September 10, 2025|Articles/Op-eds, Publications
Chavez-DeRemer v. HMMA: Court Lets Child Labor Joint Employment Suit Proceed Against Corporate Investor Brought by U.S. Department of Labor
By Thomas M. O’Connell
Insights
September 10, 2025|Articles/Op-eds, Publications
By Thomas M. O’Connell
September 10, 2025 | U.S. District Court for the Middle District of Alabama, Northern Division | Slip Copy
Executive Summary
In an unpublished memorandum opinion, Chief Judge Emily C. Marks of the U.S. District Court for the Middle District of Alabama largely adopted a magistrate judge’s recommendation and denied motions to dismiss by Hyundai Motor Manufacturing Alabama, LLC (“HMMA”) and Smart Alabama, LLC (“SMART”), while granting dismissal without prejudice for a staffing agency that was no longer in business. The Secretary of Labor alleged that a 13-year-old girl and other minors were employed at SMART’s facility producing parts for HMMA, in violation of the Fair Labor Standards Act (“FLSA”). HMMA and SMART argued lack of Article III standing, constitutional infirmity in the Acting Secretary of Labor’s appointment, and insufficient pleading of knowledge. The court rejected these arguments, holding that the Secretary plausibly alleged joint employment and sufficient threat of future injury. The case will proceed against HMMA and SMART, but not the defunct staffing agency.
Relevant Background
The Department of Labor alleged that a 13-year-old girl, identified as “EC,” was employed by a staffing agency and placed at SMART’s Luverne, Alabama, factory from July 2021 through February 2022. According to the complaint, EC worked 50–60 hours per week operating heavy machinery used to shape automotive components. Her young appearance and inconsistent identification documents did not prevent her from being hired. The situation came to light only after she failed to return home one evening, prompting an AMBER alert. Further investigation revealed that child labor had been “widespread” at the SMART facility.
The Secretary alleged close ties between HMMA and SMART: HMMA owned a majority interest in SMART’s parent, provided over $100 million in financing, supplied manufacturing equipment, placed HMMA officers on SMART’s board, and retained authority to audit SMART’s compliance with child labor laws. The government contended that these facts supported joint employer liability under the FLSA.
Defendants challenged the complaint on three principal grounds: lack of Article III standing to pursue prospective relief, unconstitutional appointment of then-Acting Secretary Julie Su, and insufficient pleading of knowledge. They also sought to dismiss claims against the staffing agency, Best Practice Service, LLC (“BPS”), which had ceased operations.
Decision
Judge Marks denied HMMA’s and SMART’s motions to dismiss but granted BPS’s motion because its defunct status defeated redressability. Several holdings are significant for franchisors, private equity investors, and other employers:
Looking Forward
Family-owned franchisees sometimes allow their children or their children’s friends to “help out” at the business. While often well-intentioned, this practice can create FLSA violations if minors work excessive hours or perform prohibited tasks. These risks are not diminished by ownership structure or familial ties.
The Chavez-DeRemer case illustrates the broad risks that child labor allegations create for companies with complex operational structures, including franchisors and their franchisees. Even when violations occur at a supplier or unit level, oversight authority and brand protection measures can draw the parent entity or investor into litigation.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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