Articles Client Alerts / 10.20.2017

Ignoring California labeling rules could be costly

labeling regulationsManufacturing companies are no strangers to product labeling regulations, whether it’s ingredient labeling for food products, OSHA hazardous material statements for chemicals or recycling symbols for packaging.

But there’s one labeling requirement that’s less well known and can carry hefty penalties for manufacturers who unwittingly violate it. It’s known as Prop 65, and it requires the following: “WARNING: This product contains a chemical known to the State of California to cause cancer, birth defects or other reproductive harm.”

That means anyone who sells their product into the state of California must display this warning if the product contains levels of certain chemicals above a safety threshold. There are more than 900 restricted chemicals in the Prop 65 regulations, making this a minefield of liability for manufacturers. Many of the chemicals are found in common household products, plastics, food, building materials and even medicines. In fact, aspirin, alcoholic beverages and wood dust are on the list.

Haven’t heard about it? You’re not alone. Many manufacturers aren’t aware of Prop 65 or even that they’re subject to it. For some, the notice from a plaintiff’s counsel that they’ve violated this law is the first time they’ve learned of its existence. Worse, they find out they are facing a hefty fine of up to $2,500 per violation per day.

Lest you think this regulation doesn’t apply to you, consider this example: If a tiny plastic component of your electronic or automotive product contains an additive on the Prop 65 list, your product must carry the warning if you sell anywhere in California. The only manufacturers exempt are those with fewer than 10 employees.

Here are four important things you need to know now about Prop 65:

  • Warning requirements will soon apply online, too. During a time in which e-commerce accounts for about 9% of all U.S. retail sales, many consumers don’t see a product’s packaging before they buy. Starting in August 2018, if you sell products online that could be shipped to California consumers, a Prop 65 warning must be displayed on the product information page in a way that can clearly be seen before a customer completes the purchase.
  • Talk to your vendors and resellers of your products. Even if you sell your products through a distributor, you still are responsible for making sure your products are properly labeled. The same is true of any materials you purchase or use in the manufacturing of your product. Be sure to talk with your vendors, distributors and resellers to be sure they are aware of and are in compliance with Prop 65. Their error could become your liability.
  • Penalties can be steep and unpredictable. While the language of the act provides for penalties of up to $2,500 per violation per day, there’s much uncertainty about how those violations might be counted, especially for consumer products. In some cases, each unit sold or on the shelf in California can count as a single violation.
  • More changes are ahead in 2018. Manufacturers face a critical new Prop 65 challenge in an upcoming 2018 rule change. It was once acceptable to place a general warning on all products potentially subject to the rule out of an abundance of caution. But beginning in 2018, to cut down on such potential overwarning, every product containing at least one of the listed chemicals must specify the material by name. That means manufacturers who want to sell into California will likely be forced to make a hefty investment into product testing and major packaging revisions.

Because Prop 65 allows for private enforcement, a significant number of plaintiff’s attorneys are actively seeking these types of cases. They are hiring individuals right now to walk the aisles of major retailers looking for products that don’t have warnings and likely contain one or more of the 900 listed chemicals. The first step to protecting yourself is to do your own due diligence to determine exactly what’s in all components of your products and make sure none of them are on the Prop 65 list.

This article originally appeared in Crain’s Cleveland Business, Oct. 16, 2017.