Update: On September 22, 2021, Governor Newsom signed AB 701 into law.

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The California legislature has wrapped up its annual legislative session, once again sending a number of employment and labor law bills to Governor Newsom’s desk.  One of the most notable, and potentially revolutionary bills – AB 701 – seeks to regulate the use of employee “quotas” in warehouse distribution centers.

According to the bill’s statement of purpose, quotas placed on warehouse distribution center employees lead to “high rates of injury and illness.” The bill states that quotas also affect the compensation of employees, preventing them from receiving the full benefit of state and local minimum wages if a quota is increased to make up for the impact of a minimum wage increase.  AB 701 addresses these perceived wrongs by placing a number of restrictions on the use of quotas in California warehouse distribution centers.

The new law would apply only to warehouse distribution centers, as defined by specified North American Industry Classification System (NAICS) codes,¹ and excludes farm product warehousing and storage. 

The bill broadly defines a “quota” 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.

AB 701 requires that a covered business provide to each employee, within 30 days of hire, or within 30 days of the effective date of the new law (which, if the governor signs the bill, will be January 1, 2022), a written description of each quota to which the employee is subject.  The 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.  A covered employer may not take adverse employment action against an employee for failure to meet any quota that has not been disclosed in writing to the employee as required by the law.

The bill makes unlawful any quota that prevents an employee from taking a meal or rest period, prevents the use of bathroom facilities, including reasonable travel time to and from bathroom facilities, or infringes on California occupational health and safety laws.  A covered employer may not take adverse employment action against an employee for failure to meet such an unlawful quota.

AB 701 further provides that any action taken by an employee to comply with occupational health and safety laws must be considered “time on task” and “productive time” for purposes of any quota.

The new law would also give employees the right to request a copy of any quota, as well as the most recent 90 days of the employee’s own personal “work speed data.”  Work speed data is defined broadly as

… information an employer collects, stores, analyzes, or interprets relating to an individual employee’s performance of a quota, including, but not limited to, quantities of tasks performed, quantities of items or materials handled or produced, rates or speeds of tasks performed, measurements or metrics of employee performance in relation to a quota, and time categorized as performing tasks or not performing tasks.

Former employees also have a right to request information about quotas and their work speed data.  However, a former employee is limited to only one such request.

Employers are required to comply with such requests as soon as practicable, but no later than 21 calendar days from the date of the request.

The bill provides that a rebuttable presumption of unlawful retaliation will exist if an employer in any manner discriminates, retaliates, or takes any adverse action against any employee within 90 days of either:  the employee’s making the first request in a calendar year for information about quotas or work speed data, or the employee’s making a quota-related complaint related to the employer or to a government agency.

If the bill is signed into law, the California labor commissioner will be charged with enforcement, including the power to subpoena records relating to quotas and work speed data.  Individual employees will also be free to pursue a private lawsuit against an employer for alleged violations.  If successful, in addition to injunctive relief, employees could be awarded attorneys’ fees and costs.  Private Attorney General Act (PAGA) claims are also possible, although there is a limited “right to cure” available to an employer.

The bill also provides that local district attorneys and city attorneys may enforce the provisions of the new law.

Among the more novel features of the bill, AB 701 would require that the labor commissioner issue a report to the Legislature by January 1, 2023, disclosing the number of claims filed under the new law, data on warehouse production quotas in warehouses in which the Division of Workers’ Compensation has indicated that annual employee injury rates are above the industry average, and the number of investigations undertaken and enforcement actions initiated, per employer.

Further, AB 701 provides that if a particular worksite or employer is found to have an annual employee injury rate of at least 1.5 times higher than the warehousing industry’s average annual injury rate, the Division of Occupational Safety and Health or the Division of Workers’ Compensation shall notify the labor commissioner, and the labor commissioner must determine whether an investigation of violations is appropriate.

Finally, the law expressly states that local governments – cities and counties – may adopt ordinances that provide “equal or greater protection to employees.”

Much has been written about a possible “California contagion” – that new laws that originate in California may eventually spread across the country.  Whether or not AB 701 is signed into law, it seems likely that other states and cities could also now look to further regulate the workplace by passing “quota” laws of their own.

Governor Newsom has until October 10, 2021 to either sign or veto AB 701.