Amazon (NASDAQ: AMZN) is known for being the online (and soon-to-be brick and mortar) retailer carrying pretty much whatever you want and getting it to you fast -- sometimes crazy fast. What the company isn't known for is worker safety.
Last year, Amazon reported 6.5 injuries per 100 warehouse workers, a rate 50% higher than the average for all U.S. warehouse workers. And while the safer-at-home lifestyle the coronavirus pandemic brought gave the already powerful retailer a big boost, it also increased pressure inside its warehouses and focused a brighter spotlight on the questionable working conditions.
In February, New York sued the retailer for failing to adequately protect its workers during the pandemic. My colleague Maurie Backman has also covered the ongoing attempts at unionization these conditions have helped spur -- and that the company continues to fight.
With Amazon coming in as the nation's second-largest employer after Walmart, with 950,000 employees, it's no wonder worker issues in its warehouses attract so much legal attention. And yesterday, a new California bill aimed at eliminating unreasonable quotas and promoting quota transparency became the first such bill in the nation to pass. Let's look at what's in the bill and how big of a threat it poses to Amazon's business model.
What changes now
Amazon employees have long complained not only that the company's quotas are too strict to meet in a safe, healthy manner but also that the quotas themselves are often unclear. Under California's AB-701, employers will be required to provide employees with a clear, written description of all quotas they're expected to meet as well as any consequences for not meeting them.
Further, employees can no longer be required to meet quotas that interfere with:
- Meal or other break times.
- Restroom use as needed.
- Any occupational health and safety laws.
Additionally, anything employees need to do to be compliant with health and safety procedures must now be counted as "time on task" for productivity purposes. Employers will also be legally prohibited from retaliating against employees in any way, up to and including termination, for failing to meet quotas that either haven't been presented to them in writing or are unenforceable under the new bill.
According to the L.A. Times, the bill's author, assembly member Lorena Gonzalez (D-San Diego), is quite clear about which company the bill is targeting but also about wanting to prevent others from following Amazon's lead.
Gonzalez said, "Amazon has set the pace, creating a market for next-day delivery of consumer goods. We see Walmart and other large warehouses following suit. We need to make sure our laws catch up with that."
So while the bill is Amazon-inspired, it's important to note that every company with a warehouse distribution center in California will be impacted.
The Millionacres bottom line
Despite questions about whether they're safe or humane, Amazon's demanding warehouse worker quotas have become an important part of its business model. With relaxed quotas in place, either customers will have to wait longer for their purchases or Amazon will have to pay more employees to do the work at a less-intense pace and pass on those costs to consumers.
It may sound like Amazon could simply up and leave California, but it's not that simple. For one thing, Amazon has more fulfillment and sorting centers in California than any other state, which would make relocating them all a logistics nightmare.
But perhaps even more importantly, the passage of this California bill may be the sign of a turning tide. It may signal that the days of unrealistic, potentially dangerous worker quotas are coming to an end in America. It will be interesting to see if similar bills are introduced in other states. In any event, retail and industrial real estate investors should keep an eye on this situation. Change has been set in motion. Just how far it will go remains to be seen.