Private Equity-Owned Companies Face Child Labor Investigations, Charges

The Department of Labor (DOL) has recently launched investigations into at least two private equity-owned companies that have employed children in dangerous working conditions: Packers Sanitation Services (PSSI), owned by Blackstone, and Hearthside Food Solutions, owned by Charlesbank Capital and Partners Group. While the companies and their private equity owners frame child labor as an anomaly inconsistent with their values, it is clear that child labor violations are actually the byproduct of broader labor issues. Where low wages and dangerous working conditions are the norm, filling unappealing positions is often relegated to staffing agencies and subcontractors that may skirt the law.

PSSI provides food safety and sanitation services to food processing plants, including major meat packing facilities owned by Tyson, JBS, and Cargill. ​​The Department of Labor’s investigation found that PSSI had employed at least 102 children in hazardous occupations in Arkansas, Colorado, Indiana, Kansas, Minnesota, Nebraska, Tennessee and Texas. The jobs performed by children included cleaning dangerous powered equipment during overnight shifts to fulfill sanitation contracts at five meatpacking plants in Nebraska and Minnesota. The investigation revealed that several minors employed by PSSI ­suffered caustic chemical burns and other injuries. A middle school nurse discovered chemical burns on a 13-year-old employed by PSSI, despite the company having no internal records of the injuries. The lack of records could be due to poor recordkeeping or intentional interference – the DOL alleged that PSSI interfered with an investigation by intimidating minor workers to stop them from cooperating with investigators as well as deleting and manipulating employment files.

When Blackstone acquired PSSI in 2018, the company was already one of the most dangerous companies to work for relative to its size: an analysis of the January 2015 through September 2016 Occupational Safety and Health Administration (OSHA) severe injury report found that PSSI’s amputation rate was five times the rate for all manufacturing workers, and that PSSI had the 14th highest number of reported severe injuries across all industries. The issues have continued at PSSI under Blackstone’s ownership – since May 2018, OSHA has conducted investigations of at least four amputations and three fatalities of PSSI employees, including one decapitation.

Since acquiring PSSI in 2018, Blackstone has collected more than more than $430 million in dividends from PSSI, while the company has taken on more than $530 million in debt financing. As the company sinks further into debt, workers pay the highest price while investors still see returns. Blackstone did not comment on the child labor investigation until it was over; the private equity giant said it was “pleased that PSSI has resolved this matter with the Department of Labor” and claimed that PSSI had a “zero-tolerance policy” against employing children.

The DOL’s investigation into Hearthside continues. Hearthside was acquired by Charlesbank Capital Partners and Partners Group in May 2018 (coincidentally the same month that Blackstone acquired PSSI). The company contracts with brands like Cheerios and Cheetos to produce and pack goods across 39 facilities in the US. In February 2023, a New York Times story detailed potential child labor violations and dangerous working conditions in Michigan. Hearthside disputed the allegations against it, pointing instead to the staffing agencies the company uses to hire workers.

As with PSSI, the recent child labor investigations were not the first sign of trouble for Hearthside workers. According to the Times article, OSHA has cited Hearthside for 34 health and safety violations and at least 11 workers have suffered amputations since 2019. In addition to health and safety concerns, Hearthside and one of its private equity owners have been questioned about limiting workers’ freedom of association. In July 2021, Ohio Senator Sherrod Brown sent a letter to Charlesbank Capital about the firm’s “anti-union practices” at Hearthside and another portfolio company. According to Brown’s letter, workers at a company acquired by Hearthside endured “captive audience meetings, use of anti-union ‘consultants,’ legal delays, surveillance, harassment, threats of plant closures, and firing of employees involved in the organizing campaigns.”

A Hearthside employee testified at a Senate Health, Education, Labor, and Pension Committee, arguing that a union could help remedy many of the concerns that workers face on the job: “We have been overworked, we’ve been injured on the job, disrespected by supervisors, and forced to work in bad conditions. We wanted a union to help protect us while we were at work, to give us a say about the conditions we had to work under, and to help us get just a little bit of respect from our bosses.” While government agencies play an important role in enforcing labor standards, they are not sufficient – OSHA estimates that it only has “about one compliance officer for every 70,000 workers.” Workplaces with unions are significantly safer than those without; as part of the response to child labor violations (amongst others), private equity firms and the companies they own should protect and promote workers’ right to freedom of association.

These issues are not limited to private equity-owned companies and reflect a systemic issue –  the DOL has seen a 69 percent increase in child labor violations since 2018. While PSSI’s case resulted in a $1.5 million fine in civil penalties at a maximum of $15,138 per minor, neither the company nor Blackstone face criminal charges.

Some family members of the children who worked for Blackstone’s Packers Sanitation, however, face criminal charges, jail time, and possibly deportation for transporting minors to work or securing falsified work documents. Despite the protections that are available for the children through the Department of Homeland Security, migrant and refugee advocates say that no children have applied for these protections and that the DOL refuses to provide a list of names or contact information to legal advocacy organizations. Anna Hill Galendez of the Michigan Immigrant Rights Center worries about children and families being left to pay the price for labor violations: “We’re concerned that poorly designed efforts to combat migrant child labor could actually push many undocumented adult breadwinners out of their jobs and leave children more vulnerable.”

Private equity firms should work to end child labor as well as other health and safety violations by implementing stronger labor standards and enforcement mechanisms across all portfolio companies.