California Law Imposes New Disclosure Obligations on Employers Conducting Voluntary Child Labor Audits – JD Supra

California’s Assembly Bill 3234 Imposes New Disclosure Duties on Employers Conducting Voluntary Audits on Child Labor Practices

On September 22, 2024, California Governor Gavin Newsom signed into law Assembly Bill 3234 (AB 3234), which requires employers to disclose the results of audits on child labor practices. Effective January 1, 2025, AB 3234 mandates that employers who voluntarily conduct social compliance audits to determine whether child labor is involved in their operations or practices must publish the audit findings on their company website.

AB 3234 offers limited guidance on these disclosure duties, leaving critical compliance details unclear. This includes the deadline for posting reports after an audit, the jurisdictional scope of the audits, the duration of the report’s online presence, and any penalties for non-compliance. Employers await further guidance from the California Labor Commissioner to clarify these ambiguities.

It is important to note that AB 3234 does not require employers to conduct audits. It only imposes a disclosure obligation on employers who voluntarily choose to conduct audits to ensure compliance with child labor laws. However, this mandatory public disclosure of audit results may discourage employers from conducting audits due to concerns about potential litigation or government scrutiny.

To Which Employers Does AB 3234 Apply?

AB 3234 does not provide a specific definition of “employer.” It also does not clarify the scope of an employer’s “operations or practices” where the audits take place. It remains uncertain whether the disclosure duties apply only to audits conducted by employers in California or if they extend to audits performed nationwide or worldwide. Arguably, the bill’s coverage may be limited to California employers as defined under Labor Code Section 1132.2.

AB 3234 further narrows its requirements by applying only to employers who “voluntarily” conduct audits. However, the definition of “voluntarily” is also unclear. For instance, does it encompass audits conducted outside of explicit governmental and legislative directives? Are audits conducted as a result of contractual duties with non-governmental parties considered “voluntary”?

What Information Must an Employer Disclose?

AB 3234 mandates the disclosure of the “findings” of a “social compliance audit.” A social compliance audit is broadly defined as a voluntary, nongovernmental assessment to determine whether an employer’s operations comply with state and federal labor laws, including laws against child labor, wage-and-hour laws, and health and safety standards.

Despite this broad language, AB 3234 specifies that employers must disclose only the findings related to “child labor,” which refers to any work performed by a person under 18 years of age in violation of state or federal law. The following information must be disclosed on the company website through a clear and conspicuous link:

• The date, time, and shift during which the audit was conducted;
• Whether the employer engaged in or supported the use of child labor;
• A copy of any written policies and procedures regarding child employees;
• Whether the employer exposed children to hazardous or unsafe workplace situations;
• Whether children worked within or outside regular school hours or during night hours for the employer; and
• A statement clarifying that the auditing company is not a government agency and is not authorized to verify compliance with labor laws or health and safety regulations.

Many employers conduct audits under attorney-client and other privileges and protections, raising the question of whether AB 3234’s disclosure requirement intends to waive such protections. While the bill does not explicitly address this issue, the legislative history suggests that employers may argue that the law does not compel the disclosure of privileged information, subject to the relevant privilege’s limitations.

The Broader Context of AB 3234

AB 3234 reflects the growing legislative focus on corporate human rights compliance efforts. Child labor disclosure and due diligence requirements are emerging in various jurisdictions, including Illinois, the European Union, Germany, Japan, and Canada. Additionally, the U.S. Department of Labor has intensified its efforts to combat child labor violations, such as enforcing the “hot goods” provision of the Fair Labor Standards Act.

Recommendations for Employers

AB 3234 highlights California’s emphasis on transparency and accountability for child labor practices. However, the broad and vague language of the bill poses significant compliance challenges for employers. It is crucial for California employers to await guidance from labor authorities, including the California Labor Commissioner, to address the unclear aspects of the legislation.

Prior to AB 3234’s effective date of January 1, 2025, California employers should determine the schedule and number of audits they plan to conduct in 2025. Since reporting is arguably triggered only for social compliance audits conducted after the effective date, employers must keep track of audits subject to AB 3234. Employers should also assess whether their audits are considered “voluntary” and fall under AB 3234’s requirements.

Importantly, many employers potentially covered by AB 3234 have already made disclosures under the California Transparency in Supply Chain Act (CTSCA) of 2012. CTSCA requires employers to disclose their audit efforts on human rights issues, including child labor. Employers should ensure that their disclosures under CTSCA align with the information disclosed under AB 3234.

Littler recommends consulting experienced legal counsel to address the significant constitutional, jurisdictional, and enforcement issues present in AB 3234. It is hoped that further guidance from California labor authorities will address these concerns.

Footnotes

¹ Arguably, the California Labor Code’s general definition of “Employer” under Section 1132.2 applies. In that section, “Employer” means a person, partnership, firm, corporation, association, or other entity that employs individuals for a wage or salary, including entities acting as agents of an employer.

² Many other jurisdictions’ child labor-related disclosure laws have a global scope, covering a company’s global business partners. See Lavanga Wijekoon, Kate Bresner, Michael Congiu, and Stefan Marculewicz, “Canada Passes Modern Slavery Act,” Littler ASAP (May 17, 2023); Naomi Seddon, Lavanga Wijekoon, Merille Raagas, Alexander MacDonald, Michael Congiu, and Stefan Marculewicz, “Australia Passes Law Requiring Large Companies to Report on Modern Slavery,” Littler Insight (Dec. 4, 2018); Tahl Tyson, “United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking,” Littler ASAP (July 14, 2015). Arguably, the reference to “state and federal law” compliance suggests that the scope does not extend beyond the United States.

³ See note 1, supra.

⁴ Audits are often required in commercial agreements for a company to supply products to a customer. While not technically required by law, audits can be enforced through finalized commercial agreements.

⁵ In California, child labor is unlawful for workers under the age of 12, but state law allows workers aged 12 and up to be scheduled for limited work days and hours. See https://www.dir.ca.gov/dlse/ChildLaborLawPamphlet.pdf.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 8: Decent Work and Economic Growth
• SDG 16: Peace, Justice, and Strong Institutions

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 8.7: Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor.
• SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the following indicators can be used to measure progress towards the identified targets:

• Indicator 8.7.1: Proportion and number of children aged 5-17 years engaged in child labor, by sex and age group.
• Indicator 16.3.1: Proportion of victims of violence in the previous 12 months who reported their victimization to competent authorities or other officially recognized mechanisms.

SDGs, Targets, and Indicators Table

Source: jdsupra.com