Blackstone’s Packers Sanitation continues to put workers and investors at risk
February 21, 2024
A year ago, in February 2023, Blackstone-owned Packers Sanitation paid $1.5 million in civil money penalties after the U.S. Department of Labor’s (DOL’s) Wage and Hour Division found the company employed at least 102 children – some as young as 13 years old – in hazardous occupations, and had them working overnight shifts at 13 slaughterhouses in eight states. The children were working with hazardous chemicals and cleaning meat processing equipment including back saws, brisket saws and head splitters. Investigators learned at least three minors suffered injuries while working for Packers Sanitation.
As a result of the investigation, PSSI lost contracts with three of its largest clients, Tyson, Cargill, and JBS, and the value of the company’s debt dropped dramatically. The child labor scandal at Blackstone’s Packers Sanitation (PSSI) is still causing problems for the world’s largest asset manager. In early November, Bloomberg reported that PSSI’s third quarter 2023 earnings had fallen 50 percent from the third quarter of 2022, with net sales down 21 percent.
Moody’s downgraded PSSI’s credit rating in May and again in November. The May downgrade came as a result of “the loss of contracts and lawsuits related to labor issues,” leading to concerns about “management credibility and track record risk”. The report highlighted that PSSI has already seen a decline in plant count over the past few years, and noted the possibility of future ratings downgrades as PSSI may lose more customers. In November, Moody’s downgraded PSSI again, highlighting the company’s refinancing risk as loans come due in 2025.
S&P downgraded PSSI in October for similar reasons: “Packers Holdings LLC has faced a rising number of contract cancellations amid the fallout from child labor law violations, which we believe will cause performance to decline more than we previously anticipated.” According to the report, the full financial impact of the scandal is still unknown – it will “take a few more quarters before Packers’ financial results reflect all of the revenue losses stemming from known contract cancellations.”
The DOL has continued to find labor violations at PSSI worksites. In August, The DOL’s Occupational Safety and Health Administration (OSHA) issued PSSI a citation in Illinois where “an employee was exposed to machine hazards associated with moving parts and pinch-points during cleaning of a Bread Line Conveyor which resulted in the fracture to the employees left arm.” PSSI has contested the violations in Illinois.
In Kansas, OSHA found that an employee faced “amputation hazards in that procedures for the control of potentially hazardous energy were not utilized,” leading to the employee amputating a finger and part of his hand. The Kansas citation has been withdrawn as part of a settlement with OSHA in which PSSI agreed to pay $15,625 in penalties.
Ongoing labor problems within the Blackstone portfolio recently led New Mexico Treasurer, Laura Montoya, to write Blackstone stating that she would “no longer support the future investment of New Mexico’s state funds with [Blackstone], at least until [the] firm can demonstrate that its businesses have significantly improved their labor practices.”
Blackstone received the lowest grade on the Private Equity Labor Scorecard, scoring worse than all its peers in amount paid for wage and hour violations, wage and hour lawsuit settlements, and amount paid for OSHA violations. The Blackstone Group should proactively guarantee labor rights across its portfolio by embracing a portfolio-wide set of labor standards like the Private Equity Labor Rights Platform.
