Beyond your typical compliance challenges associated with evolving regulations, if your company sells products, manufactures products, or has a store in the state of California, the upcoming amendment to Prop 65 (implementation date of August, 31, 2018) will present a particularly unique challenge.
The amendment to Prop 65 will bring an increase in private litigation over the first year of implementation. Many industry experts attribute this to changing warning label language, and specific industry requirements that are sending shockwaves through global supply chains. Companies are scrambling to gather the detailed information they need from their suppliers to avoid receiving a letter of intent to sue for a non-compliant situation. Commonly known as “bounty hunting,” Prop 65’s unique "citizen suite" attribute allows for any individual to identify a product or environment out of compliance, and file a lawsuit against the alleged business in violation.
What Is a Prop 65 Bounty Hunter?
Prop 65 bounty hunters are citizens who target and identify businesses out of compliance with Prop 65 labeling rules. It is estimated that around 72% of all Prop 65 lawsuits are created from bounty hunter litigation.
The allowance of private citizens to file lawsuits in regards to Prop 65 has contributed to just over $25 million in settlement fees in 2017. The foreseen increase in private litigation is due to the fact that the amendment to Prop 65 creates an additional angle for a lawsuit to be created - adequacy of the warning label. Wayne Rosenbaum commented further:
It is likely that the volume of litigation will increase. For the first time, I expect that citizen suit litigants (bounty hunters) will focus on the adequacy of the warning rather that just a failure to warn. Defendants with products already in the supply chain that are carrying previous safe harbor warnings will need to be able to establish manufacturing dates as an affirmative defense.
To hear more about Wayne's take on Prop 65 litigation and overall regulation compliance, click here to view our webinar, California Prop 65 Preparation Guide.
The Details of California Prop Amendment
Who Can File a Lawsuit?
- The California attorney General’s Office
- District Attorney for cities with populations that exceed 750,000
- Any individual acting in the public interest may file a lawsuit against a business alleged to be in violation of the law
Bounty Hunter Incentive
- Injunctive relief
- Penalties of up to $2,500 per day
- 25% of penalties paid to citizen suit enforcer
- Penalties can be up to $2,500 a day, per violation.
- Attorney's fees and costs
Common Defense Mechanisms
- Out of scope companies
- Less than 10 employees
- Government Agencies
- Safe Use Determination
- Administratively determined
- Safe Harbor Determinations
- Judicially Determined
California Prop 65 Supply Chain Strategy
One goal of the Prop 65 amendment is to clarify responsibility and accountability for communication of Prop 65 chemical information up and down the supply chain. The amendment was developed to minimize retailer burdens.
Our Director of Compliance Product Research, Zephen Specht, went into further detail outlining that section 25600.2 clarifies the obligations of parties within the supply chain and puts the primary burden of Prop 65 warnings on the "upstream entities", such as the manufacturer, producer, packager, importer, or distributor. The amendment also defines the only instances in which a retailer will be liable for a failure to provide a Prop 65 warning under the Act. This includes the retailer’s responsibility to provide warnings to specific situations in which they have removed or obscured a warning label, been notified of a warning obligation by a supplier but have failed to provide the warnings, and a few other limited circumstances such as internet and catalog purchases.
Data Management
As you look to analyze your current Prop 65 compliance process in regards to the new amendment, you may find yourself refining your supply chain data management systems. Creating an environment where ease of information exchange and product data organization are fundamentals of the system can lead to higher supplier response rates, better data quality, and ultimately a system that gives you precise compliance requirements.
California Prop 65 Amendment Preparation Webinar
Source Intelligence, along with Wayne Rosenbaum recently debuted our Prop 65 Preparation webinar. Along with a detailed overview of internet warnings, here’s some of the topics we covered:
- Pre/post amendment regulation overview
- Labeling Variations
- Internet labeling, on-product labeling, packaging labeling, occupational labeling, public facility labeling and more unique situations.
- Bounty Hunter safeguarding best practices
- 60 day warning notice course of action overview
- Supply chain communication chain of custody
- Critical product information that needs to be passed through the supply chain
- Product chemical awareness
- Evidence-based data collection approach
- Declarations vs. product analytics
- Enterprise vs. SME compliance workflow examples
