Practical Guide to California’s Warehouse Quota Law

California’s Warehouse Quota Law (AB 701) imposes strict regulations on how warehouse distribution centers implement productivity quotas. The law directly impacts workforce management in logistics, e-commerce, and wholesale sectors. Employers who fail to comply face significant risks, including employee claims, fines from the Labor Commissioner, and class-action litigation.

If your company needs support with AB 701 compliance, employee handbook updates, or responding to Labor Commissioner audits, contact Susan Shu, Esq. at susan.shu@consultils.com. We provide tailored legal solutions for logistics and warehousing employers.

Who Is Covered by AB 701?

AB 701 applies to any employer that:

• Employs at least 100 workers at a single warehouse distribution center in California; or

• Employs at least 1,000 workers across multiple warehouse sites in the state.

Importantly, the law also includes outsourced and temporary workers hired through staffing agencies, as long as the employer controls key working conditions (e.g., schedules, location, pay). Because warehouse employers typically set the time, place, and tasks for all workers on-site, outsourced workers are nearly always counted under AB 701. Using staffing agencies does not shield employers from compliance responsibilities.

Key Compliance Requirements

1. Quota Disclosure

If an employer imposes any productivity targets—such as items scanned, picked, or packed per hour—it must provide employees with a written quota notice. This document must clearly state:

• The number of tasks or materials to be handled;

• The timeframe in which they must be completed;

• The consequences of failing to meet the quota.

Example: “During working hours, employees must pick X items per hour. Failure to meet this standard may impact performance evaluations.”

Employees also have the right to request their written quota notice and receive data on their work speed over the last 90 days. Employers must provide this information within 21 days of the request. Failure to respond within 30 days may result in a $750 penalty per violation.

If an employer takes any negative action (e.g., termination, pay cut, poor review) within 90 days of an employee’s quota-related complaint or request, courts will presume it is retaliation—potentially exposing the employer to liability. In California, courts tend to favor employees in retaliation claims, with individual damages often reaching six figures—and much more in class actions.

2. Quota Legality and Reasonableness

While employers are allowed to set quotas, they must be reasonable and cannot interfere with employees’ rights to:

• Take meal and rest breaks;

• Use the restroom;

• Comply with health and safety standards.

A quota is illegal if it explicitly or implicitly forces employees to skip breaks or work without pause. Even if not stated outright, unrealistic quotas that can’t be met without sacrificing legal rest time are also deemed unlawful.

Employers may be required to pay one extra hour of wages for each missed break due to such illegal quotas.

Compliance Tips for Logistics Employers

To meet AB 701 requirements, logistics employers should take the following steps:

1. Review Existing Quota Systems

Evaluate quotas across all warehouse functions—sorting, picking, packing, loading/unloading, and inventory. Ensure that performance standards can reasonably be met without skipping legally mandated rest or meal breaks. Adjust unrealistic quotas to prevent “forced tradeoffs” between compliance and output.

2. Strengthen Performance Management Processes

Avoid using quota completion rates as the sole factor in evaluations, discipline, or termination decisions. If a worker fails to meet a quota, document any external factors (e.g., equipment issues, order volume).

Be especially cautious when making adverse decisions within 90 days of any quota-related complaint or request, and maintain thorough business justifications to refute claims of retaliation.

3. Train Supervisors and Operations Managers

Provide compliance training on AB 701, with a focus on balancing quotas with workers’ legal rights. Prevent “unspoken pressure” from occurring on the warehouse floor—for example, verbal nudging or punitive shift assignments that discourage workers from taking breaks.

4. Update Staffing Agreements

If using outsourced or temporary workers, revise service contracts to require staffing agencies to cooperate with quota disclosure and data reporting requirements. If a staffing agency fails to meet these obligations, it should bear financial responsibility.

AB 701 signals a new era of labor regulation for California’s warehousing and logistics sector. Employers must now treat quota compliance as part of daily operational risk management—ensuring that productivity demands do not come at the cost of legal violations.

If your company needs support with AB 701 compliance, employee handbook updates, or responding to Labor Commissioner audits, contact Susan Shu, Esq. at susan.shu@consultils.com. We provide tailored legal solutions for logistics and warehousing employers.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Partner and Head of Transactions at ILS, Fiona delivers professional legal and strategic support to tech companies—with a focus on AI, medical devices, and fintech. Beyond full-spectrum technology law, she specializes in export control and compliance: supporting tech firms at all growth stages, aiding startups in scaling operations, and helping mature enterprises address regulatory challenges.

Previously, Fiona gained hands-on experience building legal frameworks from scratch. She advised unicorn companies on global expansion and regulatory hurdles, developing deep insight into clients’ growth challenges. Combining legal expertise with commercial judgment, she helps clients establish sustainable legal processes and provides clear guidance to advance their business.

Email:  fiona.xu@consultils.com | Phone: 626-344-8949

Susan is specialized in employment law and compliance, with additional experience advising logistics and supply chain companies on workforce compliance and risk management, as well as cross-border investments. With years of experience advising multinational clients, Susan focuses on workforce structuring, employee transfers, terminations, compensation and benefits, and workplace policies. She has extensive experience helping companies navigate complex labor regulations, manage cross-border employment issues, and resolve workplace disputes.

In addition, Susan advises on M&A, private equity, venture capital, and cross-border investments, including VIE frameworks, and prepares due diligence reports and transaction documents.

Email:  susan.shu@consultils.com | Phone: 626-344