A Labor Department spokesman, Eric Lucero, told Reuters that the agency’s Wage and Hour Division has an open investigation into Ajin, but declined to confirm whether the probe was related to child labor.
In its statement, Ajin said it “will cooperate fully” with any investigations by regulators and law enforcement.
Hyundai, in a statement, told Reuters it “does not condone or tolerate violations of labor law” and requires that “our suppliers and business partners strictly adhere to the law.” Kia, for its part, said it “strongly condemns any practice of child labor and does not tolerate any unlawful or unethical workplace practices internally or within our business partners and suppliers.”
Hyundai and Kia, South Korea’s two largest automakers, are sister companies controlled by parent Hyundai Motor Group. Both companies told Reuters they are reviewing hiring practices used by their suppliers.
The discovery of child labor at additional plants in Hyundai’s American supply chain could deal a fresh reputational blow to a company whose fast growth and popularity in recent years has led it to become the third-largest automaker by U.S. sales.
The earlier reports of child labor drew law enforcement and regulatory scrutiny to the company’s ability to meet its own professed ethical standards and comply with basic labor regulations in the United States.
In-house human rights policies, posted by both brands online, prohibit child labor at Hyundai and Kia facilities and among their suppliers, too. Alabama and U.S. law restrict factory work for people under age 16, and all workers under 18 are forbidden from many hazardous jobs in auto plants, where metal presses, cutting machines and speeding forklifts can endanger life and limb.
After the earlier reporting by Reuters on child labor at suppliers SMART and SL, Hyundai’s COO Jose Munoz told the news agency he ordered the carmaker’s purchasing department to cease business with the suppliers named in the news reports “as soon as possible.” He also said the company would investigate all suppliers to Hyundai’s Alabama operations.
Hyundai, Munoz added, would seek to end the use of third-party staffing agencies that many of its suppliers have relied upon to vet and hire workers.
Hyundai is now backing away from Munoz’s remarks.
In its recent statement to Reuters, Hyundai said it has canceled its plans to cut off suppliers where minors have worked. Two of its suppliers, SMART and SL, have taken “corrective actions” to fire staffing agencies they found problematic, it said.
Noting the “important economic role” that parts makers play in many small Alabama towns, Hyundai added, “additional oversight is a better course at this time than severing ties with these suppliers.”
Hyundai declined to make Munoz available for a follow-up interview.
The use of third-party staffing agencies is a common practice among manufacturers and other labor-intensive sectors throughout the U.S. The tactic has long been criticized by labor activists because it gives factory owners and other employers the ability to outsource responsibility for the screening, hiring and regulatory compliance of their workforces.
Earlier this year, Reuters showed how staffing agencies in rural Alabama recruited undocumented workers from Central America, including minors who had entered the U.S. without parents or guardians, and supplied them to chicken processing plants.
As with those minors, at least some of the children who worked at Hyundai suppliers used false identities and documentation obtained through black-market brokers, sometimes with the help of staffing firms themselves.
To understand how child labor took root in the supply chain of one of the world’s most successful automakers and in the job market of the world’s richest country, Reuters interviewed more than 100 current and former factory workers and managers, labor recruiters, state and federal officials, and others.
Reporters spent weeks around auto parts factories in rural Alabama and reviewed thousands of pages of court records, corporate documents, police reports and other records.
“It’s shocking,” David Weil, a former administrator of the Wage and Hour Division of the Labor Department, said of the signs of widespread child factory work. “The ages involved, the danger of what they are being employed to do, it’s a clear violation.”
Across Alabama, a sprawling and partially interconnected network of suppliers and staffing agencies, many Korean-owned, exists to serve the Hyundai brands. Hyundai operates an assembly plant in Montgomery, the state capital. Kia builds cars across the state line in West Point, Ga.
Both states, so-called “right to work” jurisdictions whose laws allow workers to reject unions and thereby undercut the power of organized labor, have attracted numerous automakers and follow-on investments, as recently as this year, granting them billions of dollars in tax breaks and other incentives along the way.
A key element of Hyundai’s supply network is its ability to provide “just-in-time” delivery of parts, a staple of modern manufacturing meant to minimize stockpiles of materials. To avoid halting assembly lines, Hyundai can fine suppliers – sometimes thousands of dollars per minute – for any delay, according to people familiar with its operations.
Pressure to deliver, several current and former employees at suppliers told Reuters, intensified in recent years because of the labor and supply shortages that crippled manufacturers during the COVID-19 pandemic.
The struggle to meet demand, labor law experts say, has increased chances that employers cut corners to keep assembly lines staffed, whether employees are legally allowed to work or not.
“It seems like the stage was set for this to happen,” said Terri Gerstein, director of the state and local enforcement project at Harvard Law School’s Labor and Worklife Program. “Plants in remote, rural areas. A region with low union density. Not enough regulatory enforcement. Use of staffing agencies.”
The shortage of labor across manufacturing, and the low pay offered by some plants and agents for factory jobs, often attract job candidates most pressed for work – particularly undocumented migrants and minors.
“When you have workers who are desperate for jobs and they’re not empowered and you have a lot of competition, you often see a race to the bottom,” said Jordan Barab, a former deputy assistant secretary at the Occupational Safety and Health Administration, the federal workplace regulator.
So far, SL, the manufacturer in the central Alabama town of Alexander City, is the only Hyundai or Kia supplier charged with violating child labor laws. On Aug. 9, state and federal labor and law enforcement officials found seven workers between the ages of 13 and 16 on the SL factory floor, according to people familiar with the operation and government documents.
The U.S. Labor Department in a court filing said SL Alabama had “repeatedly violated” the law “by employing oppressive child labor.” It fined the company about $30,000. Alabama’s Department of Labor fined SL and one of its staffing agencies a total of about $36,000.
SL told Reuters in October it was cooperating with investigators and auditing its employment policies. The company said it had terminated the staffing agency fined by Alabama labor regulators and fired the president of SL’s Alexander City plant. The plant’s former president couldn’t be reached for comment.
Among the children found working at the plant, Reuters learned, were two Guatemalan brothers, aged 13 and 15, who were taken into protective custody by federal authorities.
While they worked at SL, the brothers lived without their parents, staying with other factory workers in a sparsely furnished house owned by the president of the staffing agency that hired them, according to property records, family members, and a former coworker interviewed at the home in Alabama.
A teenage cousin who worked at the factory with the brothers said that no one at SL ever verified workers’ ages.
“They didn’t ask any questions,” the cousin said.
Reuters isn’t naming the cousin and other minors and undocumented migrants interviewed for this story, but confirmed their identities and local employment history with authorities.
Since Reuters’ first report on child labor in Hyundai’s supply chain, staffing firms have fired foreign workers from at least five factories, current and former employees said, particularly any who appeared too young to legally work in the plants. The dismissals make it harder for authorities to investigate, officials said, because the employees may have been working under aliases and some moved away after being fired.
