By Sharon Hundal
Borneo Martell Turner Coulston
SHOULD a company whose suppliers fail to ensure that employees have basic statutory employment protection be punished? According to Sir David Metcalf, the Government’s Director of Labour Market Enforcement, the answer in his recently published report is ‘yes’.
It is reported that numerous large companies use suppliers who fail to provide their workers/employees with basic minimum wage and to pay holiday pay. In 2015, it was revealed how temporary workers at Sports Direct were effectively receiving less than the minimum wage. This led the government to, among other things pledge over £25 million pounds on National Minimum and Living Wage enforcement to ensure that the UK’s lowest paid workers were receiving the National Minimum Wage.
Sir David has estimated that 342,000 jobs were being paid below the National Living Wage in 2017. This is equivalent to 1.2 per cent of all employee jobs. He has recommended that whilst a breach of employment legislation should initially be dealt with privately between the supplier and the brand name, if appropriate measures are not taken within a specific timeframe then the sanction of naming and shaming both the supplier and the end-user company should apply. If this didn’t work, then he would consider a proposal to impose joint and several legal liability on the both companies involved. This would allow employees/workers at the bottom of the supply chain to claim compensation from the top.
The report signifies a shift towards a greater degree of accountability for all parties in the supply chain. Businesses are able to make provision in their supply contracts to ensure that the supplier promises to ensure that those standards are met. The purpose of a provision such as this is two-fold. The first is to protect the reputation of the business so that it can show that it has taken steps to ensure compliance with the supplier’s legal obligations towards employees.
The second is to allow the business to be able to terminate if there is a breach of this provision and to claim damages for any loss it may have suffered.
Although it would appear that we are some way off legislation which would impose a financial sanction on the end-user business, it would appear sensible for a business of any size to start to think about these types of issues and to put measures in place to safeguard itself from not only a legal liability or sanction, but also in order to protect its reputation.
If you wish to discuss any employment issue or other issues relating to your business please contact Sharon Hundal at Borneo Martell Turner Coulston on 01604 622101.
