DOWNERS GROVE, ILL. — Hearthside Food Solutions LLC has agreed to pay $4.5 million to settle an Illinois Office of the Attorney General and Department of Labor investigation of alleged child labor law violations by the food contract manufacturer.

H-Food Holdings LLC, Hearthside’s parent, received approval of the settlement in a Dec. 6 order by the US Bankruptcy Court for the Southern District of Texas in Houston, where the company filed for Chapter 11 bankruptcy protection on Nov. 22.

In the Dec. 4 settlement with the state of Illinois, Hearthside noted that its agreement to pay the settlement amount didn’t represent “an admission, concern or concession as to liability, wrongdoing or any violation of law” and said it “specifically denies violation of the child labor laws.”

Hearthside reiterated its denial of liability and wrongdoing and said the company “has never knowingly employed underage labor in any of its facilities” in a Dec. 16 email statement on the settlement.

“Hearthside has reached an efficient resolution with the Illinois Office of the Attorney General and the Illinois Department of Labor that protects its customers and their brands; avoids the costs, resources and time associated with further litigation; and allows Hearthside to refocus its efforts on driving its ongoing workforce transformation while positioning itself for future growth,” Hearthside said. “Hearthside looks forward to moving the company into the future on strong footing, leaving past challenges behind and positioning the business for sustained growth as we continue to deliver best-in-class, quality products and services that customers can depend on.”

Hearthside had been featured in a New York Times article in February 2023 alleging that the food manufacturer and many other companies employed underage migrant children at their plants. In a Dec. 13 disclosure statement on its Chapter 11 reorganization plan, parent H-Food Holdings cited the article and ensuing investigations as among the factors that led to its filing for bankruptcy protection.

“In February 2023, the company was the subject of a New York Times article raising certain labor issues which the company maintains were principally connected to one or more third-party staffing agencies,” H-Food said in the disclosure filing. “The company vigorously disputes the bases for the allegations raised by the New York Times, but the effects of that article were immediate and severe: adverse media attention, customer scrutiny, and a series of investigations begun by different government bodies.

“For its part, the company responded forcefully to review, assess and further enhance its own labor policies and practices. The company has made significant investments to ensure its ability to provide a strong employee base that is fully compliant with applicable laws and regulations, including by substantially reducing its use of third-party staffing agencies and ensuring that all employees are subject to appropriate identification, eligibility and verification procedures. Additionally, the company has been fully cooperative and actively engaged with government officials and regulators.”

A hearing on conditional approval of the reorganization plan disclosure is scheduled for Jan. 24, 2025, in the US Bankruptcy Court in Houston. To fund operations during the Chapter 11 process, Hearthside is securing approval of $300 million of debtor-in-possession financing, including $150 million of new money from current lenders. The company said the restructuring will enable it to eliminate over $1.9 billion in debt and secure $200 million in new equity capital upon exit from Chapter 11, expected in the first quarter of 2025.