Boohoo facing lawsuit linked to employee mistreatment allegations

Fast fashion giant Boohoo is continuing to take heat from its investors, this time in the form of a lawsuit that has been filed in regards to past allegations that suppliers were mistreating employees.

While similar claims against Boohoo have mounted over recent years, the lawsuit particularly refers to a report by The Sunday Times back in 2020, which revealed multiple allegations of labour rights violations at the company’s Leicester-based factory.

At the time, the media outlet said that factory workers received 3.50 pounds an hour, less than half the national working wage, and did not have access to face masks and personal protection equipment during the height of the pandemic.

The report sent Boohoo’s shares plummeting 16 percent immediately after its release, only to drop another 12 percent when Boohoo declined to comment on the matter the following day. The findings also led to prominent third-party partners like Next, Zalando and Asos to remove Boohoo products from their respective websites.

Such a significant drop in the share price, however, had wiped out 1.5 billion pounds from Boohoo’s value at the time, leading to the newly issued lawsuit.

According to City AM, which initially reported on the filing, law firm Fox Williams had initiated the lawsuit last month on behalf of a group of 49 institutional investors who are seeking to recover damages.

In the claim, investors who had purchased shares ahead of the 2020 revelations said they had suffered huge losses as a result of the drop in share price.

It was further alleged that Boohoo itself had made “untrue or misleading statements” while failing to publicly disclose material associated with the Sunday Times report.

Speaking to City AM, Andrew Hill, a partner at Fox Williams, said: “Boohoo is a prominent example of a company that failed to live up to its environmental, social and governance (ESG) responsibilities and caused significant harm to investors. We believe that our clients have a strong case for compensation.”

Responding to the lawsuit, a spokesperson for Boohoo told the media outlet: “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.”