Hearthside Food Solutions, a snack producer backed by private equity, has agreed to pay $4.5 million to resolve an investigation by Illinois authorities regarding allegations of child labor at its facilities. This settlement comes as the company filed for bankruptcy last month.

As part of the agreement, Hearthside will establish an email inbox and telephone hotlines for employees to report any incidents involving minors working at its Illinois locations. The settlement requires approval from a bankruptcy judge and addresses investigations led by Illinois Attorney General Kwame Raoul and the Illinois Department of Labor.

Hearthside became aware of the investigations following a New York Times article that highlighted the employment of migrant children at its processing plant in Grand Rapids, Michigan. The company operates multiple production facilities across several states and in Canada. When it filed for Chapter 11 protection in November, Hearthside indicated that some investigations into its labor practices were still ongoing but did not anticipate significant penalties or judgments.

The company maintains that it has never knowingly employed underage workers and has taken steps to reduce its reliance on staffing agencies and temporary labor. Hearthside attributes its labor issues to the practices of third-party staffing agencies. In court documents, the company has consistently disputed any allegations of wrongdoing regarding its labor practices and denies any violations of child labor laws.

The settlement is seen as a way to avoid lengthy and costly litigation, which would aid in the company's Chapter 11 reorganization process. Hearthside, acquired by private equity firms Charlesbank Capital Partners and Partners Group Holding AG in 2018, has also entered a restructuring agreement that will enable it to eliminate over $1.9 billion in debt and secure $200 million in new equity upon exiting Chapter 11.

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