California retailers have until April 8, 2015 to formally comment on new safety regulations proposed by the Office of Environmental Health Hazard Assessment (OEHHA) which, if adopted, is expected to increase litigation risks and costs for retailers operating within California.
The ostensible purpose of these new regulations is to clearly specify warning requirements of Proposition 65, also known as the Safe Drinking Water and Toxic Enforcement Act of 1986.
Prop 65: Rife With Ambiguities
Voters approved Proposition 65 (also known as the Safe Drinking Water and Toxic Enforcement Act) nearly three decades ago to protect the public from chemicals that cause cancer or reproductive harm. The law requires retailers and businesses to post warnings alerting consumers to the presence of any one of over 900 listed chemicals “known to cause to cause cancer, birth defects or other reproductive harm.”
Under current regulations, retailers can comply with Prop 65 through the use of “clear and reasonable” safe harbor warnings described in California Health and Safety Code Section 25249.6, which in most cases means posting signs in stores or placing labels on products warning consumers of the presence of one or more of the chemicals on Prop 65’s hazards list.
“Clear”=clearly communicates that the chemical in question is known to the State of California to cause cancer, birth defects or other reproductive harm.
“Reasonable” = if the method employed to transmit the message is reasonably calculated to make the warning message available to the individual prior to exposure.
Identifying the actual chemicals in the warning is not required. To do so, retailers would be compelled to conduct a battery of tests on all products to positively rule out the presence of each of the more than 900 chemicals listed. Instead, the required warnings can simply express the fact that one or more listed chemicals are present and known to cause cancer and/or reproductive harm.
Rife with ambiguity, Prop 65 statutes and regulations are something the courts and businesses have been struggling with since the 1980s. These ambiguities have spawned lawsuits seeking civil penalties and injunctions for violations by prosecutors and private enforcers, frequently called “bounty hunters,” even when proof of harm is unsubstantiated. Typically, bounty hunters go after a high number of civil penalties for each product sold or for each day a product was on the shelf, making millions of dollars in the name of “public interest.” Fortunately, retailers demonstrating that a system of safe harbor warnings was in place at the time of purchase can often defuse litigation.
Proposed Regulations Will Likely Increase Enforcement Actions
OEHHA’s proposed regulations are intended to provide more meaningful warnings to consumers, clarify the compliance responsibilities of manufactures and retailers, and reduce unnecessary litigation. Regarding the latter, the proposed revisions likely will increase, rather than decrease, enforcement actions. The new regulations effectively strip away the safe harbor and create new, unrealistic burdens on retailers. Among the key proposed provisions:
The new regulations set strict, specific criteria for warnings to comply with the “clear and reasonable” requirement. Just to name a few, warnings must now:include the name of the specific listed chemical present (i.e., this will require testing);
list the URL to an OEHHA website for more information about cancer, birth defects and listed chemicals;
inform the public they are being “exposed” to the listed chemical rather than simply warning them of its presence;
be written in a specific size and font; and employ a bright yellow, triangular warning symbol of a specific size.
Rather than shifting the burden of product testing and labeling to manufacturers, the new regs require all retailers to label each of the products they sell that contain a listed chemical if:the product is sold under a private label owned by the retailer; the retailer added the listed chemical to the product; the retailer modified or changed or did not use a warning label provided by the supplier of the product; or most crucially, the retailer is considered to have “actual knowledge” of the existence of the listed chemical within the product.
The “actual knowledge” requirement as proposed is so impractical and broad that it will almost certainly increase all California retailers’ exposure to liability. “Actual knowledge” is expressly defined in the new regulations as “specific knowledge of the product exposure that the retailer receives from any reliable source.” One of these reliable sources can be a letter from a Prop 65 bounty hunter informing the target retailer of its intent to sue. Under the new provisions, retailers will be considered to have actual knowledge of the existence of a listed chemical just 2 business days after receiving such a letter.
The idea that any corporation with more than one business location has just 2 days to race toward compliance is untethered from reality and tantamount to no safe harbor at all.
Few retailers are capable of absorbing the legal ramifications of such a letter, including distributing warnings or ceasing sales of the product within 48 hours. Only retailers with the most state-of-the-art inventory, merchandizing and control systems could hope to develop a successful product recall system that could comply. Smaller retailers have no hope of accomplishing this through affordable means.
By contrast, the federal agency known as the U.S. Consumer Safety Commission allows retailers several days or weeks before incurring litigation exposure to conduct product recalls when a defect is reported by the agency.
Without doubt, California’s Prop 65 standards are exceedingly stringent, requiring a consumer warning for the presence of even minuscule amounts of common chemicals. If OEHHA’s new Prop 65 regulations go into effect after the current comment period, retailers can expect to have just two years to prepare for the strict new warning label requirements on all of their products containing the listed chemicals.
Retailers should review OEHHA’s proposal carefully, understand its implications on their business operations and submit appropriate comments to OEHHA before April 8, 2015. Anthony Sampson of the California Chamber of Commerce and various members of the Prop 65 defense bar are recommending that California retailers join them in submitting comments to OEHHA in the hope that the proposed regulations are reconsidered.