California Creates New Issues for Supply Chain Employers

Date   Oct 8, 2021

On September 22, 2021, California Governor Gavin Newsom signed into law Assembly Bill 701 (AB 701), another “first in the nation” law, this time taking aim at perceived health and safety issues applicable to certain warehouse workers. Effective January 1, 2022, the new law, codified in California Labor Code §§ 138.7 and 2100-2112, will regulate covered supply chain employers who meet the definitions for a warehouse distribution center set forth in new California Labor Code § 2100. This includes “General Warehousing Storage;” “Merchant Wholesalers, Durable Goods;” “Merchant Wholesalers, Nondurable Goods;” and “Electronic Shopping and Mail Order Houses.” “Farm Product Warehousing and Storage” facilities are expressly excluded from that list.

The law's author, Assemblywoman Lorena Gonzalez (D – San Diego) and former labor leader, noted that AB 701 is California’s first step in tackling an emerging issue arising where employers use artificial intelligence to set work procedures. The legislation’s goal, she said, is to prevent injury by requiring humans—not algorithms—to set procedures.

The new law imposes new disclosure mandates upon employers and provides new legal protections for covered employees.

The new law requires covered employers, defined in part as having 100 or more employees at a single site, or 1,000 or more employees at one or more warehouse distribution centers within California, to provide employees with an initial disclosure of all quotas and standards to which each employee will be subject, upon hire or within 30 days of the law going into effect.

Specifically, the disclosure must describe each quota the employee is (or will be) required to meet, "including the quantified number of tasks to be performed or materials to be produced or handled, within a defined period, and any potential adverse employment action that may result from failure to meet the quota." Cal. Labor Code § 2101.

The law also mandates a secondary level of disclosures, occurring when an employee believes that meeting a quota required him or her to miss a rest or a meal period or that the production quota resulted in a violation of any occupational health and safety law or standard. When either of those events occurs, an employer must provide a written disclosure of each quota applicable to that employee and a copy of the most recent or last 90 days of the employee’s own personal work speed data report, if one is maintained. Cal. Labor Code § 2104(a). A former employee is limited to one request. Cal. Labor Code § 2014(a)(3).

Interestingly, the new law broadly defines what constitutes an employee work speed report. "Employee work speed data" will mean "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." Cal. Labor Code § 2100(e)(1). The law does not require employers to monitor or record this data. Cal. Labor Code § 2104(c). Employers that do not monitor this data have no obligation to provide it.

The new law contains several new legal protections for covered employees. For example, the statute prohibits an employer from enforcing any production quota that prevents compliance with meal or rest periods, use of bathroom facilities, or occupational health and safety laws. Cal. Labor Code § 2102. Additionally, it protects covered employees from being disciplined for failing to meet a quota that has not been disclosed or that does not allow a worker to comply with meal or rest periods or occupational health and safety laws. Cal. Labor Code § 2102.

The new law further requires an employer to consider any action taken by an employee to comply with occupational health and safety laws or division standards as "time on task" and "productive time" for any applicable production quotas or production monitoring system. Cal. Labor Code § 2103. The new law creates a rebuttable presumption of retaliation favoring employees whenever an employee is disciplined within 90 days of that employee’s request for information or submission of a complaint to the commissioner, the division, other local or state governmental agency, or to the employer.

The new law also can be enforced through a Private Attorney General Act (PAGA) action. An aggrieved employee or former employee, on their own, is authorized to bring an action for injunctive relief to obtain compliance with specified requirements and may, upon prevailing in the lawsuit, recover costs and reasonable attorney's fees in that action.

The new law's sponsors consider the statute a logical reaction to supply chain employers' "ruthless demands" on employees. California state senator David Cortese (D – Santa Clara), the chair of the California Senate Labor, Public Employment and Retirement Committee, recently stated in a news conference: “ruthless demands are forcing workers to skip bathroom breaks, working every day in fear of losing their job and risking their health and physical well-being, even during the pandemic.”

Meshing with the PAGA, the new law authorizes the California Labor Commissioner to enforce the new law's provisions by engaging in coordinated and strategic enforcement efforts with the Department of Industrial Relations, including the Division of Occupational Safety and Health and the Division of Workers’ Compensation. The new law authorizes the Commissioner to have access to data from the Department of Industrial Relations, including employer-reported injury data and enforcement actions in warehouses, the identity of uninsured employers, and employers who are committing workers' compensation fraud, wage theft, or other information relevant to the Commissioner's authority, and would make other conforming changes.

The implications of the new law to an aggrieved worker pursuing a PAGA claim are clear. A PAGA plaintiff would potentially accede to the Labor Commissioner's authority to discover and enforce this statute's employer information disclosure obligations. This information might prove helpful in subsequent coordinated efforts by employee groups targeting a supply chain employer in an action seeking damages, including punitive damages. The information adduced in a PAGA action based on the statute might then be used to support otherwise unfounded allegations of fraud, oppression, or malice, leading to the imposition of punitive damages.

In response to this new statute, covered employers should carefully review their existing or any new production quotas or evaluation metrics that are based on productivity to ensure that they can be met without preventing employees from taking meal or rest breaks, or violating other workplace safety rules.

This statute goes into effect on January 1, 2022. We will continue to keep you updated as guidance on this new law is published. If you have any questions regarding the law or other labor or employment-related issues impacting California employers, please contact the authors of this Alert, Terry Higham,, and Jack Schaedel,, both of whom are partners in our Los Angeles office. Of course, you can also contact the FordHarrison attorney with whom you usually work.