Sports Direct – the latest developments in the criticism over working practices

Mike Ashley's grilling by the select committee this week has attracted lots of media attention into working practices at Sports Direct, the public company relegated out of the FTSE 100 earlier this year following a series of allegations relating to allegedly poor working practices.

Headlines have focussed on Ashley's admission that he was not "Father Christmas" (as if we were in doubt) together with other headline grabbing phrases. Unsurprisingly there has not been much legal analysis over the basic employment rights at the centre of the allegations. I thought it may therefore be helpful to set out a potted summary of some of the issues raised.

1. National minimum wage

Workers including employees, casual workers and agency staff are entitled to be paid at least the National Minimum Wage (NMW) for working time. There are currently five different hourly rates for different categories of worker depending on age ranging from £3.30 (the apprentice rate) to £7.20 for workers over 25 (ie the National Living Wage).

Sports Direct have been accused of failure to pay the NMW due to disproportionate deductions from pay for late arrival at work, failure to pay for overtime at the end of the shift and failure to pay workers for time spent undergoing security checks at Sports Direct's Shirehouse warehouse. Workers are entitled to be paid at least the applicable average hourly rate for working time. For hourly-paid work, working time does not include rest breaks, travel between home and work or time spent absent from work (eg on holiday, sick leave or on maternity leave). Working time will cover time spent training, on-call or standby time where workers are available (and are required to be available) at or near a place of work for the purposes of doing such work (subject to limited exceptions), and travelling on business.

Mr Ashley appears to have admitted a failure to pay workers for time spent undergoing compulsory security checks at his warehouse at the end of their shift and this is apparently the subject of an investigation by HMRC.

2. Agency workers

Sports Direct have also come under huge criticism for alleged exploitation of workers engaged via employment agencies at its Shirehouse warehouse.

Agency workers typically sign up with an "employment business" to work for one or more clients. Sometimes this arrangement can be long-term and involves providing work to one client only (ie not a typical "temping" arrangement). The Agency Workers Regulations 2010 sought to offer such workers additional rights including the right to the same pay and other basic working conditions as equivalent permanent employees (if there are any) after a 12-week qualifying period. Importantly such workers may not be an "employee" of the agency or the client and, if so, they will not have the statutory rights limited to employees rather workers, most notably the right not to be unfairly dismissed. That inevitably leaves those workers in a more vulnerable position, even where they have been engaged by the agency for a long time. That state of affairs could in theory make it easier to "hire and fire" (via for example the "six strikes" policy criticised by the union at Sports Direct) without following a basic process expected of an employer carrying out a fair disciplinary or performance management process.

3. Zero hours contracts

Unite report on their website that three quarters of staff at Sports Direct's high street shops are on zero hours contracts. The use of zero-hours contracts in retail is of course not unusual and I am not familiar with the specifics of Sports Direct's arrangements.

Typically zero-hours arrangements or "casual worker" contracts mean that there is no obligation for a business to offer work and the worker is not obliged to accept any work offered, and therefore individuals usually have worker rather than employee status. However, this will not always be the case and some individuals engaged on zero-hours contracts are expected to accept work when offered and therefore are more likely to be employees on a proper analysis of the contract.

Changes came into force to protect staff engaged on zero hours contracts in January this year. As a reminder, any dismissal of an employee employed under a zero-hours contract will be automatically unfair if the main reason for the dismissal is that he has breached a contractual clause prohibiting him from working for another employer. No qualifying period of service is required to bring such a claim. Similarly it is also unlawful to subject a worker to a detriment if they work for another employer in breach of a clause preventing them from doing so.

That protection is pretty limited. It does not prevent arrangements where (typically low paid) employees have no guarantee of income from week to week. Zero hours contracts can work for both parties in the right circumstances (eg where the worker also requires flexibility), but that will not always be the case, and time will tell whether political and media pressure (together with pressure on public companies from institutional shareholders) will make a difference to the frequency of these arrangements.

In the meantime, though, it was interesting to see a rise in Sports Direct's share price following the select committee grilling – I am not sure what to take from that - albeit against the backdrop of a huge fall in share price since the media criticism began.