Seyfarth Synopsis: Governor Gavin Newsom has approved AB 701, which will impose notice and other requirements on employers of employees subject to quotas in large California warehouse distribution centers, and has vetoed AB 616, an agricultural worker card check bill.

Acting on the first two major employment-related bills of interest to private employers, Governor Newsom on September 22, 2021 approved AB 701 (AM Lorena Gonzalez, D-San Diego) and vetoed AB 616 (AM Mark Stone, D-Scotts Valley).

The Governor’s signing announcement states that AB 701 (effective January 1, 2022) “establishes new, nation-leading transparency measures for companies to disclose production quota descriptions to their workers and prohibits the use of algorithms that disrupt basic worker rights such as rest periods, bathroom breaks or compliance with health and safety laws. The legislation ensures workers cannot be fired or retaliated against for failing to meet an unsafe quota and allows them to pursue injunctive relief.”

Here are the bill’s key provisions, the consequences it creates, and the steps that covered employers should take.

Key Requirements and Prohibitions

AB 701 adds several Labor Code sections that will require employers with over 100 California employees at a single warehouse distribution center—or with 1000 or more California employees at multiple warehouse distribution centers—to give each nonexempt employee (including employees of third-party employers, temporary services, or staffing agencies) a written description of any quota that applies. This notice is to include (1) the number of tasks to perform or materials to produce or handle, (2) the relevant time period, and (3) any potential adverse employment action that could result from a failure to meet the quota. This written description must be provided upon hire, or by within days of the January 1, 2022, effective date.

AB 701 defines “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 prohibits employers from requiring employees to meet quotas that prevent compliance with meal or rest periods, use of bathroom facilities (including reasonable travel to/from), occupational health and safety laws in the Labor Code, or occupational health and safety standards. AB 701 also prohibits employers from taking adverse employment actions for any failure to meet any quotas that (1) has not been disclosed or (2) does not allow a worker to comply with meal or rest periods or occupational health and safety laws/standards.

AB 701 provides that any action taken by an employee to comply with occupational health and safety standards be considered time on task and productive time for the purposes of any quota or monitoring system. For instance, frequent required handwashing, donning/doffing necessary personal protective equipment, and lockout/tag out of equipment are common safety measures required by safety laws and regulations that would now ostensibly need to be counted as productive time. (AB 701 clarifies that meal and rest periods are breaks not considered productive time unless the employee is required to remain on call.)

Does This Apply To You?

Wondering if your distribution center subjects you to this bill? The bill defines “warehouse distribution center” as establishments falling within four specific North American Industry Classification System Codes—merchant wholesalers of durable and nondurable goods (423 and 424), general warehousing and storage (493110, excluding farm products), and electronic shopping and mail-order houses (454110).

What Information Do Covered Employers Have to Provide to Employees?

Current or former employees who believe that meeting a quota caused a violation of meal or rest standards or required them to violate a Cal/OSHA standard may request—and the employer must provide within 21 days—a written description of each applicable quota, together with a copy of the most recent 90 days of the employee’s personal work speed data.

AB 701 limits former employees to one such request. Also, the employer does not need to create data to satisfy a request, so if you do not monitor quotas or work speed you have no obligation to provide the information.

Consequences for Non-Compliance?

AB 701 creates a rebuttable presumption of unlawful retaliation if an employer discriminates, retaliates, or takes any adverse action against any employee within 90 days of the employee requesting information about a quota or about personal speed data, or complaining about a quota or violation of any of the above provisions. Complaints qualifying for protection include any report to the employer, to the Labor Commissioner, the Cal/OSHA, or to any other local or state governmental agency.

AB 701 empowers individual employees and the Labor Commissioner to enforce its provisions. AB 701 authorizes current or former employees to sue for injunctive relief, and prevailing employees may recover costs and reasonable attorney’s fees.

AB 701 also requires the Labor Commissioner to issue citations and access worker’s compensation data to identify facilities where there are high rates of injury likely due to the use of unsafe quotas, and to report to the Legislature the annual number of claims filed, 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. AB 701 also authorizes the Labor Commissioner to adopt regulations regarding employee complaint procedures.

AB 701 specifically addresses the PAGA liability question, stating that in any PAGA action to enforce AB 701 the employer will have the right to cure the alleged violations in accordance with Labor Code section 2699.3.

“Plain Language, Please?”

Practically speaking, what does the bill’s passage mean for employers?

(1) Employers should check if they are subject to AB 701: do they maintain a qualifying warehouse distribution center and meet the employee thresholds?

(2) Covered employers should evaluate their quota systems and document the bases for establishing those quotas, to establish that the quotas do not directly or indirectly run afoul of any wage/hour or safety requirements. The evaluation should ensure that any action taken by employees to comply with occupational health and safety standards (such as those that may be set by Cal/OSHA) are considered productive time for the purpose of any quota or monitoring system.

(3) In the next few months, covered employers should prepare the required written description of each quota so that required notices are ready to be distributed to new hires effective January 1, 2022, and to all employees with 30 days thereafter.

(4) Covered employers should be aware of the quota information that must be disclosed within 21 days if a current or former employee requests that information.

A Note on the Governor’s Veto of AB 616

Governor Newsom has vetoed AB 616, which would have created a process for agricultural employees to elect a labor representative through a ballot card election. In his veto message, the Governor cited inconsistencies and procedural issues related to the collection and review of ballot cards and directed the Labor and Workforce Development Agency to work with the Agricultural Labor Relations Board to go back to the drawing board and develop new policy proposals for legislative consideration.

Workplace Solutions

The passage of this new law poses some significant new requirements on many companies operating in the warehouse distribution space. If you have questions about how this law may apply to your workforce, or need assistance designing quota descriptions and employee disclosures, please contact your favorite Seyfarth attorney for assistance.

Edited by Coby Turner