California’s Proposition 65 Labeling Law

SEMA News—August 2017

LEGISLATIVE AND TECHNICAL AFFAIRS

By Daniel Ingber

California’s Proposition 65 Labeling Law

Ways to Comply and Avoid Legal Challenges

  prop 65
California’s Proposition 65 is a law that gives consumers and their attorneys the ability to sue a business that does not include warning labels on products containing certain chemicals
   

Proposition 65 (Prop 65) is a California law that gives consumers and their attorneys the ability to sue businesses that do not include warning labels on products containing chemicals associated with cancer and birth defects. The law has spawned a predatory trial-lawyer industry focused on using the law to net large settlements. The only companies safe from the reach of Prop 65 are those not producing or selling merchandise in California. Otherwise, if you are a multi-state retailer, distributor or manufacturer whose products end up in California, Prop 65 can be costly if you are not prepared. This article reviews the law and provides some compliance recommendations.

Overview

Prop 65 was a ballot initiative enacted by California voters in 1986. Prop 65 requires warning labels on products containing chemicals listed as known to cause cancer, birth defects or reproductive harm. There are more than 800 chemicals currently on the list. Prop 65 doesn’t stop anyone from selling products, no matter what chemicals they contain; it is simply a law that requires consumer warning labels under certain circumstances.

Businesses with 10 employees or more that do business in California must comply with Prop 65. The warning requirement applies to any business in the chain of distribution, including manufacturers, distributors and retailers, and including out-of-state companies selling product in California.

The California attorney general or a district attorney can pursue enforcement. However, most suits are brought by private parties claiming to be “acting in the public interest” who will then receive a portion of the fine or settlement ultimately assessed on the alleged violator. Private lawyers start by filing a “notice of violation” with the attorney general and the accused business. The notice is detailed in terms of the alleged violation, naming a specific chemical(s) for which there may be inadequate warning and including an expert’s statement meant to support the alleged claims.

Under the law, fines can run up to $2,500 per day per violation. For many faced with Prop 65 cases (known as “headhunter” suits), it can feel like a shakedown, because Prop 65 lawsuits are expensive to fight, and defendants often settle quickly to avoid the high cost of litigation. Many times, it is questionable as to whether there has been a violation of the law, since there may be limited consumer exposure to the specific chemical.

There are two chemicals that are frequent Prop 65 targets for the automotive specialty aftermarket: lead in brass parts, and DEHP. DEHP is a phthalate used in the production of polyvinyl chloride (PVC) and plastics to make them softer, more flexible and durable. Phthalates are used in a variety of products from pipes to plastic wraps, artificial leather, electrical wire insulation and adhesives.

Proposition 65 is a complex statutory and regulatory scheme. Every case is different, and compliance will depend on the nature of the product and the chemical at issue, how the product is sold, and many other factors. The recommendations included in this article are not to be construed as legal advice, and you may need the advice of counsel to determine what you must do to comply with the law.

Do I Need to Label My Product?

You do not need to label your product if it does not contain a listed chemical or the listed chemicals in your product create such a small amount of exposure to the consumer as to fall into the “safe harbor” provisions of Prop 65. The safe harbor amounts—or No Significant Risk Levels (NSRLs)—are those determined to be acceptable. For most businesses, it is impossible to know if their products contain listed chemicals and at what exposure amounts without laboratory testing and/or toxicology reports. (We discuss the benefits of laboratory testing further on.)

How Do I Label My Product?

The Prop 65 regulations are very specific. If it’s determined that a product meets the criteria for labeling, a current warning must contain the following language:

  • WARNING: This product contains a chemical known to the State of California to cause [cancer and/or birth defects or other reproductive harm].

In 2016, the warning regulations were updated to require additional information. The new rules go into effect for products manufactured after August 30, 2018, but companies can begin using them now. Under the new rules, a warning must contain:

  • A graphic depiction of a yellow triangle containing an exclamation point.
  • Specify at least one chemical for which the warning is being provided if the label is not included on the product or packaging.
  • Include the website www.P65Warnings.ca.com.

If the warning is placed directly on the product or product packaging, a shorter “truncated” label that does not include a specific chemical may be used. (See the sidebar “Examples of Acceptable Warning Labels Under the New Regulations” above for example warnings.)

A warning must be given at or before the point of purchase. If a product is sold through a website or catalog, the warning must be listed next to the product or on the product-specific webpage. If the warning is included on the product or product packaging, a label may be used that does not include a specific chemical (a truncated warning). If a product contains a truncated warning, a truncated warning may also be used on the website or catalog. If an unlabeled product is sold at retail, a retail sign may be used.

How Do I Protect Myself From Prop 65 Liability?

A business can protect itself from Prop 65 liability by labeling its product or ensuring that the product does not require labeling. Often, a company does not know what chemicals are in the products it manufacturers, distributes or sells and, if a listed chemical is present, what level of exposure it creates. Nonetheless, there are several different steps a company can consider to reduce legal exposure.

Product Testing: SEMA can assist members in finding laboratories that can test their products for listed chemicals. Laboratory testing to determine if your product contains a listed chemical and how much (the concentration of the listed chemical, usually listed in parts per million) is relatively inexpensive. However, such laboratory testing will not determine the amount of exposure (usually listed in micrograms per day) to which the product exposes the consumer. A toxicology expert can evaluate your product for exposure amounts, but it can cost up to $10,000 per product.

Nonetheless, lab testing alone can be very useful because it can determine how much of a listed chemical is present in the product, if at all. Before filing a notice of violation, plaintiffs’ attorneys usually conduct laboratory testing only and base their prosecution on the results of those tests. Settlement agreements often contain provisions that commit a manufacture to reduce the concentration of the listed chemical without any reference to exposure.

Often, businesses choose to coordinate laboratory testing with an attorney to insulate test results from discovery under work-product privilege. Testing results should be kept in your records in case you become subject to a Prop 65 action. If laboratory testing confirms that a product contains concentrations likely to trigger the Prop 65 warning obligation, you can either comply with the labeling requirements or, if feasible, reformulate the product so that it does not contain the listed chemical.

Preemptive Warnings: Even if a business is not certain whether a product requires a warning, it can choose to comply with the Prop 65 warning requirements as a preemptive measure. Often, the cost of providing a warning is lower than the cost of laboratory testing and can help insulate a business from being sued. Although the California attorney general looks at “over-warning” with disfavor, we are unaware of any cases brought against a business for labeling a product that does not require one. In some cases, a preemptive warning may be the most cost-effective way to mitigate risk.

After the new regulations take effect, preemptive warnings will be generally more difficult because businesses will be required to list at least one chemical for which the warning is required. However, if it is possible to place the warning directly on the product or product packaging, a business can use the truncated warning that does not require the listing of a specific chemical (and, in such cases, may also use the truncated warning in its catalog or on its website).

In cases where on-product or on-packaging warnings are not feasible, a business may choose to provide a preemptive warning listing the chemical most likely to be in the product (for example, if a tool has PVC handles, a warning for DEHP). One must tread carefully, because if the product does not contain the chemical that is subject to the warning requirement but contains another chemical that is, the warning will not be compliant.

Contracts: Businesses can protect themselves through agreements with upstream suppliers or sellers requiring them to label a product, certify that a product does not require labeling, or indemnify the business for Prop 65 violations.

How Should I Respond to a Notice of Violation or a Lawsuit?

A typical action begins with a plaintiff issuing a 60-day notice of violation to the alleged violator and the California attorney general. The attorney general has 60 days to decide whether it should pursue the action instead of the plaintiff, which happens rarely. After 60 days, the plaintiff can file a lawsuit.

Plaintiffs often allege over $1 million in potential fines. The costs to fight these cases can be very high, and usually these demands are used to pressure the alleged violator to settle for tens of thousands of dollars (plus an agreement to comply with labeling requirements or reduce/eliminate the listed chemical). Even when these cases are settled at an early stage, legal costs can run in the low five figures. For businesses that receive a notice-of-violation letter, it can feel like extortion. Prop 65 cases are very rarely litigated to trial.

If you receive a notice of violation, you should contact an attorney immediately. The attorney will likely contact plaintiff’s counsel and ask for the results of any laboratory testing plaintiff has done. The attorney may also choose to conduct its own laboratory testing.

In general, the only defenses to a Prop-65 enforcement are that the product does not contain the listed chemical or that it contains the listed chemical in only safe-harbor amounts. It is rare that a plaintiff will file an action if the product does not contain a listed chemical. However, if a product is not typically handled by a consumer—for example, a brass engine part containing lead—an attorney may be able to present a defense that, although the product contains a listed chemical, it does not create exposure to a consumer. If a part contains listed chemicals in only a safe-harbor amount or does not create exposure to a consumer, your attorney will use this information to deter the plaintiff from continuing the action or to reach a favorable settlement.

What Is SEMA Doing to Help?

SEMA is active in the Proposition 65 Coalition of the California Chamber of Commerce to promote legislation and regulations to decrease the cost of Prop 65 compliance. In addition, SEMA is working with the Office of Environmental Health Hazard Assessment to push for less onerous labeling requirements. Substantive changes to the law itself require a two-thirds vote from each chamber of California’s legislature, making legislative changes difficult to accomplish. Nonetheless, SEMA and the Proposition 65 Coalition are looking at every opportunity to create a friendlier environment for doing business in California.

Examples of Acceptable Warning Labels Under the New Regulations

Cancer

WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer. For more information, visit www.P65Warnings.ca.gov.

Birth Defect

WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause birth defects or other reproductive harm. For more information, visit www.P65Warnings.ca.gov.

Combined Cancer/Birth Defect

WARNING: This product can expose you to chemicals including [name of one or more chemicals], which is [are] known to the State of California to cause cancer or birth defects or other reproductive harm. For more information, visit www.P65Warnings.ca.gov.

Truncated on Product Warning

WARNING: Cancer and Reproductive Harm—www.P65Warnings.ca.gov.

Type Size: The warning text must be the same size as other consumer information presented on the package and may not be smaller than 6-point type.

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