Another New California Corporate Social Responsibility Disclosure Requirement on the Horizon

California Assembly Bill 3234 is nearing the finish line. If adopted, an employer that has voluntarily subjected itself to a social compliance audit would be required to post a clear and conspicuous link on its website to a report detailing the findings of its compliance with child labor laws. The posting requirement would apply whether the audit is conducted in whole or in part to determine if child labor is involved in the employer’s operations or practices.

As defined in the Bill, a child is a person under 18. Child labor is work performed by a child in violation of state or federal law. A social compliance audit is defined as a voluntary, nongovernmental inspection or assessment of an employer’s operations or practices to evaluate whether they are in compliance with state and federal labor laws. This would include but not be limited to wage and hour and health and safety regulations, including those regarding child labor.

The report contemplated by AB 3234 would be required to indicate (1) when the audit was conducted and whether it was conducted during a day shift or night shift, (2) whether the employer engaged in or supported the use of child labor, (3) whether the employer exposed children to any workplace situations that were hazardous or unsafe to their physical and mental health and development and (4) whether children worked within or outside regular school hours or during night hours for the employer. The report also would be required to include a copy of any written policies and procedures the employer has and had regarding child employees.

AB 3234 is expected to be signed by California Governor Newsom, given its overwhelming bi-partisan support. On August 26, the Bill passed the Assembly with 77 votes in favor and 2 abstentions. It passed the Senate on August 20 with 36 yes votes and 4 abstentions. 

Five Quick Take-aways

• AB 3234 would not impose a substantive requirement to conduct social compliance audits, relating to child labor or otherwise. However, it would require specified disclosures concerning those audits.
• Subject companies will need to put in place processes to meet the compliance requirements of AB 3234.
• As a threshold matter, legal and compliance teams will in many cases need to do some fact-finding to assess whether their company will have an AB 3234 compliance requirement.   
• An open question is whether an unintended consequence of AB 3234 will be changes to social compliance audits.
• AB 3234 will further add to the increasingly complex and interconnected nature of corporate social responsibility disclosure requirements. For example, as applicable, AB 3234 disclosures by multinationals will need to be synched up with disclosures under the Canadian Fighting Against Forced Labour and Child Labour in Supply Chains Act (discussed in this and other Ropes & Gray alerts) and the European Union’s Corporate Sustainability Reporting Directive (discussed in this and other Ropes & Gray alerts).                  

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