A businessman spoke of his “shock and horror” at the link between the name of his ex-company and the working conditions of sweatshops.
The Manjit Jaswal factory, which closed in 2018, has been declared by the Sunday Times to be exploiting the locked out workers.
Mr Jaswal said that until the end of operations, the company complied with all employee laws.
The newspaper agreed to a settlement that Mr. Jaswal said he would donate to a charity.
His family business Jaswal Fashions has operated for 30 years. He said he had never failed any health and safety checks and paid the staff the correct salary.
The company ceased operations in November 2018, but was mistakenly identified in the newspaper article because of an old sign that remained on a wall outside the factory.
The article was actually about a completely independent company, one of many operating from the premises.
Mr Jaswal said: “It was a shock and a horror. My friend called me up to say “Mate, you’re splashed all over the Sunday Times, what’s going on? “.
“We’ve been out of the industry for two years, only to be brought back and have our name stuck in the mud.
“It hurts that this is planned from left to right and center but clearly the exploitation and the links with it, which I condemn. “
The Sunday Times then published a correction regarding his article.
Mr Jaswal said he was “relieved” to reach a settlement, but said the main reason was to build “a spotless reputation, as was the case before”.
The article highlighted working conditions in some Leicester garment factories.
Fashion brand Boohoo has faced harsh criticism of the conditions of some of its suppliers and has launched an independent review.
The labor rights group, Labor Behind the Label, said that some workers were “forced to work while sick with Covid-19”.
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