Many companies in the United States and abroad have become familiar with Proposition 65, or The Safe Drinking Water and Toxic Enforcement Act of 1986, a California law which, among other things, requires businesses selling in California to post warnings if their products could expose to certain chemicals known to the State of California to cause cancer or reproductive toxicity. The list includes approximately 1,000 substances, for most of which no maximum acceptable levels are reported.
The Act is mostly enforced by private parties acting in the public interest, which are often economically motivated since the law awards to these private enforcers 25% of any penalties and reimbursement of attorneys’ fees. In 2019, a total of more than $29 million has been paid by defendants in Prop 65 settlements, of which $22.6 million were attorneys’ fees.
If any product the private enforcers analyze contains any of the listed substances and does not have a Prop 65 warning alerting the California consumers to the potential exposure, these private enforcers serve a “60-day Notice” on the parties involved, which may include resellers, distributors and manufacturers. Pursuant to the Notice, the plaintiff alerts the companies that unless a settlement is reached within 60 days, a lawsuit will be filed. Most Notices are settled before the lawsuit is brought, usually requiring the company, in addition to payment of penalties and attorney fees, to recall its products, post a Prop 65 warning, or modify formulation or processes so as to eliminate or reduce the substances in question below acceptable levels.
The warning must be “clear and reasonable”. The Act provides “safe harbor warnings”, i.e., warning requirements which by law are deemed to be clear and reasonable. Warning must also be provided when sales are made by mail-order catalog or on the Internet.
The Act presently allows two forms of warning: An “on product warning” which must indicate at least one occurring substance in the “cancer” list and/or one substance in the “reproductive harm” list; and a shorter, generic form of warning which does not require indicating the occurring substance. Although initially the short form warning was intended for small packaging products only, the use has gone beyond the initial expectations and has spread to all kinds of products.
A proposal was presented in January 2021 which would require short form warnings to include at least one occurring cancer substance and/or one reproductive harm substance. The proposal was subsequently modified to extend the compliance period from one year to two years and allow the use of short-form warnings irrespective of the size of the packaging. However, the requirement to indicate at least one substance in the endpoint “cancer” and one in the endpoint “reproductive harm” was maintained.
The proposal, even after the amendments, was strongly criticized by industry. Many commenters have urged the California lead agency, the Office of Environmental Health Hazard Assessment (OEHHA) to withdraw the short-form warning amendment as it does not provide real benefit to California consumers. They underlined the potentially huge cost for businesses, which comes at a time where supply chain disruptions and Covid-19 uncertainties damage many businesses. They pointed out that companies that have complied with Prop 65 would have to completely redesign their policies and determine which substance should be indicated in the warning. Especially for companies which manufacture, package and sell thousands of SKUs, and sell them through a multilayer distribution chain, the new warning requirements would have called for ad-hoc analyses, required hours of labor, and increased costs, which would unavoidably be passed at least in part to consumers, thereby worsening the already worrisome inflation.
Unexpectedly, for the time being this risk has been averted, or at least postponed.
In a notice published on May 20, 2022, OEHHA has notified the public that the Proposal has been, for the time being, set aside. The explanation is procedural rather than substantive in nature: Under California law, a rulemaking must be completed within one-year after the date it was first noticed to the public. The one-year period was temporarily extended by an Executive Order due to the COVID-19 pandemic. However, even with the additional time provided under the Governor’s Executive Orders, OEHHA was unable to complete the regulatory process within the allotted time. Thus, OEHHA has allowed the rulemaking to lapse as provided for under the APA.
This, however, appears to be only temporary. OEHHA intends to “restart the rulemaking process on the short-form with a new regulatory proposal, informed by comments on the previous proposal, in the next several weeks”. Public notice and an opportunity to comment on that proposal will be provided.
If OEHHA really takes into account the comments it received from industry, the risk of a similar far-sweeping modification to the short-form warning, heavily weighing on manufacturers, should be averted. However, there are no indications that OEHHA will change course.
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We at Valla & Associates will continue closely to monitor developments on the subject and will continue to advise our clients on Prop 65 matters. It is important not being caught unprepared by the upcoming changes.
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Requests for information or insights on the issue discussed in this article may be addressed to majda.barazzutti@vallalaw.com. This article is for information purposes only and does not constitute legal advice. The information contained herein may be outdated or incomplete, and shall in no way be taken as an indication of future results. The transmission of this article is not intended to create, nor does its receipt constitute, an attorney-client relationship between preparer and reader. You should not act on the information contained in this article without first seeking the advice of an attorney.
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