Clean Up on Prop 65! … A Retailer’s Risk Under Proposition 65

May 1, 2019

California’s Safe Drinking Water and Toxic Enforcement Act of 1986, also known as Proposition 65 (“Prop 65”) was enacted to protect the State of California’s drinking water sources from contamination by certain chemicals and to require businesses to inform Californians about exposures to such chemicals. Prop 65 requires the California Office of Environmental Health Hazard Assessment (“OEHHA”) to publish a list of these chemicals known to cause cancer, birth defects or other reproductive harm. This list, which must be updated once per year, has grown to approximately 900 chemicals (“Listed Chemicals”).

The reach of the Prop 65 requirements is not limited by the boundaries of the state of California. Prop 65 requires any business that manufactures, supplies, or sells products that are purchased by California consumers, to notify such consumers of significant amounts of chemicals in the products they purchase or that are released into the environment. These businesses are responsible for the exposure to consumers by chemicals that the businesses not only create but also use in the manufacturing of their products, even if those chemicals are supplied by a third party. The Safe Harbor Exemptions provide that a warning must be given for Listed Chemicals unless exposure is low enough to pose no significant risk of cancer or is significantly below levels observed to cause birth defects or other reproductive harm.

Since the enactment of Prop 65, OEHHA has promulgated new regulations that took effect August 30, 2018 which affect the required warning labels and the burden on the manufacturers, suppliers and retailers of any consumer product sold or manufactured in California. This burden may be shifted by manufacturers/suppliers onto retailers and vice versa. How can a retailer protect itself from the burden of hefty fines and violations associated with Prop 65?

Who Bears the Burden For Providing Product Warnings?

Manufacturers/Suppliers

Fortunately for retailers, the Prop 65 regulations designate the primary responsibility for providing product warnings to the manufacturer, producer, packager, importer, supplier or distributor (collectively, “Manufacturer/Supplier”), not the retailer. According to the Manufacturer/Supplier Duties, the Manufacturer/Supplier has the duty to do either of the following in order to comply with Prop 65 requirements:

  1. Provide a warning on the product label or labeling that satisfies the required warning label as required by the Required Warning Provision; or
  2. Provide a written notice directly to the authorized agent for a retail seller who is subject to the Required Warning Provision which:
    1. States that the product may result in an exposure to one or more listed chemicals;
    2. Includes the exact name or description of the product or specific identifying information for the product such as a Universal Product Code or other identifying designation;
    3. Includes all necessary warning materials such as labels, labeling, shelf signs or tags, and warning language for products sold on the internet, that satisfies the Required Warning Provision; and
    4. Has been sent to the authorized agent for the retail seller, and the Manufacturer has obtained confirmation electronically or in writing of the receipt of the notice.

Once the Manufacturer/Supplier has successfully complied with the Manufacturer/Supplier Duties, the Manufacturer/Supplier has almost immediately shifted the burden of liability onto the retailer. However, in order to effectively shift such burden onto the retailer, the Manufacturer/Supplier must follow specific Manufacturer/Supplier Notice Requirements. These requirements include the renewal of the notice after six months during the first year and annually thereafter.

Retailer

While a Manufacturer/Supplier may attempt to shift liability onto retailers, the new regulations presume that a retailer’s liability is limited to the extent practicable. Prop 65 provides for a presumption of no responsibility of retailers. However, this same presumption may be overcome by the following five carve-outs:

  1. Retailer selling the product under a brand name or trademark that is owned or licensed by the retail seller or an affiliated entity;
  2. Retailer has knowingly introduced a listed chemical into the product, or knowingly caused a listed chemical to be created in the product;
  3. Retailer has covered, obscured or altered a warning label that has been affixed to the product pursuant to the Manufacturer/Supplier Duties;
  4. Retailer has received a notice and warning materials for the exposure pursuant to [the Manufacturer/Supplier Duties] and [the Manufacturer/Supplier Notice Requirements] and the retail seller has sold the product without conspicuously posting or displaying the warning; or
  5. Retailer has actual knowledge of the potential consumer product exposure requiring the warning, and there is no manufacturer, producer, packager, importer supplier or distributor of the product who:
    1. is a ‘person in the course of doing business’; or
    2. has designated an agent for service of process in California, or has a place of business in California.

Should the retailer fall within any of these five carve-outs, the retailer runs the high risk of shifting the liability from the Manufacturer/Supplier onto itself. Aside from practicing diligence to steer away from any of the five carve-outs, a retailer can do the following to help protect itself from claims related to Prop 65 violations:

  1. If the retailer has not received any warning materials from the Manufacturer/Supplier, send a notice letter to the Manufacturer/Supplier stating that the retailer has not received the warning materials as required under Prop 65;
  2. If the retailer has received warning materials from the Manufacturer/Supplier, keep thorough records related to (i) the specific instructions given to the retailer by the Manufacturer/Supplier and (ii) when and how often warning materials and notices were sent to the retailer from the Manufacturer/Supplier; and
  3. Check with the retailer’s insurance company to determine if its policy covers any Prop 65 violations, and if so, in which circumstances.

We will be publishing more information on how a Manufacturer/Supplier can protect itself from Prop 65 violations. Please check on Axley.com for more information.

This article is intended for informational purposes only and not for the purpose of providing legal advice. We strongly encourage you to discuss these strategies with your attorney to determine which course of action best suits your needs and objectives.

For more information about "Clean Up on Prop 65! … A Retailer’s Risk Under Proposition 65," contact Mary N. Parmeter at mparmeter@axley.com or 608.283.6701.