Boohoo Investors Seek £100 Million in Damages After Minimum Wage Row


A group of investors in Boohoo are seeking more than £100 million ($127 million) in compensation from the online fashion specialist after reports in 2020 alleging its suppliers in Leicester were mistreating workers caused its share price to plummet.

Shares in Boohoo dived more than 40 percent over several days, wiping more than £1.5 billion off its valuation, after a 2020 Sunday Times report of labour rights violations at the group’s suppliers’ factories in Leicester suggested some workers were paid as little as £3.50 ($4.47) an hour, well below the legal minimum wage.

A damning independent report conducted by Alison Levitt QC on behalf of the fast-fashion retailer later found that allegations of poor working practices in the company’s supply chain – initially denied – were â€œsubstantially true.”

A legal claim on behalf of 49 investors including the California State Teachers’ Retirement System – which has investment assets totalling $332.5 billion – led by lawyers at Fox Williams filed against Boohoo Group last month alleges the company made untrue or misleading statements and failed to disclose or delayed the disclosure of material information about the matter to the market, breaching its obligations under the Financial Services and Markets Act 2000.

The group are understood to be seeking £100 million in damages as well as legal costs and interest that could add millions of pounds more to the potential bill for Boohoo.

The investors say those who bought shares ahead of the 2020 report suffered huge losses as a result of the share price drop when the problems in Boohoo’s supply chain emerged.

They say that further exposés on conditions in suppliers’ factories, including a BBC Panorama report screened in November last year, have led Boohoo’s share price to drop further.

“Boohoo has long been aware of these issues, failing to keep to past promises of fair production,” said Andrew Hill, a partner at Fox Williams who has previously led two shareholder claims against Tesco that were settled out of court over the supermarket group’s admission of a profits overstatement in 2014.

“Boohoo is a prominent example of a company that failed to live up to its environmental, social and governance responsibilities and caused significant harm to investors. We believe that our clients have a strong case for compensation.”

“This is a landmark case that will test the legal framework for securities litigation in the UK and the role of ESG factors in corporate governance and disclosure.”

A spokesperson for Boohoo said: “We have been made aware of a claim that is being brought by certain shareholders. The company strongly contests the allegations and will vigorously defend any claim.”

According to the high court claims system, Boohoo has instructed the UK-Australian law firm Herbert Smith Freehills.

The claim has emerged after protests from shareholders forced Boohoo to ditch a scheme under which its three top bosses were handed £1 million in bonuses despite the company reporting a £160 million loss.

By Sarah Butler

Learn more:

Boohoo Accused of Mislabelling Clothes as Made in UK

The mislabelling occurred at Boohoo’s flagship Thurmaston Lane factory in Leicester, England last year, where workers removed original labels affecting one in every 250 garments.

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