Are the new Prop 65 regulations the gift that keeps on giving?

You may not have heard of California's Proposition 65, but you surely have seen its consequences: Cancer and reproductive harm warnings in places like airports, hotels and parking garages, and on products as varied as art materials, plumbing components and cannabis products. You may soon see Prop. 65 cancer warnings provided for coffee, too, based on a ruling by a Los Angeles County Superior Court judge in Council for Education and Research on Toxics v. Starbucks Corp., et al. (BC435759) [ruling attached below]. Now, recently adopted Prop. 65 warning regulations, effective Aug. 30, 2018, are changing not only the text of these warnings, but also how businesses are working within their supply chains to address their obligations under this law.

What Is Proposition 65?

Codified at Health and Safety Code Sections 25249.5 et seq., Prop. 65 is a California right-to-know law that prohibits "persons in the course of doing business" from exposing individuals to substances on the Prop. 65 chemical list without first providing a clear and reasonable warning. The chemical list, with over 900 chemicals, consists of substances "known to the State of California" to cause cancer or reproductive harm. In addition to substances one ordinarily would think of as chemicals, the list also includes materials like wood dust and "salted fish, Chinese-style." Pharmaceutical products like the blood thinner warfarin and, ironically, certain cancer chemotherapy agents, also are on the list. It seems, frankly, that little in this world may avoid being tagged as a Proposition 65 chemical.

The Office of Environmental Health Hazard Assessment (OEHHA) implements the law but, alas, does not enforce it, frequently resulting in gaping disconnects between the agency's implementation approach and what happens in real life. Instead, Prop. 65 is enforced exclusively by civil lawsuits, which may be filed by public enforcers like the California attorney general or by private persons "in the public interest." In a twist on the usual burden of proof in civil actions, alleged violators bear the burden of proving that no warning is required.

Available Remedies Incentivize Settlement

In addition to injunctions, violators are subject to up to $2,500 in civil penalties per day of violation; named plaintiffs get 25 percent of civil penalties imposed. Under the California private attorney general statute codified at California Code of Civil Procedure Section 1021.5, private enforcers also enjoy another financial incentive to sue, in the form of entitlement to reasonable attorneys' fees and costs. That's a one-way street, though: Successful defendants are not entitled to fees under that statute.

With this financial disincentive to litigate, combined with the shift in the usual burden of proof, it's no wonder that alleged violators simply roll with the punch, pay up, and get out. Which is also why there is an abundance of warnings all over everywhere in California -- easier (and cheaper) to warn than to fight.

The New Regulations Will Change How Warnings Look

In 2016, OEHHA completely revamped the Prop. 65 warning regulations, the first time in 30 years that any substantive changes have been made. Effective on Aug. 30, and codified at Title 27, California Code of Regulations, Sections 25600 et seq., these new regulations already are having a significant effect on consumer product supply chains.

First, some context. A business can provide a Prop. 65 warning any way it wants. Remember that symbol Prince used when he was "The Artist Formerly Known As Prince"? Setting aside the likely lawsuits you'd get from Prince's estate, you could use that symbol as Prop. 65 warning if you want -- but you'd have to prove that the symbol provides a "clear and reasonable" warning, a dicey endeavor for sure.

Understanding that businesses need certainty about what constitutes compliant warnings, OEHHA's predecessor agency promulgated the safe harbor warning regulations in 1987. Businesses need only prove that they complied with those regulations; they don't separately have to prove that the warnings are clear and reasonable. In other words, providing safe harbor warnings are the best way for businesses to avoid being sued.

Now, the new safe harbor warnings will look a lot different. Among other changes, safe harbor warnings must include a yellow triangle bordered in bolded black and enclosing a black exclamation point, and must identify one or more chemicals. And, for specific types of exposures, like those from food or furniture, specially tailored safe harbor warning requirements apply.

For example, the new safe harbor warning text for a carcinogen is:

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

Many businesses, though, will be using the new short-form version of the safe harbor warning, which does not require the identification of a chemical. For a carcinogen, the warning looks like this:

WARNING: Cancer -- www.P65Warnings.ca.gov.

Changing the Way Supply Chains Talk

As the effective date approaches, entities in consumer product supply chains are scrambling to get ready. This mad dash is due not just to the new safe harbor warning requirements, but also to other new regulatory provisions.

Warnings now must be provided for online and catalog sales even if the product already is labeled with a warning. OEHHA has refused to provide guidance on what happens if a retailer fails to provide warnings on its own website or catalogs: is only the retailer liable for failure to warn, or both the supplier (who labeled the product) and the retailer? This uncertainty has initiated a wave of communications from suppliers to retailers, advising of the retailers' own responsibility to provide warnings. For their part, many retailers are demanding supplier compliance certifications, as if the law itself was just enacted (it's been around for 30 plus years).

At the same time, the new regulations clarify that suppliers have the primary burden to warn, vis-à-vis retailers. However, suppliers can shift that entire burden by providing the retailer with a formal written communication that meets the requirements of new Section 25600.2. Even as some suppliers seek to take advantage of that notification procedure, retailers are prohibiting their suppliers from doing so.

And in what seems to be the beginning of an expensive musical chairs game, virtually all entities across supply chains are encountering vastly increased demands for defense and indemnity agreements. The paperwork is flying as businesses seek to push, to other entities, the financial responsibility for alleged failure to warn.

What Can Businesses Expect?

OEHHA promulgated the new regulations in part to reduce unnecessary warnings and frivolous enforcement actions. But the new regulations do nothing to address the threshold question of whether warnings are required in the first place. And, with their tricky, picky and sometimes ambiguous requirements, they likely will trigger "bad warning" claims, i.e., claims that warnings do not comply with the new requirements and therefore are not clear and reasonable. So: Get ready for more warnings, for more notices of violation, more lawsuits, more tenders of defense and indemnity demands, and, probably, higher product prices.