Deal struck with Unite and HMRC affects thousands of staff and follows Guardian investigation into pay rates at retailer

Thousands of Sports Direct warehouse workers are set to receive back pay totalling about £1m after the retailer admitted breaking the law by not paying the national minimum wage.

The sportswear chain and its employment agencies are also facing fines of up to £2m imposed by the Department for Business, Energy and Industrial Strategy (BEIS) after they were found to have been underpaying some of the country’s lowest-paid workers for four years.

The move, which follows an undercover Guardian investigation last year that exposed how Sports Direct workers were being paid less than the legal minimum, is to include payments backdated to May 2012 and could be worth up to £1,000 for some workers, trade union officials estimate.

The agreement, which is understood to have been struck between the union Unite, the retailer and HM Revenue & Customs, includes about 200 workers directly employed by Sports Direct and around 3,000 staff hired through temporary employment agencies. Two agencies, The Best Connection and Transline, provide most of the labour in the company’s warehouse in Shirebrook, Derbyshire.

Notices informing the companies how much the government believes staff have been underpaid, as well as how much each employer will be fined, are expected to be sent to the employers by BEIS this week.

Those familiar with the deal, however, say that 1,700 Transline agency workers may initially receive just half the back pay they are owed when payments begin from the end of the month. This is because the agency is refusing to refund unpaid wages from before it took over contracts from a rival agency, Blue Arrow, two years ago.

Steve Turner, Unite’s assistant general secretary, described the agreement as a significant victory that demonstrated the importance of modern trade unions in Britain.

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“Investors and customers alike should not be fooled into thinking that everything is now rosy at Sports Direct’s Shirebrook warehouse. Transline, one of the employment agencies involved, is disgracefully still trying to short-change workers by seeking to duck its responsibilities,” he said.

“Deep-seated problems still remain regarding the use of agency workers with the behaviour of both Transline and The Best Connection further jeopardising Sports Direct’s battered reputation.”

Unite, Britain’s biggest union, has led a long-running campaign against working conditions at the Shirebrook depot.

Sports Direct and The Best Connection did not comment.

A spokesman for Transline said: “We are making all payments required in full compliance with HMRC”. A Blue Arrow spokesperson, added: “Blue Arrow is aware of the situation at Sports Direct. We take the welfare of our workers very seriously and work closely with all our customers to ensure legal requirements are met. Our contract ended with Sports Direct on 25 May 2014, however we will co-operate fully with any ongoing or future HMRC investigation”.

Tom Watson, Labour’s deputy leader, said: “I welcome the fact that thousands of Sports Direct workers will at last be paid what is due to them, following the scandalous failure of their employer to pay the minimum wage.

“But it should not have taken months of pressure from MPs, trade unions and the general public. In light of the appalling practices at Sports Direct, it is only right that the Government imposes fines to send a clear signal to other rogue employers.”

In June, Sports Direct’s billionaire founder Mike Ashley admitted his company had broken the law by failing to pay staff the national minimum wage.



The concession, which was made when he appeared before MPs investigating his firm’s treatment of its workers in June, confirmed the findings of the Guardian’s investigation, which revealed that warehouse staff were required to go through searches at the end of each shift, during which their time was unpaid. They also suffered deductions from their wage packets for clocking in for a shift a minute late.

The practices contributed to many staff being paid an effective rate of about £6.50 an hour against the then statutory minimum wage rate of £6.70, saving the firm millions of pounds a year at the expense of some of the poorest workers in the UK.

Ashley told MPs that he had moved to address the queues of workers waiting, unpaid, to be searched at the end of each shift, but also admitted that docking workers 15 minutes’ pay for being one minute late was unacceptable and unreasonable.

Both practices had led to breaches of minimum wage legislation, the Guardian investigation found.

HMRC said: “This isn’t about doing deals. While we don’t discuss individual cases we won’t accept anything less than what’s owed. Our role is to investigate all cases where we believe an employer is not paying its workers the national minimum wage to ensure those workers receive what they are owed under the law.”

BEIS said: “All employers are automatically considered for naming where the investigation has been closed and the arrears owed are over £100. There are only very limited circumstances where an employer can avoid being named.”

Monday’s announcement covers only those working in the retailer’s Shirebrook warehouse. Last month the Guardian revealed how the official investigation into Sports Direct’s failure to pay workers the legal minimum is understood to have been widened to include the sportswear chain’s 13,000 retail workers.