The Nickel Report

The Safe Drinking Water and Toxic Enforcement Act of 1986, a.k.a Proposition 65, requires warning California consumers prior to exposing them to even minute amounts of any of the 900+ chemicals listed as causing cancer or reproductive harm. The law has been on the books for 30 years. 2016 saw noteworthy amendments to the “safe harbor” warning provisions.

Prop. 65 is implemented by the Office of Environmental Health and Hazard Assessment (OEHHA) and enforced by California’s Attorney General and private citizens through citizen suits. It is enforceable against any or every entity in the chain of commerce from the raw materials supplier to the retailer or a website seller. Over the past three years, there have been more than 1,600 claims by citizen enforcers and more than $73,000,000 paid by businesses as penalties and plaintiff’s attorney’s fees relating to Prop. 65 claims. These figures do not include business interruption costs, defense attorney’s fees, experts’ costs or the costs to implement “fixes” to comply with settlements. Businesses that adhere to the new warning provisions concerning the method of delivery and the language content are, by definition, deemed to be in compliance and unlikely to even receive a 60 Day Notice of Violation.

The recently adopted warning regulations are divided into two main sub-articles. The first significantly impacts relationships between manufacturers, producers, packagers, importers, suppliers and distributors on the one hand (upstream entities) and retailers on the other hand. A second sub-article details the methods of transmission and the content required for a warning to be judged a “safe harbor” warning (i.e., a warning that fully complies with those provisions will be deemed to be compliant). For more background on Prop. 65 go to www.oehha.ca.gov/proposition-65 or www.HuntonProp65.com.

Safe Harbor Warnings. 27 CCR § 25601 et seq. of the recently adopted regulations creates a “safe harbor,” meaning that if warnings are provided consistent with the provisions, then the warning will be deemed to be “clear and reasonable” and compliant with the law. Businesses may choose to use other warning content or methods of transmission, but they then run the risk of having to defend their chosen language and method of transmission, if faced with a notice of violation.

Specific Warnings. 27 CCR § 25607 et seq. provides safe harbor language and methods of transmission for specific products and types of exposures like alcohol, food, dental care, furniture, vehicles, etc. While businesses can warn California consumers of exposures from listed specific products or sources with general content and transmission methods, not using the specified content and methods of transmission means the warning will not be deemed as a safe harbor. When there is a specific applicable product or type of exposure listed, we encourage businesses to use them to take advantage of the safe harbor protection.

Retailer Exposures. 27 CCR § 25600.2 details new responsibilities for providing consumer product warnings as between retailers and upstream entities in the chain of commerce. While Prop. 65 requires minimizing the burden on retail sellers of consumer products to provide warnings, 27 CCR § 25600.2 seems to contradict this mandate.

The new regulations allow upstream entities to comply with their warning obligations by shifting that obligation to retailers. The regulation states, “[Upstream entities] may comply … either by affixing a label to the product bearing a warning that satisfies [the duty to warn], or by providing a written notice directly to the authorized agent for a retail seller …”, thereby requiring them to comply with the warning requirements. Sections 25600.2 (b) and (c) go on to specify the details that the upstream entity must adhere to in order to shift the compliance burden to the retailer. But, if those conditions are met, then the retail seller is responsible for providing the warning. In sum, the new warning regulations place a burden on the retail seller by allowing upstream entities to shift the warning responsibility to them.

In this light, it behooves retailers to look at the practical steps they can take to reduce liability and manage risks, keeping in mind that there are 900+ chemicals on the Prop. 65 list and that the list is constantly updated.

First, business owners should conduct periodic assessments to identity the products they sell that contain chemicals of concern, whether products can be reformulated to remove those chemicals and, when warnings are needed, how best to provide such warnings. Concerned retailers should first develop a comprehensive understanding of the new warning regulations and how they potentially impact operations, catalog sales and Internet sales into California. A firmer grasp of the regulations can potentially be achieved by engaging in a dialogue with industry peers and trade groups or associations.

Second, retailers doing business in California must determine whether they will allow upstream entities to impose in-store warnings for their products or, alternatively, seek to ensure that upstream entities place warnings on their products. Allowing upstream entities to mandate in-store warnings may result in a glut of in-store warnings.

Third, to the extent upstream entities are not willing to resolve the warning obligations in ways satisfactory to retailers, then the real possibility exists that retailers will terminate relations with such upstream entities.

Fourth, we anticipate that many retailers will review and enhance Prop. 65 “shield” clauses in agreements with upstream entities to ensure that ultimate liability will rest with the upstream entities.