Snack Maker Hearthside Settles Illinois Child Labor Probe

(Bloomberg) — Private equity-backed snack producer Hearthside Food Solutions has agreed to pay $4.5 million to end an investigation by Illinois authorities into allegations the business used child labor at facilities in the state.

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Hearthside, which filed for bankruptcy last month, has also agreed to set up an email inbox and telephone hotlines for employees to report alleged incidents of minors working at its Illinois facilities, according to papers filed Friday in Texas bankruptcy court.

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The settlement, which must be approved by a bankruptcy judge, would resolve investigations by Illinois Attorney General Kwame Raoul and the Illinois Department of Labor. Hearthside said in court papers that it became aware of government investigations after the New York Times published a story last year about migrant children who worked at its processing plant in Grand Rapids, Michigan. The company also operates production facilities in several other states and Canada.

When it sought Chapter 11 protection in November, Hearthside said some government investigations into its labor practices were ongoing, though it said the company didn’t expect those inquiries to result in material judgments, fines or penalties. 

The snack producer has said it never knowingly employed underage labor in its facilities and has significantly reduced its use of staffing agencies and temporary labor. The business has attributed its labor issues to the use of third-party staffing agencies, according to court documents.

Hearthside said in Friday’s court filing that it has “consistently and firmly disputed any allegations of wrongdoing” with respect to its workforce or labor practices. The company denies liability and that it violated child labor laws, according to the settlement. 

The company said the settlement avoids costly and time-consuming litigation and help facilitates its Chapter 11 reorganization

Hearthside, which was acquired by private equity firms Charlesbank Capital Partners and Partners Group Holding AG in 2018, has also entered into a restructuring agreement that will allow it to shed more than $1.9 billion of debt and obtain $200 million in new equity once it exits Chapter 11.

The case is H-Foods Holdings LLC, case number 24-90586, in the US Bankruptcy Court for the Southern District of Texas.

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