In September 2021, Governor Newsom signed Assembly Bill (AB) 701, which regulates the use of quotas at warehouse distribution centers in California.

AB 701 requires employers with large warehouse distribution centers to disclose quotas and pace-of-work standards to each employee upon hire or within 30 days of the law going into effect.

AB 701 went into effect January 1, 2022, and employers must provide notice to covered employees of the quota requirements by January 31, 2022.

California’s Labor Commissioner who is charged with enforcement of AB 701 has published FAQs regarding AB 701.

The following are some of the highlights from the FAQs.

Warehouses Covered

AB 701 covers employers who directly or indirectly control 100 or more employees at a single warehouse distribution center or 1,000 or more employees at one or more warehouse distribution centers in California. Employees provided by outside staffing agencies may also be included where the employer controls the terms and conditions of employment for those employees.

Definition of a Quota

A “quota” is defined as “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.”

This would include processing a required number of packages in a specific amount of time, such as 200 packages per hour. It would also include having to clear all packages from a conveyor belt based on belt speed, clearing all incoming or outgoing inventory within a single shift, or filling a certain number of containers in a specific time or in one work shift.

Information to Provide to Employees

Covered employers must provide to each employee a written description of each quota the employee works under. This includes the number of tasks to be performed or materials that must be produced or handled within a time period, and any potential adverse employment action that could result from failing to meet the quota.

Limitations on Use of Quotas

An employee cannot be required to meet a quota that prevents compliance with meal or rest periods, use of bathroom facilities (including reasonable travel time to and from bathrooms), or compliance with occupational health and safety standards.

A quota that prevents compliance with meal or rest periods, use of bathroom facilities, including reasonable travel time to and from bathroom facilities, or occupational health and safety laws in the Labor Code or division standards is unlawful and may not be the basis for an adverse employment action. A quota may be illegal if it directly or indirectly precludes employees from exercising these statutory rights.

The Labor Commissioner provides this example: a quota that requires that employees always are engaged in productive activity during work hours would be unlawful as it would directly prevent employees from taking meal and rest periods and prevent them from using bathroom facilities during work hours or exercising their rights regarding health and safety standards.

Employers covered by AB 701 should continue to check the Labor Commissioner’s FAQs as updates may occur as enforcement of the bill begins in the coming months.