Proposition 65: Big Changes That Could Cost You Money Trent Norris Arnold & Porter Kaye Scholer trent.norris@apks.com / 415-471-3303 January 9, 2017

Presentation Overview Proposition 65 101 New Warning Regulations Other Developments

The Environment “There is science, logic, reason; there is thought verified by experience. And then there is California.” -- Edward Abbey

Prop. 65 101 - Overview Approved by the voters in 1986 Requires the State of California to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. There are more than 850 chemicals on the list. Requires businesses to provide warnings if their products (regardless of manufacturing location) or facilities can expose consumers to a listed chemical above threshold levels.

Prop. 65 101 – Compliance Requirements To comply, a business must: Assess whether it releases, or its products contain, Prop 65-listed chemicals (the “whether” question) Determine if individuals (consumers or bystanders) may be exposed to a listed chemical or chemicals at levels that necessitate a warning (the “when” question) If a warning is required, determine what it must say and how it must be presented (the “how” question)

Prop. 65 101 – The “Whether” Question There are four ways for chemicals to be listed: State’s Qualified Experts Authoritative Body Formally Required to Label Labor Code

Prop. 65 101 – The “When” Question General Rule A warning must be given for listed chemicals unless exposure is low enough to pose no significant risk of cancer (1 in 100,000 excess cancers) or is 1/1000th of the lowest level observed not to cause birth defects or other reproductive harm. To guide businesses in determining whether a warning is necessary, OEHHA has developed “safe harbor” levels. A business has a “safe harbor” from warning if exposure to a chemical occurs below the established levels.

Prop. 65 101- The “How” Question “No person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual . . . .” (Health and Safety Code, Section 25249.6)

Warning Regulations – How it Started Governor Brown’s Principles for Reform (May 2013): “Ending frivolous ‘shake-down’ lawsuits” “Improving how the public is warned about dangerous chemicals” “Strengthening the scientific basis for warning levels.”

Warning Regulations – How It Started 2/3 vote of each house Amendment must “further the purpose” of the law

Warning Regulations - Snapshot Promulgated by the Office of Environmental Health Hazard Assessment (OEHHA). Provides guidance on the “how to warn” question only. Provides “safe harbor” warnings for consumer product exposures, environmental exposures, occupational exposures. Provides tailored “safe harbor” warnings for specific products/facilities. Clarifies responsibility of manufacturers, retailers and others in the supply chain to provide warnings. Adopted on August 30, 2016. Repeal of current safe harbor regulations will become effective in two years. Businesses may conform to the new regulations between the adoption date and the effective date. Provides an unlimited sell-through period.

Consumer Product Safe Harbor Warning Elements Current Safe Harbor New Safe Harbor “This product contains…” “This product can expose you to…” No requirement to specify the chemical for which the warning is being provided. Must specify at least one chemical for which the warning is being provided. If warning for both carcinogenicity and reproductive toxicity, must specify at least one of each. No requirement to include a pictogram. or

Consumer Product Safe Harbor Warning Elements Current Safe Harbor New Safe Harbor No requirement to translate warnings. Where a consumer product sign, label, or shelf tag used to provide a warning includes consumer information in a language other than English, the warning must also be provided in that language. No requirement to specify a URL. “For more information go to www.P65Warnings.ca.gov.”

Consumer Product Safe Harbor Warning Language For exposures to carcinogens: WARNING: This product can expose you to [chemical], which is known to the State of California to cause cancer. For more information go to www.p65warnings.ca.gov. For exposures to reproductive toxicants: WARNING: This product can expose you to [chemical], which is known to the State of California to cause birth defects or other reproductive harm. For more information go to www.p65warnings.ca.gov. NOTE: These can be combined.

Consumer Product Safe Harbor Warning Methods (Brick & Mortar) A product-specific warning provided on a posted sign, shelf tag, or shelf sign for the product at each point of display. A product-specific warning provided via any electronic device or process that automatically provides the warning to the purchaser prior to or during purchase. A product label.

Consumer Product Safe Harbor Warning Methods (Internet and Catalog) For internet purchases: Include the warning (1) on the product display page, (2) on a clearly marked hyperlink using the word “WARNING” on the product display page, or (3) by prominently displaying the warning to the purchaser prior to completing the purchase. For catalog purchases: Must be provided in the catalog in a manner that clearly associates it with the item being purchased.

Can Businesses Avoid Specifying a Chemical in Their Warning? YES! If the warning is provided on the product or its exterior packaging, then the warning may read as follows: “WARNING: Cancer - www.p65warnings.ca.gov.” “WARNING: Reproductive Harm – www.p65warnings.ca.gov.” “WARNING: Cancer and Reproductive Harm – www.p65warnings.ca.gov.”

Are Businesses Required to Use the Safe Harbor Warnings? NO! Businesses may warn however they wish so long as they can defend the warning as “clear and reasonable” under the Act if challenged. Caution: Be prepared to defend your alternative warning!

Do the Regulations Grandfather Warnings Previously Approved by Courts? YES! A business that is warning pursuant to a court-ordered settlement or final judgment establishing warning methods or content may continue using those warnings notwithstanding the new regulations. But beware: the consent judgment must cover the specific product and company providing the warning. Other companies who sell similar products do not have the protection of the consent judgment.

May Businesses Provide Supplemental Information to Contextualize the Warning? YES, within certain limitations. For safe harbor warnings, the warning content may contain supplemental information, but that information must be limited to identifying the source of the exposure or providing information on how to reduce exposure. Other supplemental information may be included as long as it is not part of the warning content (e.g., package insert or instruction manual).

Responsibility to Provide Warnings Manufacturer/producer/packager/importer/supplier/ distributor of a product may comply by either: Affixing a label to the product bearing a warning; or Providing written notice directly to the authorized agent for a retailer seller which: States that a warning is required Includes the name or description of the product or specifies identifying information such as the UPC Includes all necessary warning materials Has been sent to the retailer, and the business providing notice has obtained confirmation of receipt of the notice electronically or in writing

Responsibility to Provide Warnings Notice must be renewed within 6 months during the first year after the effective date of the regulation, then annually thereafter. Additional notice required within 90 days when a different or additional chemical name/endpoint is included in the warning. Retailer is responsible for providing the warning when it has “actual knowledge” of the potential exposure. “Actual Knowledge”: Five business days after the retail seller receives notice.

Applicability to Licensors Licensors are in a gray area under Prop. 65 Notorious bountyhunter Cliff Chanler has sued licensors on a theory of “control” over the quality of the licensed product Typically resolved via contractual indemnity provisions Standard “abide by all laws” provision requires review Usually makes licensee responsible for compliance with Prop. 65 Products may end up being sold in California inadvertently Licensor may prefer compliance without a Prop 65 warning in order to protect brand Licensor may insist on approval of any warnings; otherwise, reformulation of product or no licensed product at all

Environmental Exposures “Environmental exposure” means an exposure that occurs as the result of contact with an environmental source, such as ambient air, indoor air, drinking water, standing water, running water, soil, vegetation, or manmade or natural substances or objects, through inhalation, ingestion or skin or other contact with the body.

Environmental Exposures Follows same scheme as consumer product warnings. For exposures to carcinogens: WARNING: Entering this area can expose you to chemicals known to the State of California to cause cancer, including [chemical], form [name of one or more sources of exposure]. For more information go to www.p65warnings.ca.gov.

Occupational Exposures “Occupational exposure” means an exposure to any employee at his or her place of employment. An occupational warning complies with the regulations if it fully complies with all warning information, training and labeling requirements of the federal Hazard Communication Standard, the California Hazard Communication Standard, or for pesticides, the Pesticides and Worker Safety Requirements.

Tailored Warnings Provided for the Industries Below Food Exposures Alcoholic Beverage Exposures Food and Non-Alcoholic Beverage Exposures for Restaurants Prescription Drug Exposures Emergency Medical or Dental Care Exposures Dental Care Exposures Raw Wood Product Exposures Furniture Product Exposures Diesel Engine Exposures Vehicle Exposures Recreational Vessel Exposures Enclosed Parking Facility Exposures Amusement Park Exposures Petroleum Product Exposures Service Station and Vehicle Repair Facility Exposures Designated Smoking Area Exposures Interested Parties May Petition OEHHA to Adopt Additional Tailored Warnings

Lead Agency Website http://www.p65warnings.ca.gov/ Separate but related regulation establishing an OEHHA administered website to provide the public with information on chemicals, products and locations associated with Prop. 65 warnings. OEHHA may request information from businesses regarding their warnings which may then be posted on the website.

Lead Agency Website Regulation Business Protections in Website Regulation: Businesses may request a correction of website material. Businesses are not required to perform any new or additional testing or analysis to respond to OEHHA’s request for information. Confidential business information may not be posted. Information subject to legal privilege need not be provided to OEHHA. Failure to comply with the website regulation shall not constitute a violation of the “clear and reasonable” warning section of the Act.

Future Concerns? New breed of litigation regarding warning content? “Unsafe” safe harbors Inadequate translations Increased complexity for licensors and licensees Increased burden on retailers and strain on business relationships Continuing burden of proof on business to show that no warning is required

Other Prop. 65 Developments Litigation Mateel v. OEHHA Monsanto v. OEHHA Regulations and Proposals Bisphenol A (BPA) Emergency Regulation and Interim Regulation Lead MADL Reduction Single-day Limit for all MADLs except lead Use of Arithmetic Mean in Calculating Intake of Average User Ban on Averaging of Concentration Levels Across Lots Naturally Occurring Background Levels for Arsenic in Rice and Lead in Some Foods

Questions Trent Norris Partner, Arnold & Porter Kaye Scholer LLP trent.norris@apks.com / 415-471-3303 Anthony Samson Senior Attorney/Policy Advisor, Arnold & Porter Kaye Scholer LLP anthony.samson@apks.com / 916-425-9447