On September 22, 2021, Governor Newsom signed AB 701 into law aimed at “warehouse distribution centers” and the use of quotas.  While the law was drafted to curtail alleged practices of Amazon, it will impact many warehouses across California.  Here are five key questions California employers need to understand about the new law:

1. Which employers must comply with AB 701?

The new law applies to 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 of California.  Warehouse distribution centers are defined 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 makes clear that “warehouse distribution center” does not include NAICS Code 493130, Farm Product Warehousing and Storage.

2. What quota disclosures are required to employees?

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.”

Employers must provide to each employee upon hire or within 30 days once the law takes effect, a written description of each quota that applies to the employee, and the “quantified number of tasks to be performed or materials to be produced or handled, within the defined timer period, and any potential adverse employment action that could result from failure to meet the quota.”

Current and former employees who believe that meeting a quota caused a violation of their right to take a meal or rest period or required them to violate an occupational health and safety law, the employee may request the following:

  • A written description of each quota applicable to them, and
  • The employee’s own “personal work speed data.”

Current and former employees may make this request orally or in writing, and employers have 21 calendar days from the date of the request to provide the information.

3. Which quotas cannot be enforced by employers under AB 701?

The new law provides that employees shall not be required to meet quotas that prevents the employee from taking compliant meal and rest periods, using bathroom facilities (including reasonable travel time to and from the bathroom), or violating occupational health and safety laws.  Employers may also not take adverse employment actions against employees who do not meet a quota due to taking a compliant meal and rest break or complying with the health and safety laws, or if the quota was not disclosed to the employee as discussed above.

4. What are the penalties for violations?

Employees may bring a lawsuit for injunctive relief to obtain compliance with the requirements, and if they prevail in the action, they are entitled to recover costs and attorney’s fees.  Employers may also be exposed to penalties in representative actions brought under the Private Attorneys General Act (PAGA).  However, the new law does provide that if the employee files a PAGA claim for violations under the new law, employers can cure alleged violations under Labor Code section 2699.3.

5.  When does the law take effect?

AB 701 takes effect January 1, 2022.