Child Labor Law Violations: U.S. Department of Labor Issues New Assessment Procedures for Calculating Civil Monetary Penalties

At a Glance

• On November 28, 2023, the U.S. Department of Labor’s Wage and Hour Division announced that it will assess child labor civil monetary penalties for nonserious injury and noninjury violations of the Fair Labor Standards Act on a per-violation basis, rather than on a per-child basis as it had previously done, significantly increasing the aggregate of potential penalties.
• Civil monetary penalties for a “hot goods” violation will be assessed on a per-shipment or per-delivery basis rather than on a per-investigation basis, and recordkeeping violations that will be assessed on a per-employee basis.
• The Department will continue to assess penalties up to the maximum statutory cap of $15,138 per violation taking into account “gravity” and the “size of the business” factors.

The U.S. Department of Labor’s Wage and Hour Division (the Department) has enhanced its response to child labor violations following a 69% increase in findings of child labor violations between 2018 and 2022.¹ Earlier this year, the Department announced an Interagency Task Force to Combat Child Labor Exploitation to strengthen federal efforts to protect minors from illegal employment situations.² The Department has recently announced new assessment procedures for violations, changing the penalty structure and enforcing the “hot goods” provision in order to fully utilize its regulatory authority.³

In February 2023, the Department announced that a nationwide food safety sanitation services provider, Packers Sanitation Services, Inc., Ltd. (PSSI) paid $1.5 million in civil money penalties following the Department’s investigation of minors under the age of 18 years old working in hazardous conditions in multiple meat processing facilities across eight states.⁴ The Department assessed PSSI $15,138 for each minor employed in violation of the Fair Labor Standards Act (FLSA), the maximum civil penalty allowed by federal law.⁵ More recently, a federal court entered a $3.8 million judgment against a California poultry supplier, Exclusive Poultry Inc., of which $121,104 was assessed for the illegal employment of minors and $300,000 in punitive damages for unlawful child labor violations.⁶ The Department also obtained an injunction to prevent Exclusive Poultry from shipping into commerce any “hot goods,” or goods produced in locations where the Department observed “oppressive child labor.”⁷

New Assessment Procedures for Calculating Civil Penalties

Previously the Department assessed penalties for nonserious injury and noninjury violations on a per-child basis by assigning an initial amount for a particular violation per-child that reflected the gravity of the violation.⁸ A nonserious injury means any injury that requires treatment no more extensive than first aid and results in a minor missing school or work, or having their normal activities curtailed, for less than five days. This amount could then be increased or decreased based on the size of the business or whether the violation was willful.⁹

Under the new assessment procedures, the Department will assess civil money penalties on a per-violation basis.¹⁰ For example, if there are three separate violations relative to a minor’s employment, such as two hazardous occupation order violations and one recordkeeping violation, the employer is assessed three separate penalties even if they relate to one minor and each assessment can reach the statutory penalty. The statutory maximum per violation remains at $15,138 for nonserious injury and noninjury violations.¹¹

In calculating the penalty amount, the Department will apply the statutory maximum of $15,138 and then increase or decrease the amount based on “gravity factors” such as whether the violation has been repeated or willful, the number of minors employed, the age of the minors, whether the work is hazardous, the extent of any injury, the duration of the illegal employment, and the hours of employment.¹²

Once the gravity has been considered, the Department will further adjust the penalty amount based on “size of business factors” such as the number of employees employed, annual dollar volume of sales, amount of capital investment and financial resources.¹³

The Department illustrates two examples applying gravity and size of business factors:

Example 1: An employer has 30 employees and an annual dollar volume of $3.5M. The Department concludes that a minor (aged 16 and eleven months) has been employed by the employer for nine months in roofing work in violation of a hazardous order that prohibits minors from performing this type of work. The violations are not repeated. The employer is assessed $15,138 x 130% (increased based on gravity factors for violation of hazardous work order and willfulness) = $19,679 per violation. The business size factors do not apply and no further reduction is made.

Assessment: While the employer could be assessed $19,679 for one violation (for performing unlawful work), the statutory maximum of $15,138 applies and therefore the employer is assessed $15,138.

Example 2: An employer has 15 employees and an annual dollar volume of $5 million. The Department concludes that two minors (aged 15-years old) were employed for three months in violation of child labor laws because they worked until 9:30 p.m. on school nights. The violations are identical and are not willful.

The employer is assessed $15,138 x 70% (reduced based on gravity factors because no hazardous work, no injury, and the time of day) = $10,597 per violation. The business size factors reduce the penalty because the employer has 15 employees. The employer is assessed $10,597 x 85% = $9,007 per violation.

Assessment: The employer had violations for two minors and therefore the assessment penalty is $9,007 x 2 = $18,014.

The assessing official may independently consider the circumstances of the violation to make further reductions, such as whether the violation is de minimis, the employer has given credible assurances of future compliance, no prior history of child labor violations, and the violations involved no intentional or heedless exposure of any minor to an obvious hazard.

Employers should keep in mind that these assessments apply to nonserious injury and noninjury child labor violations. The Department assesses penalties for the violation of child labor standards that cause the serious injury or death of a minor up to $68,801 and willful or repeated violations up to $137,602.

Enforcement of the “Hot Goods” Provision

The FLSA prohibits the shipment of “hot goods” that were produced in an establishment “in or about” which oppressive child labor occurred.¹⁴ The Department announced in August 2023 its commitment to utilize all available enforcement tools to combat illegal child labor including its enforcement of the “hot goods” provision.¹⁵ “Hot goods” are barred from being shipped in interstate commerce, and goods may be considered “hot” regardless of whether the minor in question worked directly on the goods themselves.¹⁶

The provision prohibits subsequent downstream shipping of “hot goods” if they were removed from the producing establishment within the 30 days following a child labor violation.¹⁷ The Department has the authority to seek a court order compelling any downstream producers, manufacturers or dealers in possession of the goods to stop shipment. The FLSA provides a good faith defense for purchasers who acquire goods in reliance on written assurances from the producer, manufacturer or dealer that the specific goods were produced in compliance with the child labor provisions.¹⁸

The Department may assess civil money penalties to ensure compliance throughout the supply chain.¹⁹ For purposes of calculating penalties for child labor violations that involve the prohibited movement of goods in violation of the hot goods provision, penalties will be calculated using the gravity and size of business factors as well as any additional regulatory considerations described above. The penalties will be assessed for each shipment or delivery for shipment. Previously, the assessment for “hot goods” cases were conducted on a per investigation basis rather than a per shipment or delivery for shipment.

Enforcement of Recordkeeping Penalties

Under the FLSA, employers are required to record a birth date in their files for every employee under the age of 19 years and retain those records for three years. Violations of the recordkeeping provision are calculated using the gravity and size of business factors as well as any additional regulatory considerations. The penalties will be assessed per employee. For example, if an employer fails to keep records for five employees, the agency may assess five separate recordkeeping violations.

Employer Takeaways

The Department reviews child labor compliance as part of every FLSA investigation. As such, employers should have a plan in place for responding to the Department’s investigation, reviewing its policies for the employment of minors, and confirming they have appropriate record keeping mechanisms in place to comply with the FLSA. Businesses should obtain written assurances from the producer, manufacturer or dealer that the specific goods are produced in compliance with the child labor provisions to avoid penalties under the “hot goods” provision.

Law Clerk Leah Chrisbacher contributed to this article.