The California Office of Environmental Health Hazard Assessment (OEHHA) has adopted amendments to its 2016 Proposition 65 warning regulations. These amendments address issues that arose regarding how manufacturers and distributors communicate with retailers and other downstream businesses about the need to provide warnings. The amendments also revise the definition of the “actual knowledge” that creates a duty to warn for retailers in certain circumstances under the warning regulations. The changes become effective on April 1, 2o20.
The 2016 amended warning regulation
In August 2016, OEHHA adopted a regulatory package that made sweeping changes to Prop 65’s warnings regulations (mandatory for products manufactured after August 30, 2018). One portion of the amendments allocated responsibility for providing warnings among retailers on the one hand, and manufacturers, importers, and distributors on the other hand. Upstream suppliers could now meet their warning obligation “either by affixing a label to the product bearing a warning…, or by providing a written notice directly to the authorized agent for a retail seller.”
Under the 2016 changes, retailers are responsible for providing warnings when their suppliers send them warnings to be used for the supplier’s products, or under other limited circumstances. One such circumstance is if no upstream supplier could be held responsible in court because the suppliers were all exempt from Proposition 65 or not subject to jurisdiction in California. In that circumstance, retailers are deemed responsible for providing warnings five business days after they received “actual knowledge” of an exposure requiring a warning.
Once in effect, practical difficulties with the regulations became apparent. In particular, the complexity of supply chains led to concerns about requiring manufacturers, importers, or distributors to provide warning materials to retailers with whom they did not directly supply their products. Industry also raised questions about what the “actual knowledge” standard meant for retailers with exempt or offshore suppliers.
The recent amendments were directed to these two issues. OEHHA modified the requirements relating to providing notices to downstream customers (and ultimately to retailers) and modified the definition of the “actual knowledge” sufficient to impose a duty on a retailer to provide a warning for exempt/offshore suppliers:
The revised notification requirements
In recognition of the complexity of product supply chains, OEHHA revised the regulation to allow companies to communicate with their direct customers, instead of requiring them to provide warning materials all the way to the ultimate retailer. Now, an upstream supplier may comply with Prop 65 by providing notice only to the business to which it is selling the product, or to the retailer, so long as that business is not exempt from Prop 65.
OEHHA also responded to concerns that many businesses had not identified “authorized agents” for receiving Prop 65 communications, and the ensuing confusion about how to address communications. Under the amended regulation, if a business has not designated an authorized agent, the supplier may serve the notice on the business’s legal agent for service of process.
We do not expect the amendments to change much in actual practice, as many upstream suppliers remain unable to provide warning notices to all of their downstream customers. However, the amendment makes clear that providing a notice to direct customers will comply with the regulation in most circumstances.
The revised definition of “actual knowledge”
The original definition of ”actual knowledge” was “specific knowledge of the consumer product exposure received by the retail seller from any reliable source.” While this was intended to mirror the level of specificity required in 60-day notices, OEHHA recognized that further definition was required, and the amended regulation now provides:
‘Actual knowledge’ means the retail seller receives information from any reliable source that allows it to identify the specific product or products that cause the consumer product exposure.
OEHHA noted in its Final Statement of Reasons that “these modifications reflect OEHHA’s intent that the primary responsibility for providing warnings is not on the retailer who likely will have no knowledge at all that a warning is required for a given exposures.” It stated its intent that the new language “remains consistent with the level of specificity required in [60-day] notices, . . . [which] must be of ‘sufficient specificity to inform the recipients of the nature of the items allegedly sold in violation of the law and to distinguish those products or services from others sold or offered by the alleged violator for which no violation is alleged.’”
The original regulation also did not define how a retailer could obtain actual knowledge. As OEHHA said in the Initial Statement of Reasons for the amendments, “as written, the regulation could be interpreted to mean that a retail seller will have ‘actual knowledge’ of an exposure from information provided to any employee in the organization from any reliable source, including lower-level employees who could not reasonably be expected to evaluate the information and take action on behalf of the retail seller.”
In the amended regulation, actual knowledge is limited to information received by the retailer’s “authorized agent or a person whose knowledge can be imputed to the’ retailer.” According to the Initial Statement of Reasons, such an person is “an employee in a position of sufficient responsibility that his or her knowledge can be imputed” and the amendment was intended to “clarify OEHHA’s intent to incorporate existing case law and legal principles under which knowledge gained by an agent or employee with a legal relationship may be attributed to the business.”