New California Law Imposes Transparency Requirements About Employers’ Child Labor Practices

At a Glance

• The public disclosure of the social compliance audit report may have unintended consequences and deter employers from voluntarily engaging in these audits.
• California employers will need to determine whether AB 3234 will apply to their operations or practices, which in many cases will involve a fact-intensive analysis. Employers will need to put a process in place to meet the compliance requirements.
• Multinational companies also should consider how AB 3234 will impact their corporate social responsibility disclosure requirements.

On September 22, 2024, California Gov. Gavin Newsom signed Assembly Bill (AB) 3234 into law, which imposes transparency requirements for employers who audit their child labor practices. The bill will take effect on January 1, 2025.

Under AB 3234, any employer who has voluntarily subjected itself to a “social compliance audit,” in whole or in part, to determine if child labor is involved in the employer’s operations or practices, must post a clear and conspicuous link on its website to a report detailing the findings of its audit. “Child labor” means any work performed by a person under 18 years old in violation of state of federal law. AB 3234 defines “social compliance audit” as a voluntary, nongovernmental inspection or assessment of an employer’s operations or practices to evaluate whether the operations or practices are in compliance with state or federal labor laws, including wage-and-hour and health and safety regulations, including those regarding child labor.

The report must contain at minimum:

• The year, month, day and time the audit was conducted, and whether the audit was conducted during a day shift or night shift
• Whether the employer did or did not engage in, or support the use of, child labor
• A copy of any written policies and procedures the employer has and had regarding child employees
• Whether the employer exposed children to any workplace situations that were hazardous or unsafe to their physical and mental health and development
• Whether children work within or outside regular school hours, or during night hours, for the employer
• A statement that the auditing company is not a government agency and is not authorized to verify compliance with state and federal labor laws or other health and safety regulations

Four Takeaways for Employers

1. AB 3234 does not impose a substantive requirement to conduct social compliance audits relating to child labor or otherwise. However, if an employer voluntarily subjects itself to a partial or complete audit of child labor compliance, the law will require specific disclosures about the audit.
2. The public disclosure of the social compliance audit report may deter employers from voluntarily engaging in these audits. 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. As previously reported, the Department has strengthened federal efforts to protect minors from illegal employment situations, changing the penalty structure for violations, and enforcing the “hot goods” provision that would prohibit the shipping of goods that were produced in an establishment where oppressive child labor occurred. State agencies have also enhanced their response and increased enforcement activities to address potential child labor violations.
3. There are open questions about AB 3234 that will be crucial for compliance. AB 3234 does not specify a deadline for posting findings following a social compliance audit, how long the report must be posted, and penalties for noncompliance. Further guidance will be required from the Division of Labor Standards Enforcement (DLSE) before enforcement activities ensue.
4. California employers will need to determine whether AB 3234 will apply to their operations or practices, which in many cases will involve a fact-intensive analysis. Employers will need to put a process in place to meet the compliance requirements of AB 3234. Companies also should consider how AB 3234 will impact their corporate social responsibility reporting and compliance with global forced labor laws. Multiple countries have recently implemented laws to combat forced labor in supply chains and require disclosure of potential exposure and measures taken to remediate forced labor or child labor. California employers should promptly work with legal counsel to assess whether their companies are subject to the AB 3234 disclosure requirements.