California Enacts Law Aimed at Work "Quotas" Set by Employers With Warehouse Distribution Centers

On September 22, 2021, Governor Newsom signed AB 701 into law, a bill that will require large employers to ensure quotas do not interfere with warehouse worker meal and rest periods under California's wage orders. Below is a summary of the new law.

1. Which employers are covered under AB 701?

Businesses, staffing agencies, and individual owners who employ 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 who utilize quotas in their performance metrics.

A "quota," under the law, 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."

2. What is a "warehouse distribution center?"

Warehouse distribution centers include establishments that fall within classification codes 423, 424, 493110, 494110 under the North American Industry Classification System (NAICS) for general warehousing and storage, merchant wholesalers for durable and nondurable goods, and for electronic shopping and mail-order houses.

Farm product warehousing and storage centers are excluded from coverage.

3. What does AB 701 require of qualified employers?

Upon hire, employers must provide a written notice that describes each task assigned within the timeframe of the quota and the consequences to the employee should they fail to make the quota. There is a 30-day grace period for employers to implement this notice on its current workforce once the law takes effect.

4. Which quotas are barred under AB 701?

Any quota set by an employer that prevents the employee from taking meal and rest periods, using bathroom facilities, or otherwise violating occupational health and safety laws.

5. How is AB 701 enforced?

Current and former employees who believe that their rights have been violated must provide notice to their employers of the disputed quota and any supporting documentation regarding the tasks performed and the rate of speed to complete the task.

Current and former employees may make this request orally or in writing. Employers have 21 calendar days from the date of the request to provide its response.

6. How does AB 701 affect workplace discrimination and harassment laws?

If an employer takes disciplinary action on an employee within 90 days of that employee requesting information about or making a complaint related to their quota, the employer will have to prove that it did not unlawfully discriminate against or harass the aggrieved employee for making the request or complaint.

7. What are the penalties to employers because of non-compliance?

Employees may seek a court order to force employers to comply with the rule, individually or under California's Private Attorney General Act (PAGA). The employee will be entitled to reimbursement of costs and attorney's fees.

Should the employees file a PAGA action, employers will be granted the right to fix their error before having to pay penalties.

8. When is the effective date of AB 701?

January 1, 2022.