The Companies Behind the Surge in Illegal Child Labor

Executive Summary

An analysis of federal enforcement data finds that the companies most responsible for a surge in illegal child labor during the past decade are major retail and restaurant chains. Although child labor penalties are shockingly low, some employers have nonetheless racked up substantial cumulative fines. These include companies controlled by private equity firms, which in this analysis are treated as the parents of their majority-owned portfolio companies. We also associate franchises with their national company names no matter how the national company is owned.

Topping the list is the private equity firm Roark Capital. Fast-food businesses such as Subway, Dunkin’, Auntie Anne’s and Sonic which are owned or franchised by Roark portfolio companies accounted for more than $1.7 million in penalties between 2017, when the current surge in child labor violations began, and 2023, the most recent year for which complete data is available. Roark’s properties received more than 2,000 separate violations during those seven years.

In second place is the McDonald’s chain, whose operations together accounted for slightly less than the Roark penalty dollar total but a higher number of individual violations. Every McDonald’s violation was found at a franchised location.

Blackstone comes in third in total penalties because one of its portfolio companies, Packers Sanitation Services Inc. (PSSI), has been penalized $1.5 million for employing scores of children as young as 13 to perform dangerous cleaning work at meat processing plants in eight states. The Wendy’s chain ranks fourth in penalties at $647 million and third in the number of violations (981).

Other major companies whose properties have been disciplined most often for child labor misconduct include Berkshire Hathaway (owner of Dairy Queen), and Restaurant Brands International (owner of Burger King and Popeyes).

These well-known corporations are among the thousands of companies of all sizes that were fined a total of $27 million by the U.S. Department of Labor’s Wage and Hour Division (WHD) between 2017 and 2023. At the peak of child labor violations in 2022, civil penalties had increased 130% in the last six years—and the number of children affected nearly doubled.

The federal Fair Labor Standards Act (FLSA) restricts the employment of minors according to the age of the worker, the nature of the work and when the work is being performed. Agricultural work protections are laxer and allow children to work as young as 12 with parental consent.

Most child labor violations are related to working excessive hours, operating heavy machinery such as forklifts and meat-processing machines, or performing dangerous jobs like roofing or logging. While wage theft certainly happens to children, it is not the major issue it is for adults.

Protections for young workers are intended to keep them safe from jobs that pose a higher risk. Construction is a particularly dangerous industry for all workers, but especially for youths. That sector accounts for the highest injury rate for workers under 20 and the highest average penalty for child labor violations.

Apart from the FLSA, states have their own child labor laws. These have customarily been designed to improve on federal law. Over the past two years, however, legislators in at least 10 states have introduced bills weakening protections, and some proposals go so far as to directly contradict federal age requirements.[1] Though employers are required to follow whichever law is most stringent, state rollbacks are seen as a tactic to generate pressure to weaken federal rules down the road. In response, 20 states plus the District of Columbia have introduced bills to strengthen child labor protections, and seven states have signed such bills into law.

The surge in child labor violations in recent years points to the need to make federal rules more, not less strict. Above all, this means increasing penalties to a level at which they create a more effective deterrent.

Unlike adult workers, minors do not receive any of the federal penalty amounts imposed on employers. We recommend this discrimination be ended, that underage workers themselves should be allowed to claim a portion of those penalties as damages.

Other needed reforms include holding owners of large retail and restaurant chains responsible for violations both at the locations they own and those operated by franchisees. Chronic violators should be disqualified from receiving federal contracts.

Along with tightening their regulations, state labor departments need to do a better job of disclosing records of their own enforcement activities, which are currently not readily available in most states.

Introduction

A Brief History of Child Labor Laws

The widespread use of underaged workers was a defining feature of U.S. industrial expansion after the Civil War. By the early 20^th century, children performed duties ranging from delivering newspapers and shining shoes to dirty, dangerous work performed in mines or factories, without any restrictions. By 1904, 25% of textile workers in the South were children under 16.[2]

Notably, young workers known as the “breaker boys” performed hazardous work in coals mines where they would remove impurities from the coal by hand. Breaker boys frequently suffered injuries to their hands and arms and would even lose limbs or get crushed to death by large machinery. Children who worked in the mines were three times more likely to die than their adult counterparts; a report published in 1907 estimated that 75% of coal miners killed on the job were children under 16.[3]

Labor crusaders including Mother Jones led protest marches of children, like the 1903 March of the Mill Children from Philadelphia to President Theodore Roosevelt’s home in Oyster Bay, New York, to dramatize the plight of exploited youth. The National Child Labor Committee, founded in 1904, agitated for reforms in numerous states, including New York, Pennsylvania, Mississippi, and North Carolina.

By 1912, every state had some sort of child labor law on the books, but they offered very few protections and lax enforcement: eight states still allowed children under 14 to work in heavy industry. Also in 1912, the federal Children’s Bureau was created to start collecting data on many measures of well-being, including dangerous occupations and work. In 1918-1920, the U.S. Supreme Court struck down two federal laws that had been enacted to deter child labor.[4]

It wasn’t until the passage of The Fair Labor Standards Act (FLSA) of 1938 that the regulation of child labor was formally adopted nationwide, and then quite partially. FLSA covered only about six percent of working children the year it was enacted. Yet it was an important step toward eliminating the worst forms of exploitation.

The Fair Labor Standards Act Child Labor Provisions

Federal child labor laws vary depending on the age of the worker and are broken up into non-agricultural and agricultural work. The following tables summarize these requirements:

Table 1: What Federal Law Covers for Non-Agricultural Work

 Source: FLSA

Table 2: What Federal Law Covers for Agricultural Work

 Source: FLSA

Hazardous work includes duties such as operating large machinery or motor vehicles, manufacturing or storing explosives, or exposure to radiation.[5]

Civil money penalties are the primary method of federal enforcement. As of this report, the maximum monetary penalty that can be imposed for unlawfully employing a minor is $15,629 per employee or $71,031 in cases of death or serious injury, which may be doubled in cases of willful recidivism.[6]

Unlike adult cases, penalties related to child labor violations are only remitted to governments—child workers do not receive remediation in the form of back wages or liquidated damages.[7] Without the option of remedies, young workers are not incentivized to report illegal or unsafe conditions since it will likely only result in the loss of needed income. The addition of restitution to civil penalties would help to shine a light on cases that may have otherwise gone unnoticed and improve enforcement efforts.

Similarly, only a small number of states allow lawsuits against employers for damages when injury or death of a minor is involved.[8] Legal recourse for these employees typically results in more serious repercussions for employers and could be used to deter recidivist companies.

The Role of States in Child Labor Enforcement

The FLSA outlines the bare minimum requirements for employing children. Many states have enacted additional rules such as work permit requirements, restrictions on working hours for 16- and 17-year-olds, and regulation of breaks or meal periods.

Where state and federal law differ, employers are required to follow the more stringent law. State labor departments enforce their add-on rules, but many do not disclose detailed enforcement data. That is why the analysis in this report is based solely on cases reported by the federal Wage and Hour Division of the U.S. Department of Labor.

During the past two years, some states have taken the unusual step of adopting rules that are weaker than the federal regulations. This does not have an immediate practical effect, but it is seen as a tactic to create pressure to dilute federal protections.

Countervailing those regressive states, some other states have tightened their rules. In 2024, six states enacted legislation to roll back child labor protections, while seven states strengthened them.[9]

Key Findings

Until about a decade ago, illegal child labor had disappeared as a significant problem in the United States. It re-emerged at a time when a tight labor market prompted employers to seek new sources of labor, even if that meant breaking the law.

Between 2017, when the current surge in child labor law violations began, and 2023, the most recent year for which complete data is available, partment of Labor’s Wage and Hour Division (WHD) fined companies a total of $27 million.

These figures peaked in 2022 when penalties reached over $7 million compared to $3 million in 2017—an increase of 130%. And the number of children affected nearly doubled during that period.[10]

Businesses Linked to Private Equity Firms Among Worst Child Labor Violators

Among the biggest violators have turned out to be companies owned by private equity firms such as Roark Capital and Blackstone. For the purposes of this report, we treat the PE firms as parents of their majority-owned portfolio companies. We also associate franchises with their national company names no matter how the national company is owned.

Roark Capital, which invests in many fast-food chains, is linked to more child labor penalties than any other parent. Since 2017, its businesses have been cited for more than 2,000 violations and paid over $1.7 million in cases involving nearly 1,600 children on the job. The Roark Capital properties involved in these cases include: Subway, Sonic, Dunkin’, Arby’s, Auntie Anne’s, and Baskin Robbins.

Blackstone has particularly large monetary penalties because of one of its portfolio companies, Packers Sanitation Services, Inc. (PSSI). PSSI has gotten widespread attention for its child labor abuses over the last few years. It was found that the company illegally employed at least 102 children, from the ages of 13-17, in hazardous jobs at 13 meat processing facilities in eight states.[11]

These children operated heavy machinery during overnight shifts, when the FLSA prohibits 14- and 15-year-olds from working past 9 p.m. It was found that several of these young workers suffered chemical burns along with other injuries. PSSI allegedly interfered with the investigation by intimidating minor workers to stop them from cooperating with investigators and even manipulated employment files. PSSI was ordered to pay a total of $1.5 million in civil money penalties—the maximum amount allowed by federal law.

Highly leveraged companies are under much more pressure to cut costs on safety or labor issues to meet profit targets, creating an incentive to use low-paid young workers. Blackstone used a lot of debt to purchase PSSI and has extracted $432 million in dividends from PSSI since 2019.[12]

Apart from the PE companies, many of the most penalized companies are fast-food restaurants that use a franchise model. Nearly a third of our total penalty amounts for child labor violations dating back to 2017 belong to franchised brands.

One of these highly franchised chains, McDonald’s, accounts for slightly less than the Roark penalty dollar total but a higher number of individual violations (2,262). Every McDonald’s violation was found at a franchised location.

One McDonald’s franchisee, Coughlin Inc., was cited for allowing more than 140 14- and 15-year-olds to work beyond the number of hours federal law permits. It also allowed these workers to use deep-fat fryers resulting in burns to two minors.[13] Another McDonald’s franchisee, Bauer Food LLC, was found to have worked two 10-year-old children as late as 2 a.m. and also to have failed to pay them properly.[14]

Wendy’s has the fourth largest parent penalty total at nearly $650,000, followed by: Berkshire Hathaway, which owns Dairy Queen ($565,632); and Restaurant Brands International ($468,733), which owns Tim Hortons, Burger King, Popeyes, and Firehouse Subs. The only retailer on the list, Abercrombie & Fitch, has the second largest penalties per-child worker at  $4,307.

Table 3. Child labor violations by parent company, sorted by total penalties

Note: Includes penalties paid by private equity portfolio companies and franchises operating under the company name. Source: U.S. Department of Labor Wage and Hour Division Compliance Action Dataset

Hazardous Industries Have the Highest Per-Worker Penalties

Although child labor violations are heavily concentrated in the fast-food and retail industries, the problem can also be found in other sectors. These include some highly hazardous occupations.

This is apparent when we analyze the average child labor penalty by industry. In the period we examined, janitorial services, which primarily consists of cleaning and sanitation companies, had the highest average, over $11,000 for each underage worker involved in a violation. This number reflects the inclusion of Packers Sanitation Services, Inc. (PSSI), which alone incurred $1.5 million in penalties from just 13 violations.

Table 4. Child labor violations by industry since 2017, sorted by total penalties

Source: U.S. Department of Labor Wage and and Hour Division Compliance Action Dataset

Contracting and construction services have each been penalized $3,500 and $4,200 per minor, respectively. Many of these violations have been for injuries or deaths due to hazardous work. In 2021, Stover and Sons Contractors Inc. in Tennessee was assessed a $122,000 penalty for the death of a 16-year-old boy who fell 160 feet after attempting to jump from a roof onto a power-driven hoisting device next to the building.[16]

Another contracting company, Apex Roofing & Restoration in Alabama, paid $177,000 earlier this year after a teen worker fell 50 feet to his death during his first day on the job.[17] Both of these companies were found to have willfully employed these underage workers and had violated other sections of the FLSA relating to overtime pay.

Child workers or their families are not awarded damages or restitution in cases of injury or death—these penalties are instead paid to the federal government.

The remaining less dangerous industries with lower per-employee penalties, such as grocery stores, restaurants, and amusements parks, have been cited for less dangerous violations like working too many hours or not providing adequate meal breaks. The average of the remaining per-minor penalties by industry (excluding janitorial, construction, and contracting services) is just $1,400—less than one-tenth of the maximum penalty for employing a minor.

Figure 1. Gustavo Ramirez (pictured) was 16 when he fell to his death at the site of a construction site. His family is suing the companies involved. Source: WSMV in Tennessee.

Policy Conclusions

Given that the FLSA is the first line of defense against illegal child labor — and in many states, the only meaningful protection — recent abuses make it clear there are ways it should be improved.

Here are our key federal policy recommendations:

• Federal civil money penalties for child labor violations need to be substantially increased to actually deter recidivism. A maximum penalty of $15,000 per worker is negligible for large corporations.
• Children themselves should receive back-pay awards and be able to sue for damages.
• Large companies need to be held accountable for child labor violations that occur either in their supply chains or through their subsidiaries or franchisees.
• The child labor provisions for agricultural work under the FLSA need to be improved to mirror non-farm work. Treating farm safety differently only puts migrants and other disadvantaged children at further risk in an industry that is already less visible.
• Federal agencies should be allowed to debar contractors with a high rate of recidivism for child labor violations.

Finally, our key state policy recommendation:

• State labor departments need to improve the disclosure of their own enforcement actions, which are currently not readily available in most states. The California Labor Commissioner’s Office and Massachusetts Attorney General’s Fair Labor Division are good examples of state transparency on child labor law violations.

Methodology

This report uses data from the U.S. Department of Labor’s Wage and Hour Division (WHD) Compliance Action Dataset that was most recently updated in April 2024. We specifically use the data relating to child labor that discloses civil money penalties assessed, the number of violations found, and the number of child employees affected. We use case details for 5,400 child labor enforcement actions between January 1, 2017 and December 31, 2023.

This report uses a different threshold than Good Jobs First’s Violation Tracker database, where we exclude cases with penalties of less than $5,000. Since penalties for child labor abuses are typically very low, it was necessary to include values below this amount to get the full picture. We include cases with monetary penalties of all sizes as long as the offender was a company and not an individual.

Many states do not disclose data on their enforcement activity, so we do not include any state-level data in this analysis.

All entries were run through Good Jobs First’s proprietary parent-subsidiary matching system. This system, which uses a combination of machine-generated suggested matches and human verification, identifies which of the entities named in the individual case announcements are owned by any corporations in our universe of more than 3,000 ultimate corporate parents. These include large publicly traded and privately owned for-profit companies, private equity portfolio companies, and major non-profit corporations.

In addition to identifying parent relationships, we matched entries to major franchisers as it was possible. The WHD dataset includes both legal and trade names, so we were able to match many of these independent franchisees to an associated chain. It is likely that these brand linkages are not apparent in some of the legal names provided, so our totals are almost certainly conservative.

Endnotes

[1] Child labor laws are under attack in states across the country. Economic Policy Institute. December 31, 2023. https://www.epi.org/publication/child-labor-laws-under-attack/

[2] History of child labor in the United States—part 1: little children working. U.S. Bureau of Labor Statistics, Monthly Labor Review. January 2017. https://www.bls.gov/opub/mlr/2017/article/history-of-child-labor-in-the-united-states-part-1.htm

[3] History of child labor in the United States—part 2: the reform movement. U.S. Bureau of Labor Statistics, Monthly Labor Review. January 2017. https://www.bls.gov/opub/mlr/2017/article/history-of-child-labor-in-the-united-states-part-2-the-reform-movement.htm

[4] Ibid.

[5] Fact Sheet #43: Child Labor Provisions of the Fair Labor Standards Act (FLSA) for Nonagricultural Occupations. U.S. Department of Labor Wage and Hour Division. December 2016. https://www.dol.gov/agencies/whd/fact-sheets/43-child-labor-non-agriculture

[6] Code of Federal Regulations: Child Labor Violations – Civil Money Penalties. August 1, 2024. https://www.ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-A/part-579

[7] Policies for states and localities to fight oppressive child labor. Economic Policy Institute. February 27, 2024. https://www.epi.org/publication/fight-oppressive-child-labor/#epi-toc-6

[8] Ibid.

[9] More states have strengthened child labor laws than weakened them in 2024. Economic Policy Institute. June 12, 2024. https://www.epi.org/blog/more-states-have-strengthened-child-labor-laws-than-weakened-them-in-2024-this-year-state-advocates-were-better-equipped-to-organize-in-opposition-to-harmful-bills/

[10] Department of Labor Wage and Hour Division’s Compliance Action Dataset

[11] U.S. Department of Labor News Releases. February 17, 2023. https://www.dol.gov/newsroom/releases/whd/whd20230217-1

[12] Profit Over Safety: Private Equity’s Leveraged Bet on Packers Sanitation. Private Equity Stakeholder Project. March 2022. https://pestakeholder.org/wp-content/uploads/2022/03/Packers-Sanitation-Blackstone-Leonard-Green-PESP-March-2022.pdf

[13] U.S. Department of Labor News Releases. September 12, 2022. https://www.dol.gov/newsroom/releases/whd/whd20220912-1

[14] U.S. Department of Labor News Releases. May 2, 2023. https://www.dol.gov/newsroom/releases/whd/whd20230502-0

[15] USA: Private auditors fail to detect child labour in supply chains of major supermarket & renowned food brands. Business & Human Rights Resource Centre. February 14, 2024. https://www.business-humanrights.org/en/latest-news/usa-private-auditors-fail-to-detect-child-labour-in-the-food-supply-chains-of-major-us-companies-incl-cos-responses-non-responses/

[16] U.S. Department of Labor News Releases. May 25, 2021. 2https://www.dol.gov/newsroom/releases/whd/whd20210525

[17] U.S. Department of Labor News Releases. February 7, 2024. https://www.dol.gov/newsroom/releases/whd/whd20240207

[18] DOL Says Hyundai Hired 13-Year-Old To Work Assembly Line. Law360. May 30, 2024. https://www.law360.com/compliance/articles/1842630?utm_source=shared-articles&utm_medium=email&utm_campaign=shared-articles

[19] U.S. Department of Labor News Releases. October 11, 2022. https://www.dol.gov/newsroom/releases/WHD/WHD20221011

[20] Working Children: Federal Injury Data and Compliance Strategies Could Be Strengthened. United States Government Accountability Office. November 2018. https://www.gao.gov/assets/gao-19-26.pdf

Cover photo credit: A child cleans at the JBS Beef Plant in Grand Island, Nebraska | U.S. Department of Labor.