Sports Direct faces mass legal tussle over bonus claims

Sports Direct is facing a legal tussle with 300 of its employees over claims made by those on zero-hour contracts that they were not eligible to participate in its bonus scheme.  

While no claim has yet been issued, law firm Leigh Day sent letters in February to the retailer’s legal team claiming more than £1 million in compensation on behalf of 30 zero-hours employees. The staff had been with the organisation for more than five years, but were allegedly excluded from its bonus scheme because they were not classed as permanent staff.

In April 2013 alone, the scheme paid out more than £100 million to 2,000 employees.

Martin Warren, partner and head of human resources group at Eversheds, said: “The letters act as a warning to Sports Direct of the details of the claim. The defendant [Sports Direct] is then expected to give a full written response within a reasonable period and both parties will explore the potential for settlement, with the aim of resolving the matter away from public court proceedings.

“We expect the claimants’ solicitors to argue that long-serving zero-hour contract workers are ‘permanent’ employees and had a contractual entitlement to receive a share of the bonus paid out in previous years.

”Depending on the wording of the bonus scheme, this may involve legal arguments over the employment status of the zero-hour contract workers: whether they are employees or workers, with workers being more likely to work on a casual or irregular basis.”

Sports Direct agreed to change its recruitment and policy practices for zero-hours staff in November 2014, which included clear written policies setting out the sick pay and paid holiday to which staff were entitled.

Although this is quite a specific case, if as a result of the claim, it is found that zero-hour employees are entitled to the same benefits as employees engaged on more traditional employment contracts, zero-hour contracts might no longer be attractive for employers.

Any ruling is likely to analyse whether such arrangements circumvent the rights a ‘fixed-contract employee’ would otherwise be entitled to, and could therefore influence how employers treat the UK’s estimated 1.4 million zero-hour contract workers and their benefits. 

Sarah Henchoz, partner at law firm Allen and Overy, said: “Subject to the case proceeding to the courts and the outcome of that case, we expect to see employers looking more closely at how they use these kinds of contracts and what the benefits are compared with the potential liabilities and whether or not they want to carry on using them at all.”

Sports Direct declined to comment.