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Modern ShipperNewsTop StoriesTruckingTrucking RegulationWarehouse

California legislation targets Amazon, but all warehouses would be impacted

Senate expected to OK AB 701 soon, after earlier approval by Assembly

A bill that could have a major impact on California’s giant warehouse sector is headed toward a full vote by the state Senate, with Amazon seen as its primary target.

The legislation is AB 701, given the AB designation because it came out of the state Assembly. And its sponsor is Assemblywoman Lorena Gonzalez, the sponsor of another bill, AB 5, that has had significant impact on independent contractors in the state and may eventually come to regulate the trucking industry’s use of them.

The legislation doesn’t mention Amazon by name. But since AB 701 was introduced earlier this year, it generally has been viewed as a proposal to regulate certain activities in the state’s final-mile warehouses, with Amazon particularly in Gonzalez’s crosshairs. (A spokesman for her office declined FreightWaves’ request for comment on the proposed legislation.)

Two Senate committees approved the legislation in late August. It is unclear when it will be taken up by the full Senate, but Rachel Michelin, president of the California Retail Association, expects it to be soon. The Assembly voted overwhelmingly in favor of the legislation, and Michelin expects it to pass the Senate. 

One possible complicating factor in predicting its fate: Gov. Gavin Newsom has not signaled his stance on the legislation. And on Sept. 14, Newsom faces a recall election. Michelin said she expects that Newsom would sign AB 701 if it passes and he hangs on to his job. 

Newsom also was relatively silent on AB 5 when it was winding its way through the state legislature, but he ultimately signed it.

Michelin did not dispute that Amazon was the focus of AB 701. “The author is really targeting one particular company,” she said to FreightWaves in a telephone interview.. 

Rachel Michelin, California Retailers Association

On the surface, the changes in warehouse operations that would be required under AB 701 do not seem overly onerous. But the reaction to them from opponents of the bill, seen through various public commentaries, is fierce.

The Senate Judiciary Committee that approved the legislation put together a lengthy document that spelled out both supporters’ and opponents’ view of what is wrong — and right — with the bill, and by extension, the warehouse sector.

“The bill essentially sets down two key rules and then builds mechanisms around them to make sure they are enforceable,” the Judiciary Committee’s report said.

Quotas are at the root of the “key rules.” One rule in AB 701 is that when a worker is hired, the employee must be given a “written description of all the work quotas to which the worker will be subject, as well as what the consequences will be if the worker fails to meet those quotas,” according to the Senate committee summary.

With that list in hand, another key rule can be invoked: that employees can’t be expected to meet quotas whose demands would prevent the workers from being able to comply not just with occupational safety rules in general but with permitted rest and meal breaks. 

And the AB 701 legislation decrees that if it is necessary for workers to spend time complying with occupational and safety rules, that time should not be counted when figuring out whether quotas were met.

In an interview with FreightWaves, Michelin said the “most troublesome” part of AB 701 was the extension of the California Private Attorneys General Act (PAGA) into the issue. Or as the Senate Judiciary Committee report said, “the potential interaction of (PAGA) with this bill has, to this point at least, been a significant source of contention among the stakeholders.”

PAGA allows an employee to “act as a stand-in” for the labor commissioner in taking an action against an employer that alleges violation of state safety and employment laws, according to the Senate report. “In this way, PAGA acts as a force multiplier for the Labor Commissioner,” the report said.

“California is a litigious state,” Michelin said of her group’s concern about the PAGA expansion, echoing the oft-heard description of employee lawsuits as frequently cheaper to settle than fight. 

One of the most common arguments from opponents is that the state’s occupational regulations are already adequate to deal with the issues that AB 701’s sponsors are citing. 

“We are not opposed to compliance with existing legal protections,” the state’s Chamber of Commerce wrote in its comments. “Our opposition stems from the overbroad standards contained in AB 701 and the litigation which it will bring on warehouses across the state.” That is a clear reference to the PAGA provisions. 

Michelin said her coalition’s belief is that adequate regulations are in place already to deal with the issues raised by the backers of AB 701. The coalition would prefer that agencies like the Labor Commission be “empowered and to really give them the resources.”

But the impact of 701 wouldn’t end with private litigation. The Senate summary of the bill says AB 701 would give the labor commissioner the power to adopt regulations for employees to make complaints against their employers, and also makes clear that localities can make their own ordinances regarding warehouse issues. 

For a law targeting worker safety, there aren’t any actual safety provisions in the bill. It doesn’t demand new standards or tighter regulation, except for a provision that says that the state safety division known as Cal/OSHA should develop “a new set of health and safety standards specific … to warehouse work.”

It’s mostly about arming employees with tools to use if they believe they are being forced to act in a way that violates existing safety regulations. 

The Senate summary lists 60 groups or governments that have weighed in supporting the bill, including major labor organizations and governments such as the city of Sacramento. The list of groups opposing the bill, like the coalition led by the retailers, is just under 30.

Quoting one of the letters the Senate committee received in support of the bill, “growth in business is only speeding up conditions inside warehouses.”

“Amazon warehouse workers complain of relentless quotas and crushing workloads, managed through a system of constant surveillance,” the letter said. “To keep up with Amazon, Walmart and other competitors have been forced to also offer two-day and next-day delivery, leading to a dangerous rise in quotas and time pressures.”

A spokeswoman for Amazon said the company is declining to comment on AB 701. However, Michelin said that as a member of the California Retail Association, Amazon has been active in efforts to push back against the legislation.

Tight warehouse space in California already has led some retailers to look at building warehouses in neighboring states, according to Michelin. Additionally, the sector already was facing tighter emissions regulations from the provisions of the indirect source rule.

“It is just layer after layer, like a hamburger,” Michelin said. The specter of more litigation through the extension of the PAGA provisions, she said, “is just going to cause companies to say we’d rather have our distribution centers outside the state.”

More articles by John Kingston   

If AB5 comes to California trucking, there may be a way out: The B2B exception

New Jersey bill backed by key leaders seeks more local input on warehouse growth

Two divisions of Covenant settle in big case by drivers alleging “no hire” conspiracy

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.

3 Comments

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  2. California communism and socialism crushing personal freedom and your ability to have plentiful jobs because the employers are being targeted as the enemy !! Large corporation should start completely pulling out of the California state in entirety!!! Amazon should block all of its products getting shipped to California and remove all of its corporate and shipping facilities. Enough is enough It’s time to send California and extremely strong message that we are tired of their tyrannical overreaching and massive controlling government that has a thirst for power and control that is insatiable !!!

  3. The article fails to mention that the PAGA provision included in the bill is a “right to cure” provision (Labor Code Section 26699.3(c)). No right to sue under PAGA arises if the employer “cures” the alleged violation within 33 days of being notified. Another bit of the PAGA bogeyman here.

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