California’s Prop 65: Enforcement Trends, Reform Efforts, and the Impact on your Business
California Proposition 65 (Prop 65) is one of the most stringent state environmental laws for the chemical industry even though there is much confusion amongst Californians, whom the law was designed to protect, as to its exact scope and potential impact.
The main purpose of Prop 65 is to inform consumers about carcinogenic or reproductive risks of chemical exposure through a warning in sign or label. Prop 65’s biggest concern for the industry is that it can be enforced by private citizens – including those with less than noble motives. In fact, citizen enforcers file hundreds of Prop 65 cases every year in California, and it is estimated that they have collected more than $150 million in damages from businesses around the country since the inception of Prop 65 in 1986, with the majority of money going to attorney’s fees.
In recent years, several notable enforcement trends have emerged. First, as a reaction to the increase in citizen lawsuits, industry started to pressure the state legislators for reform to alleviate the imbalances in Prop 65 actions. Another hope for legislative reform was the federal preemption through the Toxic Substances Control Act (TSCA). Second, industry-wide self enforcement began often in the form of cooperation through trade associations. Such concerted effort established harmonized solutions for a level playing field and funds for the scientific defenses that can be too burdensome for a small/medium sized company. Lastly, defendants have increasingly fought back in court and prevailed.
The latest reform proposal came from OEHHA, the state agency in charge of publishing Prop 65 chemical list, in March 2014. OEHHA’s proposed amendments substantially change the warnings if products or premises contain Prop 65 chemicals, with the revised warnings designed to convey “more clarity to the Proposition 65 warning requirements and more specificity regarding the minimum elements for providing a ‘clear and reasonable’ warning for exposures that occur from a consumer product, including foods and exposures that occur in occupational or environmental settings.”
The proposal also suggests that businesses no longer be able use the “safe harbor” warning language if a Prop 65 chemical may be in their product. The proposed regulation instead requires them to know definitively the chemical content of all their products and premises, including possible contaminants, and warn of potential “exposures” to the specified chemicals. The increased burden in creating the Globally Harmonized System of Classification and Labeling of Chemicals (GHS) style warnings and additional language requirements have significant cost implications associated with them. The proposal also requires companies to submit information about the chemicals to OEHHA for posting to a website. All of these requirements present significant challenges for businesses, combined with the potential risk of new enforcement lawsuits for those who do not or cannot comply to the satisfaction of citizen enforcers.
OEHHA on April 14, 2014 held a public workshop to discuss its proposed amendments in Sacramento, California and was met by strong opposition of many stakeholders, including the California Chamber of Commerce, California Manufacturers and Technology Association, American Coatings Association, and Association of Home Appliance Manufacturers (http://oehha.ca.gov/prop65/warnings/041414agenda.html). After an overview of the revisions by OEHHA and showing example images of the proposed warnings, many trade groups presented pointed questions and expressed opposition and skepticism. After the workshop, OEHHA extended the public comment submission deadline to June 13, 2014.
On June 18, 2014, OEHHA published the public comments received on the pre-regulatory proposal on its website (http://oehha.ca.gov/prop65/warnings/workshopcommentsJune2014.html). Close to 60 comments were submitted from various industry associations and NGOs. Most comments were from industry groups, which were largely opposed to the proposal. Expectedly, several public interest groups were supportive of OEHHA’s proposal.
The general consensus of stakeholders is that the businesses to be most financially burdened by the proposed changes are mostly unaware of the proposals and will not raise concerns in time to have any meaningful effect on the legislative development.
Understanding the Business Impact
In addition to the financial costs, businesses are concerned about whether they can obtain the information required to comply with the proposal. Currently under Prop 65, businesses are not required to disclose the specific identities of chemicals in a product, nor do they have to disclose specific potential exposure information to OEHHA. In most cases, distributors, importers, restaurants and retailers do not have the detailed ingredient data like chemical manufacturers and suppliers do. However, the proposed amendments would expand the “clear and reasonable warning” requirement considerably:
- The proposal requires the listing of 12 “common” chemicals on warning labels.
- Companies would need to submit full rosters of the listed chemicals in their products or premises.
- Detailed information concerning occupational hazard and environmental exposure potential must be submitted to OEHHA, including “reasonably available” data on exposure levels, routes and types and steps the public may take to reduce or eliminate exposure.
- OEHHA’s website would publish such information, supposedly to increase public knowledge about Prop 65 chemicals.
Those businesses that rely on manufacturers or suppliers to provide such data can easily be targeted for lawsuits when their manufacturers or suppliers add a newly listed Prop 65 substance without prior knowledge or notice. Additionally, the proposed information submission requirements are simultaneously heavy and vague, which can produce compliance traps stemming from minor and technical errors. For instance, several important terms are undefined (e.g., “reasonably available”), and such oversight can create basis for lawsuits. Lastly, the exhaustive disclosure requirements create a concern for protecting confidential business information (CBI) of chemical manufacturers and suppliers.
Instead of placing greater burden of proof on plaintiffs or revising the enforcement framework to reduce enforcement lawsuits, OEHHA’s proposed changes place greater burden on businesses and open up more opportunities for Prop 65 violations.
Potential Impact on the Consumers
Most Proposition 65 warning labels currently do not provide information about the actual chemicals in the products or premises. Instead, businesses generally use the safe harbor language, such as “Warning! This product contains a chemical known to the State of California to cause cancer.”
The proposed revisions would forbid such generalized warnings when a business is unsure whether a product actually contains a Prop 65 chemical. The proposed replacement of the safe harbor language with extensive disclosure about the chemical ingredients in the product will not necessarily educate consumers. Such over-warning has the potential to be confusing and misleading, increasing consumer apathy and desensitizing consumers to warnings of actual threats to their health. The proposed warning labels will also likely increase the cost of consumer goods.
The likely effect of lengthy and complex warnings is more room for enforcement lawsuits. Companies will face lawsuits if they unintentionally fail to warn about a chemical they were not aware of or do not comply to the letter with the proposals’ burdensome data-submission requirements.
OEHHA’s proposed amendments do not seem compatible with its initial purpose for change – to provide more useful warnings to the public; establish warning standards for increased compliance certainty for businesses; and reduce litigation. As a result, Proposition 65 remains a troublesome law, and companies struggling to conform to or to understand the potential impact of reform efforts, are well advised to seek counsel.
James Lee is a regulatory analyst with 3E Company. In his role at 3E, Mr. Lee is responsible for research and analysis of various statutes and regulations of the US and Canada, which pertain to environmental compliance, hazard communication, chemical products, food additives, food contacts and pharmaceuticals. Mr. Lee also monitors and updates database content for 3E’s Ariel products and provides regulatory and legal information support to clients. He earned his BS degree in chemistry from Emory University, and did his graduate studies in chemistry at Georgia State University before earning a Juris Doctorate from University of Missouri- Kansas City Law School. Prior to joining 3E, Mr. Lee worked as an intellectual property attorney.
Energy Manager News
- Some Insurance Companies Invested Too Heavily in Fossil Fuels, says Ceres
- ERC: Price Benchmark Trends Week Ending May 20, 2016
- CAL-ISO Study: Regional Energy Market Could Yield $1.5B in Savings Annually to Ratepayers
- Sands to Stay, But MGM and Wynn Still Plan to Leave NV Energy
- Turning Data into Knowledge–and Action
- STULZ, CoolIT Enter Data Center Cooling Pact
- Smart Grid Partnership Announced in Europe
- Wisconsin Power & Light Files for Higher Residential Base Rates, Lower Commercial Rates