Amazon Fined for Breaking Labor Law
Amazon Fined for Breaking Labor Law
California protections require changes to production quotas
I was brimming with naive excitement back in spring 2016 as I walked into my first session of Employment Law. Over the next four months, I learned that learning about American employment law is learning there’s not much to learn.
In comparison with other developed economies, the US work environment is sparing in meaningful worker protections.
Unless an employer is being obviously unsafe or discriminatory, they can rest assured laws are tilted heavily enough in their favor to spare them substantial legal defense fees. Which allows them to plow those freed monies into occasional skirmishes with ordinarily drowsy regulators.
That landscape may be starting to change. Some states are passing laws which recognize how employment trends of the past couple decades have reshaped the contemporary workplace.
California is one such state, and it is focused on working conditions in the warehouses of retailers like Amazon, which employs more than 170,000 people across the state according to the most recent figures.
In 2022, California passed a law specifically focused on warehouse operations called AB-701. If you need a cure for insomnia, you can read the text yourself here.
Otherwise, enjoy this snip of the provisions relevant to this vignette.
In plain English, this law imposes two new requirements.
Warehouses which use production quotas to measure employee performance have to tell employees what those quotas are, in writing, along with any consequences of failing to meet them.
Quotas cannot prevent employees from taking breaks, using the bathroom, or seeing to their safety, and so must incorporate these basics.
The point of the law is health and safety. California doesn’t want workers who are already in physically demanding roles hurting themselves trying to keep pace with unreasonable quotas. By imposing limits and transparency, the state takes a healthy interest in worker safety.
This is not only the right thing to do, it’s smart policy. Fewer medical claims, reduced disability compensation, and a more robust and healthy workforce will reduce burdens on public resources, allowing tax revenues to stretch further.
Last week, the California Labor Commissioner’s Office (CLCO) slapped Amazon with a $5.9M fine for breaking the warehouse quota law 59,017 times in six months at two of its San Bernardino County warehouses. Half of the employees at the two centers are implicated.
CLCO says it informed every warehouse operator across the state, including Amazon, after the law was passed. It also says compliance across the state has been strong, making Amazon’s violations of the law exceptional rather than normal.
Why?
Why, other than the fact that $5.9M wouldn’t qualify as a molecule of dust on the cover of Amazon’s annual expense report, has the retailer failed to comply with such a basic requirement?
This is where it gets interesting.
The biggest clue comes from media reporting, which exposes how Amazon communicated with employees about the regulatory change.
Seems Amazon told its workers there was nothing to see here. Yes, they’re in a warehouse. Yes, their working speed is monitored. Yes, it’s monitored because managers consider it when assessing their performance.
But somehow, none of this matters.
This matches the corporate response from spokesperson Maureen Lynch Vogel:
“The truth is, we don't have fixed quotas. At Amazon, individual performance is evaluated over a long period of time, in relation to how the entire site's team is performing.”
If Vogel ever quits PR, she might consider becoming a professional pick-pocket. Or a stage magician. Such is the artistry of the subtle linguistic sleight-of-phrase she delivers.
Maureen doesn’t state flat-out “we don’t have quotas.” She says Amazon doesn’t have fixed quotas.
She then goes on to stipulate, albeit by vague implication, that individual performance is indeed evaluated. It’s just done so over a stretch of time and in comparison with other workers. In other words, it’s a non-fixed quota. This is the alchemy which permits her a well-crafted misrepresentation masquerading effectively as a true denial.
But it’s just bullshit.
I led warehouses for Amazon. Here’s what actually happens.
Several processes make up the end-to-end task of fulfilling customer orders. Workers are grouped and trained by process. Each process has a target rate assumption for veteran workers who are fully trained. It is derived from historical production data.
Individual performance against the veteran target is constantly recorded and measured against the average performance of the entire population.
Every so often, the system digests recent rate data to keep productivity analysis current. These rate assumptions are used in the plans that drive production and labor.
The data is also used to build a productivity curve upon which every worker is situated, which allows managers to understand which workers’ production rates are the lowest among the overall population in each process. A percentage of the slowest producers, perhaps 5% but sometimes more or less, is distilled.
These bottom producers are highlighted and given additional attention, ideally additional support. If they remain slower than the rest of the pack, they’ll be progressively nudged, coerced, warned, and at some point, disciplined.
Eventually they’ll be dismissed. Temporary workers will simply find they’re not offered a permanent contract.
So, if you’re an employee, you are certainly subject to a quota. If you produce a lower share of output than obliged, there are professional consequences.
Amazon alleges its novel method of establishing a productivity expectation swerves the definition of “quota.”
But it doesn’t. And we don’t need complex legal gymnastics to navigate this violation. It’s crystal clear.
The definition of “quota” is stated in AB-701.
So we need answer only two questions to understand if Amazon has broken the law as California says.
Are employees “required to perform at a specified productivity speed?”
Might employees “suffer an adverse employment action if they fail” to perform at that speed?
The answer to both questions is “yes.”
The fact the productivity speed is not eternally fixed but changes over time doesn’t mean it’s undefined. There is a specified rate workers must achieve. If they don’t meet that rate, they’ll be subject to discipline.
California says Amazon must share that quota with workers and explain what will happen if they fall short.
It’s not for California and its workforce to bend around Amazon’s novel definition of production quotas. It’s for Amazon to comply with California law. If this requires changing the way it does business, the company must do so.
So why hasn’t Amazon done so? Why did it absorb a hefty fine? Why will it spend more money appealing the CLCO’s findings?
This is where it gets even more interesting.
Because being forced into this level of transparency with employees is contrary to Amazon’s company culture, which reflects its corporate interests.
By not having a fixed quota, managers keep workers uncertain. This is seen as a useful form of subtle coercion. People uncertain of where the cutoff lies will work hard enough to create a healthy berth between themselves and that cutoff.
Being transparent removes Amazon’s flexibility. If workers know what number they need to hit to stay out of trouble, the network can’t decide on the hoof to change the percentage of workers it wants to discipline. Doing so has been used in the past as a valve to shrink or grow the labor force in response to variable demand.
Being transparent means Amazon needs to declare how long it takes for people to walk from their workstation to the bathroom and back. From their workstation to the cafeteria and back. It must therefore acknowledge that some stations are seven minutes away while others are three, which adds complexity to quota calculation.
Once declared, these pockets of time are removed as potential slices of productive upside. Employees will fully utilize the times published, and will challenge when the allocated time isn’t enough.
But here’s the big problem. And the reason executives are probably somewhere between chomping sedatives and pissing themselves over this seemingly innocuous case.
If employees know what rate they need to hit to avoid being disciplined, they will drop down to that rate as a default.
Transparency will give workers massive bargaining power they don’t currently possess. If they know they can slow down considerably without jeopardy, they’re likely to do so.
This would require Amazon to actually earn and bargain for performance above that stated minimum. Otherwise, the entire labor model would need to be rewritten, and might be too broken to repair.
For an employer which has cultivated a needlessly antagonistic relationship with frontline workers for too long, and often opened itself to charges of commoditizing performance in ways less humane than it should, there is a sense of chickens coming home to roost.
Amazon doesn’t want to react in earnest to this change.
It might mean restoring warehouse managerial staffing to previously higher levels, so managers have the bandwidth to engage more effectively.
It might mean investing more and getting more serious about working smarter vs harder, with improved equipment and process design, so employees reach higher production rates without additional exertion.
It might mean paying workers more to earn those higher levels of production on a consistent basis.
Or, it might mean accepting that a slower production pace is the new reality under a new legal regime. This would expose how much of Amazon’s solvency depends on sustaining galactic production rates that many have long considered unrealistic, irresponsible, or both.
Then again, it might be a blessing in disguise. Throttling production speed could reduce worker fatigue, exhaustion, and injury. Reducing turnover would reduce labor expense.
Would it be enough to wash away the expense of reduced labor rates? That’s a question financiers within Amazon’s California network are undoubtedly analyzing.
In fairness, I’ll state that in my experience, Amazon has become less obsessed with productivity over the years. This coincided with enhanced focus on worker wellness and overall empathy.
But my view is also skewed. My experience in the UK network, where senior managers must be pragmatic and sensible about unionization threats, will have been totally foreign from what occurs in the festering revenue swamp that is the American online retail sector.
It would be easy to think that Amazon simply got its legal analysis wrong by interpreting California’s quota law through the lens of employer rather than employee.
Or that it’s just demonstrating corporate arrogance in believing it can redefine words to suit its purposes.
But in this case, any observable ignorance or arrogance is animated by fear. Which brings me to two takeaways.
First, Amazon will fight tooth and nail to resist laws like this one. Online retailers have long been dangerously dependent on paying low wages in order to stay solvent or occasionally profitable. Laws which stand to drive those costs up are nothing less than an existential threat. If you have any doubt about that, look no further than responses to unionization, which would have a similar impact.
Second, Amazon’s retail business model is worth watching closely in the months ahead. The company is under growing regulatory pressure, with two active Federal Trade Commission lawsuits scrutinizing whether it has employed deceptive and anti-competitive business practices. Its relationship with third party sellers is not good. It’s relationship with salaried staff is also not good. Is this just normal creaking, or is the ship starting to list?
If so, it illustrates the risk of building a strategy on a shaky assumption. Like the assumption that warehouse labor will stay dirt cheap forever, and that regulators, unions, workers, and other stakeholders will never exert themselves.
When we see increases in the kind of flagrant lawbreaking on display here, it exposes something about the corporate state of mind.
Add to that Amazon’s recently increased reliance on deception and misrepresentation, legal maneuvering, and rampant pissing contests with regulators, and we might be glimpsing an uptick in anxiety among senior executives. The corporate amygdala seems to be in charge more often.
This may explain why Amazon continues to pile up cash instead of investing in its workforce. Could be someone thinks a storm is coming.
TC is an independent writer and expert in organizational leadership. He is a former Amazon general manager with seven peak seasons of operational experience.