New California Law Targets Warehouses—and Perhaps All Employers That Use Performance Metrics

A new California law, Assembly Bill (AB) No. 701, provides new regulatory scrutiny of job performance quotas at warehouse distribution centers. The stated purpose of the law is to ensure that the use of production quotas do not penalize workers for taking meal and rest breaks, using the restroom, and complying with other health and safety standards.

All California employers that use quotas or other production metrics may want to consider documenting that their standards do not impede employee opportunities for compliant, uninterrupted, duty-free time for meal and rest breaks and California Labor Code health and safety protections.

Rationale for the Law

Proponents of the law assert that workers at warehouse distribution centers have to meet unreasonable quotas that prevent employees from taking compliant meal and rest breaks, or even restroom breaks, and from enjoying other health and safety protections.

As such, the law imposes new quota disclosure requirements for warehouses, prohibits warehouse employers from counting employee time spent complying with health and safety laws as “time off task,” and requires enhanced enforcement of these provisions by the California labor commissioner.

Key Definitions

Important definitions in the law include the following:

• A covered “employer” refers to a warehouse distribution center of 100 or more employees at a single location, or 1,000 or more employees at 1 or more locations in California.
• “Quota” means a set number of tasks that an employee must perform within a specified time period; failure to meet a quota may result in an adverse employment action.

Key Provisions

Key provisions of the law include the following:

• Warehouse employers must provide “[e]ach employee, upon hire or within 30 days … a written description of each quota” that applies to that employee’s job duties “and any potential adverse employment action that could result from the failure to meet the quota.”
• An employee cannot be required to meet a quota that prevents compliance with meal, rest, or restroom breaks (“including reasonable travel time” to and from the restroom), state occupational health and safety laws, or the California Division of Occupational Safety and Health’s (Cal/OSHA) standards.
• Employers are prohibited from taking an “adverse employment action against an employee for failure to meet a quota that does not allow a worker to comply with meal and rest periods” or health and safety protections.
• A current or former employee who believes that a quota prevented him or her from taking meal or rest breaks or using the restroom has the right to the employer’s written description of each quota and a copy of that employee’s personal work record from the most recent 90 days under the quota requirements.
• There is a rebuttable presumption of unlawful retaliation if an employer discriminates against or takes any adverse action against an employee within 90 days of the employee: (1) asking for his or her quota and personal work-record data or (2) making a complaint related to a quota violation.
• If a warehouse distribution center has an annual employee injury rate of at least 1.5 times higher than the warehousing industry’s annual average, Cal/OSHA or the Division of Workers’ Compensation must notify the labor commissioner for further investigation.
• A current or former employee may file a lawsuit for injunctive relief to obtain compliance with the law’s provisions.
• An employer has the right to cure alleged violations before an action seeking penalties under the Private Attorneys General Act (PAGA) can be brought.

On this last cure provision, PAGA limits the number of times an employer can cure an alleged violation.

For example, for some types of alleged violations, an employer may use the cure provision no more than 3 times in a 12-month period for the same violation, regardless of the worksite. If a warehouse has hundreds of employees, and multiple locations in California, the cure provision may be exhausted quickly with just a few claims.

Key Takeaways

Warehouse distribution center employers may want to consider the following:

• Consider developing written quota disclosure documents and distributing them to every employee. In order to comply with AB 701, consider including in the disclosures certain information about the quota and the potential adverse actions that could result from failing to meet the quota. Employers may also consider reaffirming that the company requires and encourages employees to take all compliant meal and rest breaks and all restroom breaks, as needed, and that the company expects employee compliance with all health and safety standards in the workplace. Employers may also consider distributing notices stating that the company requires employees to report to human resources any concerns that their job requirements prevent them from taking compliant meal and rest breaks or from complying with other health and safety protections. The disclosures may emphasize that the company strictly prohibits any retaliation against employees who report concerns about these issues.
• Consider creating a formal process that provides employees with the opportunity to review their quota and work speed data upon request, and documents that process to demonstrate compliance with this new law.
• Because of the new rebuttable presumption of retaliation, warehouse employers may also want to consider adding protected activity under this new law to their separation checklist of risks to consider prior to deciding to separate an employee.

Non-warehouse employers that use objective performance metrics to evaluate employee performance may also consider developing and maintaining detailed documentation showing that employees have ample time to take compliant meal, rest, and restroom breaks and still meet the productivity standards required for their jobs. This new law reflects a predominant legal theory among the plaintiffs’ bar that objective performance metrics are inherently illegal because they inevitably require employees to work through their meal and rest breaks and off the clock in order to meet the objectives. However, industrial engineers can often demonstrate that an employer’s performance metrics and schedules enable employees to meet quotas while also affording them ample time for duty-free meal and rest breaks, restroom breaks, and other time off.

Requiring employees to work more time is not the primary or even the preferred way for employers to increase productivity. Instead, employers may be able to use better technology and improved manufacturing processes to increase productivity, and thorough documentation of these facts may be able to help defend against PAGA claims and class actions.

A version of this article was previously published by Law360.