AB 701 – California Passes Quotas in Warehouses Law

Recently a new bill has been signed into law regarding employment regulation and quota use for warehouse distribution centers in the state of California. This bill, AB 701, is intended to stop large employers from setting quotas that may interfere with their warehouse staff members’ rest and meal periods. 

Now, many warehouse businesses will need to make amendments to the way they assign quotas and perform business. In addition, the enforcement of this bill will require new tasks and responsibilities for both warehouse workers and leadership staff members to be executed appropriately. These changes are made to ensure workers can get the right to meals and rest they deserve, without fear of facing negative repercussions due to the establishment of unfair quota timeframes.

Naturally, businesses and staff members in California have many questions about the new bill, like who it will affect, how it will affect workers and staff, and what measures they need to be taking. In this piece, we will be covering all of these details so that you can be armed with the necessary information about the AB 701 bill.

What is AB 701?

Governor Gavin Newsom signed the AB 701 bill into law on September 22, 2021. The signing of this bill will require many warehouse businesses to change their quota and employee management processes, effective in 2022. These changes and stipulations regarding the California new law have been developed with the intention of avoiding the interference of quotas with warehouse worker meal and rest periods.

The following quote provides more information on the new law and how it will affect businesses in the California warehouse distribution workforce:

Effective January 1, 2022 AB 701 requires companies to disclose production quota descriptions to their workers and prohibits the use of algorithms that disrupt basic worker rights such as rest periods, bathroom breaks or compliance with health and safety laws. The legislation ensures workers cannot be fired or retaliated against for failing to meet an unsafe quota and allows current or former employees to pursue injunctive relief.

California’s New Law Explained

This new law will put new requirements for California warehouse distribution center businesses. To explain this in basic terms, affected warehouse employers will need to provide a written notice to their employees upon hire. This notice is to describe each of the tasks that can be assigned within their duties, as well as the timeframes that they will need to complete the task within. 

Finally, the notice will include consequences for failure to complete the tasks within the timeframe specified. After the law took effect on January 1, 2022, employers had a grace period of 30 days to implement the notice on their current workforce.

In the following subsections, we provide a more in-depth breakdown of all of the different factors of the new AB 701 California law.

AB-701: Key Requirements and Prohibition

The AB701 law will affect warehouse businesses based on stipulations regarding the number of workers they employ. The law applies to employers of single warehouse distribution centers with over 100 California employed workers or employers with 1000 or more California employed workers at multiple warehouse centers. 

These affected employers will need to provide their non-exempt employees with written notices regarding their applicable quotas. This does not include the following exempt employees: workers employed by staffing agencies, temp services, or third-party employers. 

When determining the exemption status of your employees, remember to consider the California AB5 law, which extends employee classification status to certain gig workers.

The employers must give their non-exempt workers notices regarding their quotas. The notices will include their tasks, the amount of tasks or duties they must perform, the time periods they will have to perform these tasks, and any consequences they could face should they fail to meet the quota. 

Employers must immediately provide written quota description notices to their existing employees and their new workers upon hire when carrying out warehouse staffing. Additionally, any onboarding systems utilized by affected warehouse distribution centers should contain documentation of these written quota descriptions.

How Warehouse Distribution Centers are Defined

This subsection provides information on which warehouse distribution center establishments are included in this new law. As represented by their North American Industry Classification System (NAICS) Codes, the California establishments affected by the law include:

  • 493110 for General Warehousing and Storage.
  • 423 for Merchant Wholesalers, Durable Goods.
  • 424 for Merchant Wholesalers, Nondurable Goods.
  • 454110 for Electronic Shopping and Mail-Order Houses.

However, it is important to be aware that the law does not apply to NAICS Code 493130, Farm Product Warehousing and Storage warehouse distribution centers.

Defining Quotas Under California’s AB 701

So how does this new law define quotas? Well, the AB 701 law refers to quotas as being “a work standard under which an employee is assigned or required to perform at a specified productivity speed, or perform a quantified number of tasks, or to handle or produce a quantified amount of material, within a defined time period and under which the employee may suffer an adverse employment action if they fail to complete the performance standard.”

The law prohibits affected California warehouse employers from requiring their workers to meet any quota that could interfere with their meal or rest periods or their bathroom facilities use, including travel to/from these facilities. Additionally, workers should not be required to meet quotas that would interfere with their occupational health and safety standards or occupational health and safety laws in the Labor Code.

The law states that employers are prohibited from taking adverse employment actions upon workers that fail to meet quotas that haven’t been properly disclosed or interfere with their meal periods, rest periods, or occupational health and safety laws/standards.

Additionally, any action taken by the worker to comply with occupational health and safety standards should be considered time on task and productive time for the purposes of a monitoring system or quota. However, rest and meal periods shouldn’t be considered productive time unless the task requires that the worker remain on call. 

AB 701 also discusses PAGA liability, should alleged violations occur. The law states that the employer will have the right to cure alleged violations before a PAGA claim is filed according to the California Labor Code.

What AB 701 Means for Employers and Their Employees

So how exactly will employers and workers affected by this law be impacted? The following text will provide insight into factors that California warehouse employers and employees will face due to the law’s passing.

Disclosing Quotas

The law requires employers to provide descriptions of quotas to each of their new employees upon hire and each of their existing employees within 30 days from the law taking effect. The written description will notify workers of the number of tasks they must perform and the time period in which they must be completed, as well as any potential adverse employment actions that they may face if they are unsuccessful in their timely completion of the quota.

So what if a current or former employee believes that their quota requirements interfered with their meal, rest, or Cal/OSHA standards? In this case, the worker may request from their employer a written description of any and all applicable quotas along with a copy of their personal work speed data for their most recent 90 days of work. 

These requests regarding violations should be made to their company, not their client. Their company employer must then coordinate with the client on complying with the regulations and provide the worker with these materials within 21 days of their request.  

However, the AB 701 warehouse law does set limitations on former employees regarding this process. Former employees are limited to only one such request, and the employer is not required to create data to satisfy requests from previous employees. Therefore, if the client fails to monitor quotas or work speed, they are not obligated to provide this information.

AB 701 and Workers’ Compensation

AB 701 also contains requirements regarding citations and worker’s comp. According to the law, the Labor Commissioner is required to issue citations and access worker’s compensation data, including the annual number of files claimed, data on quotas in facilities with above-average employee unjust rates, and the number of investigations that have occurred and enforcement actions that have been initiated. 

AB701 implements these requirements in order to identify applicable California warehouse distribution center facilities with high rates of injury, as this is likely due to the utilization of quotas that are unsafe. Additionally, the law authorized the Labor Commissioner to adopt procedures that regulate employee complaint processing. 

Compliance Actions for Employers

To comply with this new law, employers must take action regarding their warehouse operations, clients, and employees. If you have warehouse clients with over 100 California employees at a single warehouse distribution center—or with 1000 or more California employees at multiple warehouse distribution centers in California, the following steps should be taken:

  1. Review your employees’ positions, and identify any that would qualify for the California Warehouse Quota requirements.
  2. Ensure that your client provides a written description to any warehouse workers, as necessary.
  3. Provide a written description for all of your existing CA warehouse employees within 30 days of the law taking effect. Additionally, provide a written description to all new CA warehouse employees upon hire.
  4. Collaborate with your client, and obtain a copy of their written quota description for documentation purposes. Add this copy to your organization’s onboarding systems.

Penalties for Violations of AB 701

Should employers violate the AB 701 law, they will risk facing penalties. To protect employees, the law creates a rebuttable presumption of unlawful retaliation should the lawyer take any adverse action against an employee within 90 days of them requesting quota information, personal speed data, or complaining about a quota or a violation of the law’s provisions. The complaints that qualify would include reports to the Labor Commissioner, Cal/OSHA, the employer, client, or any local or state governmental agency.

According to AB701, current or former workers are authorized to sue for injunctive relief. Prevailing employees in this situation may recover costs and reasonable attorney’s fees. 

Employers can also face penalties brought on under the Private Attorneys General Act (PAGA), but if an employee under the new law files the PAGA claim for violations, employers can cure the alleged violations under Labor Code section 2699.3.

AB 701 Effective Date 

The effective date of the AB 701 law was January 1, 2022.  

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