California Passes Law Regulating Quotas in Warehouse Distribution Centers

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On Sept. 22, 2021, Governor Newsom signed AB 701, aimed at regulating quotas in warehouse distribution centers, into law. Here is what employers need to know.

Which Employers Must Comply with the New Law?

Effective Jan, 1, 2022, employers with 100 or more employees at a single warehouse distribution center or 1,000 or more employees at one or more warehouse distribution centers in the state must comply with the new quota disclosure requirements. The law defines “Warehouse distribution centers” as:
an establishment as defined by any of the following North American Industry Classification System (NAICS) Codes, however that establishment is denominated:

(A) 493110 for General Warehousing and Storage.
(B) 423 for Merchant Wholesalers, Durable Goods.
(C) 424 for Merchant Wholesalers, Nondurable Goods
(D) 454110 for Electronic Shopping and Mail-Order Houses.

The law specifies that the term “warehouse distribution center” does not include NAICS Code 493130, Farm Product Warehouse and Storage.

What are the Quota Disclosure Requirements?

Each employer must provide to each nonexempt employee, upon hire, or within 30 days of the effective date of this law, a written description of each quota to which the employee is subject. This written description must include “the quantified number of tasks to be performed or materials to be produced or handled, within the defined time period, and any potential adverse employment action that could result from failure to meet the quota.”

The law defines “quota” to mean “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.”

Which Quotas are Unenforceable under AB 701?

Employers cannot enforce quotas that prevent an employee from (1) taking compliant meal and rest periods, (2) complying with occupational health and safety laws, or (3) using bathroom facilities, including reasonable travel time to and from the bathroom facility (yes, this is specifically stated in the law).

What if an Employee Complains About an Alleged Violation?

If a current or former employee believes that meeting a quota caused a violation, they have the right to request, and the employer must provide, (a) a written description of each quota applicable to the employee and (b) a copy of the most recent 90 days of the employee’s own “personal work speed data,” or the “information an employer collects, stores, analyzes, or interprets relating to an individual employee’s performance of a quota.” 

The request may be made orally or in writing, and the employer has 21 calendar days from the date of the request to provide the information.

In addition, the law creates a rebuttable presumption of unlawful retaliation if an employer in any manner discriminates, retaliates, or takes any adverse action against an employee within 90 days of an employee’s complaint of a violative quota or request for quota information or work speed data.

Can Employees Sue for Violations of this Law?

Yes, employees can file lawsuits based on violations of this law. The law authorizes current or former employees to bring a lawsuit for injunctive relief to obtain compliance with the law, and if they prevail, they are entitled to recover costs and attorney’s fees. Employers may also be exposed to civil penalties under California’s Private Attorneys General Act of 2004 (known as “PAGA”), but employers are given the right to cure any alleged violations under Labor Code section 2699.3.

Employers Should Act Now to Ensure Compliance

Employers with warehouse distribution centers should carefully review their quota systems to first determine if the quotas are necessary, and if so, ensure compliance with this new law. This begins with ensuring that employees are provided with compliant meal and rest breaks, are able to comply with OSHA laws and regulations, and have ample time to take bathroom breaks in light of the quotas. Employers should next begin preparation of clear written descriptions of any and all quotas, since they will need to be distributed to all new and current employees in January 2022.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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