While much of our focus has been on COVID-19 over the past weeks, businesses involved with the manufacturing, distribution, and sales of consumer products should also be aware of changes to the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“Proposition 65”) that go into effect on April 1, 2020.
The amendments to Proposition 65, to section 25600.2 of the California Code of Regulations, state that any business employing 10 or more people should provide “clear and reasonable warning” before exposing consumers to any chemicals listed under Proposition 65.
This amendment seeks to provide clarification to assist both manufacturers and retailers by adding the following modifications:
- It clarifies that “compliance may be met so long as the business to which the authorized agent for a retail seller provides the written notice to is subject to Section 25249.6 of Proposition 65.”
- It clarifies that entering into a written agreement is not limited to retail sellers, but that other intermediate parties – businesses to which they are selling or transferring product – may also enter into a written agreement about the warnings required.
- It clarifies that confirmation receipt of the warning notices, that must be renewed annually, can be received electronically or in writing.
- Businesses can now, instead of putting warnings on the products themselves, send written warning notes to the authorized agent of the retail seller or the next business in line, such as a distributer, taking legal possession of the products.
Background of Proposition 65
The Safe Drinking Water and Toxic Enforcement Act, also known as Proposition 65, was introduced in the state of California in 1986 by popular vote. The law is designed to protect residents and the environment from excessive exposure to harmful chemical carcinogens and other toxins and requires warnings to be provided to consumers and employees before exposing them to chemicals and substances identified by the State to cause cancer or reproductive harm. However, Proposition 65 has been a plague to many businesses due to private attorney general enforcement efforts, particularly as the Act provides for recovery of attorney’s fees and costs.
Proposition 65 requires the state to publish and maintain an updated list of chemicals known to cause cancer, birth defects and/or reproductive harm. Today, the list includes close to 1,000 chemicals found in pesticides, food, drugs, solvents and a range of common household or consumer products, along with many substances used or discharged by the manufacturing and construction industries. Over the last 35 years, there have been several amendments and clarifications to Proposition 65, with the last update effective August 2018 which changed the content of the reasonable warnings that are required. Businesses with more than 10 employees are obligated to comply with the warning requirements or face civil penalties, and in the instance of private attorney general enforcers, attorney’s fees and costs for any enforcement action.
The 2020 Amendment Helps to Clarify How to Transfer the Risk for Warning Requirements and How to Take Advantage of this Opportunity
On December 31, 2019 the Office of Administrative Law approved amendments to California Code of Regulations, Title 27, Article 6, Section 25600.2, subsections (b), (c), (f) and (i) with the goal of providing businesses in chain of commerce for consumer products on how to satisfy their warning responsibilities.
OEHHA has expressed its position that the overall structure of Proposition 65 is to minimize the burden on retail sellers; this most recent amendment is to continue with this spirit and approach and to provide clarification of the warning obligations when it may not be known who would be ultimately selling to a consumer.
Written Notice In Lieu of On-Product Labeling
The amendment allows a business in the chain of commerce to give the notice and warning materials directly to the designated agent (or legal agent) for the business to which it is transferring or selling the product and thereby discharge their duty to warn under Proposition 65. In the alternative, warnings may be provided on the product or product label to satisfy the Proposition 65 requirements. However, this new option to provide written notice can only shift responsibility to an entity that is subject to Proposition 65 (e.g., has more than 10 employees). In addition, the amendment provides that this notice must be renewed annually while the product is sold in California by the retailer.
In both situations, the business providing the notice and warning materials must obtain verification of receipt electronically or in hard copy from the downstream entity. If there is any reason you cannot obtain confirmation, businesses should rely on product labeling. In addition, entities who may be involved in products ultimately sold in California should designate an agent with the California Secretary of State who can understand, handle, and distribute these warnings as appropriate.
With these amendments, the manufacturer, producer, packager, importer, supplier, and distributor of any given product must work together in some regard as each of these actors has the same warning requirements as a manufacturer if the manufacturer fails to provide the appropriate warning information.
What Should the Notice Include?
Under the amendment, the requirements of the written notice include:
- Stating the product that may result in exposure;
- Describing the exact name or description of the product for identification;
- Including all necessary warning materials that satisfy §25249.6 including the chemical/substance;
- Advising that the entity must forward this letter to any downstream entity, and
- Renewing the notice annually.
Thus, in order to transfer the risk, the Written Notice should include the date of the letter, be on the issuing company’s letterhead, and be signed and remind the recipient that it is obligated to comply or provide the notice to anyone downstream.
Confirmation of Written Notice Required
In addition, as noted above, the downstream party much confirm receipt of the Written Notice and do so in compliance with the new section. “Authorized agents for the business to which they are selling or transferring the product” have been added to be able to receive written notice – previously this was limited to authorized agents for the retail seller. This new language likely includes any authorized agent for the manufacturer, produce, packagers, importer, supplier, or distributor of any product in alleged violation.
“Actual Knowledge” Definition Modified
However, this amendment does not change Proposition 65’s requirement that the Retail Seller is required to receive the notice. However, changes to the definitions of Actual Knowledge and the source of Retail Seller’s Knowledge clarify the relationship between an authorized agent receiving a notice and the Retail Seller’s imputed knowledge regarding a specific product that causes consumer product exposures.
This amendment changes the definition of “Actual Knowledge” to include “information from any reliable source that allows it to identify the specific product or products that cause the consumer product exposure.” There is no clarification as to what “any reliable source” is to mean other than the fact of receipt of a notice of violation by a Proposition 65 enforcer is not sufficient. The scope of the “reliable source” will likely be construed liberally, and thus businesses are cautioned to use care when ignoring information that a product they are selling may be subject to Proposition 65 and require a warning.
The amendment clarifies that a Retail Seller’s “knowledge” that a product requires a warning can be directly obtained or imputed to it by information received by an authorized agent. The Retail Seller will not be deemed to have knowledge until five (5) days after receipt of such notice – this is to give the Retail Seller sufficient time to identify the product. If the Retail Seller has such knowledge and does not provide a warning, it has knowingly and intentionally caused an unwarned exposure.
With the specifics and details involved in assessing if a business must provide Proposition 65 warnings are complex and it may seem more practical to simply use on product labels, the law does not require this, as warnings may be provided through various means. Any business involved with the sale of consumer goods should consider these risks and benefits as well as where it falls in the chain of commerce when determining its labeling strategy.
While it is not stated specifically in the Act, there is a risk for over-warning. It is therefore important that any business in the chain of commerce for consumer products ensure that this 2020 amendment is closely followed to ensure a reasonable basis for the warning – whether it be a letter from the manufacturer or upstream supplier that the product contains chemicals that are required to carry a warning, or a warning on the product itself.
The Proposition 65 Team at Gordon & Rees has been handling Proposition 65 compliance and litigation matters for more than 25 years and stand ready to assist all businesses to understand and evaluate their compliance risk.