WASHINGTON: Employers must notify warehouse employees of quotas

Governor Jay Inslee recently signed legislation requiring employers of warehouse distribution center employees to notify them of any production quotas, effective July 1, 2024 (HB 1762). Here are the requirements:

Covered industries: A warehouse distribution center is an establishment engaged in activities as defined by any of the following North American Industry Classification System (NAICS) codes: 493 (warehousing and storage, but not 493130 (farm product warehousing and storage)); 423 (merchant wholesalers, durable goods); 424 (merchant wholesalers, nondurable goods); or 454110 (electronic shopping and mail-order houses). Unfortunately, the bill’s reference to NAICS code 454110 is outdated – that code existed in 2017 but was split into 43 different codes in 2022. Subject to clarification in regulations from the Washington Department of Labor and Industries (L&I) or in future legislation, Vigilant recommends using the 2017 NAICS database to determine applicability of code 454110.

Covered employers: Employers who employ or exercise control over the wages, hours, or working conditions of 100 or more employees at a single warehouse distribution center in the state of Washington or 1,000 or more employees at one or more warehouse distribution centers in the state of Washington are covered by this law. All employees, including those employed through a temporary agency and through the employer’s affiliates, must be counted.

Covered employees: Nonexempt (overtime-eligible) employees are covered by the law.

Quota defined: The bill defines “quotas” broadly: “a work performance standard, whether required or recommended, where: (a) 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; or (b) an employee’s actions are categorized between time performing tasks and not performing tasks, if the employee may suffer an adverse employment action if they fail to meet the performance standard.” The first category describes a traditional quota system, but the second seems to describe ordinary employee performance expectations; we hope L&I will provide guidance.

Initial notification requirements: Upon hire, or within 30 days of the effective date of the law, covered employers must provide a written description of each quota to which an employee is subject. The written notice must include the quantified number of tasks to be performed or materials to be produced or handled within a defined time period, any potential adverse employment actions resulting from failure to meet a quota, and any incentives or bonus programs associated with meeting or exceeding a quota.

Changes in quotas: When a quota changes after the initial written description is communicated, you must notify the employee verbally or in writing as soon as possible and before the employee is subject to the new quota. You must also provide the employee with an updated written description of each quota to which the employee is subject within two business days of the change.

Discipline for failure to meet a quota: Whenever you take an adverse action against an employee in whole or in part for failure to meet a quota, you must provide the applicable quota and personal work speed data that was the basis for the adverse action. The written description provided to the employee must be understandable, in plain language, and in the employee’s preferred language.

Calculating productive periods: The time periods designated as productive time under a quota system must take into account: (1) time for rest breaks, including reasonable travel time to designated break areas; (2); reasonable travel time to on-site designated meal break locations (but not the meal period itself, unless you require an employee to remain on duty on the premises or at a prescribed worksite in the interest of your organization); (3) time to perform any activity required to do the work subject to any quota; (4) time to use the restroom, including reasonable travel time; and (5) time to take any actions necessary for the employee to exercise their right to a safe and healthful workplace, such as time to access tools or safety equipment. Reasonable travel time to locations for breaks, meal periods, and restrooms must take into consideration the architecture and geography of the facility and the location within the facility where the employee works.

Record retention: The law also imposes significant record retention requirements. If you use quotas, you must establish, maintain, and preserve accurate, contemporaneous records of each employee’s own personal work speed data; the aggregated work speed data for similar employees at the same warehouse distribution center; and the written descriptions of each quota the employee was provided pursuant to this law. The bill imposes three different but overlapping retention periods for these records: (1) keep all records throughout the duration of each employee’s employment; (2) keep records relating to the six-month period before the date of the employee’s separation from employment for at least three years after the date of separation; and (3) keep records relating to any adverse actions against an employee in whole or in part for failure to meet a quota for at least three years from the date of the adverse action. The bill also grants current and former employees the right to request free copies of some of these records. We will be updating our Legal Guides, Record Retention and Employee and Third-Party Access to Personnel Records.

No retaliation: The bill prohibits retaliation against employees and former employees and creates a rebuttable presumption that any adverse employment action taken within 90 days of an employee engaging or attempting to engage in protected activities is a retaliatory act in violation of the law.

Penalties: Covered employers and their “agents” and “affiliates” can all be held accountable for failing to comply with the law. L&I is tasked with enforcing the law, and penalties include fines of up to $1,000 for first violations and up to $10,000 for repeat violations.

Tips: Even though the effective date is more than a year away, now is the time to determine whether your industry and size qualifies your organization as a covered employer under the new law and to assess whether any of your production standards could qualify as a quota. If so, determine whether to make any adjustments to your system, and prepare for complying with the notification and recordkeeping requirements that will take effect on July 1, 2024. Questions? Contact your Vigilant Law Group employment attorney.