Source: https://www.martenlaw.com/newsletter/20180829-new-proposition-65-regulations
Timestamp: 2019-04-24 09:00:09+00:00

Document:
Important changes to California Prop. 65 regulations take effect this week, on August 30, 2018. The new rules include requirements for online retailers, revised “safe harbor” warning labels, and a new allocation of compliance responsibility between retailers and manufacturers, including new authority allocating legal liability. This article provides a road map to navigate the new Prop 65 regulatory compliance landscape.
This language has long been criticized for lacking specificity and utility. The new regulations adjust the safe harbor rules and update the regulations with specific procedures for warnings associated with Internet and catalog sales. The old safe harbor warnings may no longer be relied upon for products manufactured after August 30, 2018.
A short-form warning on the label that complies with the content requirements in Section 25603(b)….
The safe harbor product warning labels and short forms are described below, as well as requirements for online and catalog sales.
The word “WARNING” in bold capital letters.
A triangular yellow warning symbol, placed to the left of the text of the warning, in a size no smaller than the height of the word “WARNING,” unless the product label or shelf sign does not use the color yellow, in which case the symbol can be black and white.
A statement that the product “can expose you to” a Prop. 65 chemical rather than that the product “contains” the chemical.
The name of at least one chemical that prompted the warning. If the product contains chemicals that can cause both cancer and reproductive harm, at least one example of each must be provided. The full chemical name as it appears on the Prop. 65 list must be included in the first mention of the listed chemical in the warning. If an abbreviation is included as part of the full chemical name in a warning, the abbreviation can be used after the first mention.
Warnings in languages other than English when a consumer product sign or label used to provide a warning includes consumer information in a language other than English. “Consumer information” includes warnings, directions for use, ingredient lists, and nutritional information but excludes brand name, product name, company name, location of manufacture, or product advertising. OEHHA offers warning translations in several languages.
These safe harbor warnings are often placed on a product’s exterior packaging. Labeling the product packaging directly avoids some problems associated with other warning methods, such as a product inadvertently being moved to a different shelf by an employee or customer, thus being separated from its warning sign. It is important to note that labeling on the product itself or on a package insert does not by itself comply with the requirements of Prop. 65 if an exposure requiring a warning can occur upon opening the package, because the warning must be issued before the exposure.
Short form labels must be in a type size no smaller than the largest type size used for other consumer information on the product and may not be smaller than 6-point type. Due to this size requirement, it can be expected that the short-form warnings will be used primarily on packages with very small labels. The short form may only be used on product labels and may not be used on signs.
For online purchases, warnings must be provided to the consumer prior to completing the purchase. This requirement is in addition to the requirement of a compliant warning provided by any one of the four methods discussed above. The online warning must “be provided by including either the warning or a clearly marked hyperlink using the word “WARNING” on the product display page, or by otherwise prominently displaying the warning to the purchaser prior to completing the purchase.” If the short-form warning is used on the product label, the website may use the same short-form warning. A warning is not considered to be prominently displayed if the purchaser must search for it in the general content of the website.
For catalog purchases, a compliant warning must “be provided in the catalog in a manner that clearly associates it with the item being purchased.” If a short-form is used on the product label, the catalog may use the same short-form.
According to OEHHA’s “Questions and Answers for Businesses,” “[a] warning symbol provided near a product in a catalog or on a webpage separate from a consumer product warning which is located elsewhere in the catalog or website is unlikely to ensure that the warning is ‘clearly associated’ with the item being purchased” and would not meet safe harbor requirements.
In addition to revising the safe harbor warning labels, the new regulations aim to clarify who is responsible for compliance with the warning requirements. The new regulations strive to “minimize the burden on retail sellers of consumer products” and provide that the primary responsible entity is the manufacturer, producer, packager, importer, supplier, or distributor (collectively, producers), rather than the retailer.
A producer taking this approach must renew the notice and confirm the receipt of the notice by February 28, 2019, and then annually during the period in which the product is sold in California by the retailer. An additional notice is required within 90 days when a different additional chemical or harm (cancer or reproductive toxicity) is added to the warning.
Finally, the retailer must provide a warning if the retailer has covered, obscured, or altered the warning label affixed by the producer. It is probably uncommon for retailers to do this intentionally, but there is a risk of noncompliance where price tags, sale stickers, or shipping labels are placed directly onto product packaging. Retailers should guard against the unintentional obstruction of producer warning labels and ensure all store and warehouse employees are trained to avoid obstructing such labels.
Many retailers may wish to avoid point-of-sale signage and may require their suppliers to label their products with compliant warnings. It is more difficult for online and catalog retailers to reduce their burdens. While in-store retailers can enter into contracts with their suppliers regarding package labeling, online and catalog retailers will be required to place warnings on product display pages even where the supplier has already labeled the package. Retailers offering online and/or catalog sales may consider requiring suppliers to provide an image of the warning or product label to provide on the online or catalog product display page, but the retailer will still be responsible for placing the warnings on product display pages.
The new regulations also provide that so long as the consumer receives a compliant warning prior to exposure, producers and retailers “may enter into a written agreement…to allocate legal responsibility among themselves for providing a warning for the product. That is to say, producers and retailers will now be permitted to allocate legal, as opposed to merely contractual, responsibility for providing compliant warnings to consumers. Indemnity agreements, long used in the Prop. 65 compliance space, can now be drafted to effectively create a statutory liability shield, as opposed to just a cause of action under the contract. Producers and retailers would be well-served to revisit their indemnification agreements and ensure they are utilized to maximum effect.
Prop. 65 consumer product warning requirements are vigorously enforced, and penalties can be severe. This combination poses serious compliance risks to regulated entities.
Penalties for violations of Prop. 65 can be up to $2,500 per day, per violation, in addition to injunctive relief and attorney fees. Twenty-five percent of the penalties collected in a Prop. 65 enforcement action are paid to the office of the city attorney, city prosecutor, district attorney, Attorney General, or private individual who brought the action, providing a strong enforcement incentive.
The California Office of the Attorney General reports judgments and settlements under Prop. 65. In 2017, there were over $18 million in judgments, of which over $13 million went to attorney’s fees. There were $25 million in settlements reported, of which over $19 million went to attorney’s fees. In 2016, there were over $20 million in judgments, of which almost $14 million went to attorney’s fees, and just over $30 million in settlements, of which over $21 million went to attorney’s fees.
Within these totals are a large number of relatively small settlements, but individual settlement amounts can easily climb into the six figures. For example, several recent large penalties relate to heavy metals in food products. This year, companies including Hershey, Mars, and Trader Joe’s paid large penalties (some approaching $1 million) to settle claims related to the alleged failure to warn of cadmium and lead in chocolate. In 2017, the American Roland Food Corporation paid $200,000 to settle claims alleging that certain packaged seafood and fruit products caused exposure to lead and/or cadmium and required Prop. 65 warnings. In another example involving food products, in 2015, PepsiCo entered into a class action settlement agreement related to 4-methylimidazole in certain PepsiCo beverages. PepsiCo paid $500,000 to settle the claims; the entire amount went to attorney’s fees.
The new regulations may result in a fresh wave of enforcement activity, particularly private enforcement activity. Now, private enforcers can simply browse the internet or catalogs for alleged violations, and at up to $2,500 per day per violation, the penalties could pile up quickly, especially for online or catalog retailers caught unaware.
Prop. 65 was at the forefront of consumer chemical disclosure regulations when it passed in 1986, and California remains in a class of its own when it comes to the depth and breadth of regulation in this area. The Prop. 65 compliance landscape is constantly evolving, as the list of regulated chemicals is updated annually and new No Significant Risk Levels and Maximum Allowable Dose Levels are promulgated.
California lawmakers continue to push consumer disclosure and “right-to-know” laws that go beyond the requirements of Prop. 65. This Newsletter previously covered the Cleaning Product Right to Know Act, which was signed into law by Governor Brown on October 15, 2017 and will begin to take effect in 2020.
In June, the New York State Department of Environmental Conservation announced the state’s final policy and form for manufacturer disclosures under the Household Cleansing Product Information Disclosure Program, which requires manufacturers of cleaning products sold in New York to disclose chemical ingredients and other information on their websites. Most manufacturers are required to comply by July 1, 2019, which will make New York the first state in the nation to require such disclosures.
Other states have considered, but not passed, cleaning products laws like those in California and New York. Potential future chemical disclosure laws in other states are likely to be based on California and/or New York’s laws, or even copied wholesale. Careful attention to compliance with California and other leading states’ regulations will likely pay dividends in the event of future regulation in other states.
The new Prop. 65 regulations will take effect on August 30, 2018, presenting the business community with new compliance challenges, but also new tools to shield regulated parties from liability. Companies not already prepared will have to act fast to revamp warning labels or risk losing Prof. 65’s safe harbor protections. In a bright spot, particularly for retailers with complex supply chains, the new rules will enable more efficient and effective (re)allocation of legal liability by contract. But entities such as online and catalog retailers will also face new burdens, including requirements to place warnings on product display pages, even where products themselves are sufficiently labeled. Private enforcers in search of the quick settlement dollar can now be expected to turn some of their attention to websites and catalogs, scanning for violations. Given this robust enforcement environment and California’s steep penalties, regulated entities must remain ever-vigilant to ensure Prop. 65 compliance.
* Alexa Shasteen is a Harvard-educated environmental lawyer in Marten Law’s litigation and regulatory practices, where she specializes in federal and state AG enforcement defense, data center and retail products compliance and risk management counseling, and represents clients in complex civil litigation involving a wide array of issues and industries—from cleanup of contaminated sites to water rights and water quality.
 27 CCR § 25603.2(a) (operative until August 30, 2018).
 See, e.g., Press Release: Governor Brown Proposes to Reform Proposition 65, May 7, 2013, https://www.gov.ca.gov/2013/05/07/news18026/. The governor also took aim at “frivolous” and “nuisance” lawsuits filed under Prop. 65. Amendments affecting settlement terms, penalty amounts, and attorney’s fees in civil actions filed by private parties were passed in 2016. They have not resulted in a significant decline in Prop. 65 enforcement activity.
 Court-ordered warnings may continue to be used. See 27 § CCR 25600(e) (“A person that is a party to a court-ordered settlement or final judgment establishing a warning method or content is deemed to be providing a ‘clear and reasonable’ warning for that exposure for purposes of [the clear and reasonable warning requirement], if the warning complies with the order or judgment.”).
 27 CCR § 25603(a)(2)(A), (C).
 See 27 CCR § 25600.2(e).
 See Cal. Health & Saf. Code § 25249.7.
 Proposition 65 requires that attorney’s fees be “reasonable under California law.” Cal. Health & Saf. Code § 25249.7(f)(4)(B). See also California Code of Civil Procedure 1021.5.
 See Cal. Health & Saf. Code § 25249.12(d).
 See New California Law Will Require Manufacturers to Disclose Ingredients in Cleaning Products, Air Fresheners, and Automotive Products, January 2, 2018, https://www.martenlaw.com/newsletter/20180102-new-california-law-disclose-ingredients.

References: § 25603
 § 25603
 § 25600
 § 25249
 § 25249
 § 25249