they are entitled to.”

A spokesperson for the Department for Business Innovation and Skills said: “We are determined that everyone who is entitled to the national minimum wage receives it. HMRC investigates every complaint made to the Acas helpline. In addition, HMRC conducts risk-based enforcement in sectors or areas where there is a higher risk of workers not getting paid the legal minimum wage.”