California Imposes Disclosure Obligations for Child Labor Audits

On Sept. 22, California Gov. Gavin Newsom signed into law Assembly Bill 3234, which requires employers to disclose the results of audits on child labor practices. Specifically, effective Jan. 1, 2025, AB 3234 requires employers that voluntarily conduct a social compliance audit for the purposes of determining whether child labor is involved in the employer’s operations or practices to publish the audit findings on the company website.

AB 3234 offers little guidance on these disclosure duties. Indeed, it leaves critical compliance details unclear, including, for example, the deadline for posting reports after an audit, how long the report must remain online, and any penalties for noncompliance. There may be guidance from the California Labor Commissioner clarifying these and other unclear points. Until then, employers will face the difficult task of complying with a law that is ambiguous.

To be clear, AB 3234 does not mandate that employers engage in audits. It only places a disclosure obligation on those employers that voluntarily conduct audits to determine whether their operations comply with child labor laws. This required public disclosure of audits might now deter employers from voluntarily engaging in audits for fear of exposing themselves to litigation or governmental scrutiny as a consequence of publishing damaging audit results.

To Which Employers Does AB 3234 Apply?

AB 3234 does not define “employer.” It also does not define the scope of an employer’s “operations or practices” wherein the audits at issue occur. Thus, it is unclear if the disclosure duties encompass audits performed by an employer in the state of California only, or whether they would also extend to audits performed nationwide or worldwide. As this bill is an amendment to the California Labor Code that applies to California employers, coverage of the bill arguably applies only to those California employers as defined under Labor Code Section 1132.2.

AB 3234 appears to further narrow the scope by limiting its requirements to those employers that voluntarily conduct an audit. However, what counts as “voluntarily” is also unclear. For example, does it mean all audits conducted outside explicit governmental and legislative directives? Are audits conducted as a result of contractual duties vis-à-vis a nongovernmental party considered voluntary?

What Information Must an Employer Disclose?

AB 3234 requires that the findings of a “social compliance audit” be disclosed. “Social compliance audit” is defined very broadly 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 then goes on to specify that the employer must disclose only those findings related to “child labor,” which is defined as any work performed by a person under 18 years of age in violation of state or federal law. Specifically, the following information must be disclosed via a clear and conspicuous link on the company website:

• The year, month, day, and time the audit was conducted, and whether the audit was conducted during a day or night shift.
• Whether the employer engaged in, or supported 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 worked 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.

Many employers conduct audits under the attorney-client and other privileges and protections, thus raising the question as to whether AB 3234’s disclosure requirement is intended to pierce such protections. While AB 3234 does not explicitly address this issue, the legislative history indicates that employers may take the position that the law does not compel disclosure of privileged information, subject to the limits of the relevant privilege. 

The Broader Context of AB 3234

AB 3234 is a recent addition to a growing legislative focus on corporate human rights compliance efforts. Indeed, child labor disclosure and due diligence requirements are emerging in jurisdictions as diverse as Illinois, the European Union, Germany, Japan, and Canada. In addition, the U.S. Department of Labor recently intensified its efforts to combat child labor violations, including enforcing the Fair Labor Standards Act’s “hot goods” provision.

Recommendations for Employers

AB 3234 underscores California’s growing focus on transparency and accountability for child labor practices. However, AB 3234’s broad and vague language raises significant compliance challenges for employers. It is hoped that California labor authorities—including the California Labor Commissioner—will soon provide guidance on the various points in the legislation that remain unclear. 

Before AB 3234’s Jan. 1, 2025, effective date, California employers should determine when their first audit of 2025 is scheduled to take place as well as how many audits they expect to perform throughout the year. Because—arguably—only social compliance audits that occur after the effective date trigger reporting, it is important for employers to keep track of the audits that would be subject to AB 3234. Also, to the extent possible, California employers should determine whether their audits are conducted voluntarily and are thus covered under AB 3234.

Importantly, many employers that may be covered under AB 3234 have already published disclosures under the 2012 California Transparency in Supply Chains Act (CTSCA), which, among other things, requires employers to disclose their audit efforts on human rights issues, including child labor. While the scope of CTSCA disclosures is broader, employers should ensure that those disclosures are consistent with any information disclosed under AB 3234.

However, AB 3234 may contain some significant constitutional, jurisdictional, and enforcement issues that should be vetted with the assistance of experienced legal counsel as part of assessing compliance efforts. Hopefully, further guidance from California labor authorities will address these issues.

Lavanga V. Wijekoon and Priya Gupta are attorneys with Littler in Chicago. Joy C. Rosenquist is an attorney with Littler in Sacramento, Calif. Stefan J. Marculewicz is an attorney with Littler in Washington, D.C. Michael G. Congiu is an attorney with Littler in Minneapolis. © 2024 Littler. All rights reserved. Reposted with permission.