Proposition 65: The Cost of Being Served a Notice of Violation

Proposition 65 Notice of Violation

What happens when your business is targeted with an NOV?

The unique aspect of Proposition 65 is that it is enforced by private citizens and the threat of civil litigation via a Notice of Violation (NOV).  Even without going to court, receiving an NOV can be costly.                                                                      

If your company is targeted with a Notice of Violation under California Proposition 65, which alleges you are not compliant with the regulation, your company will be faced with 2 options:

a) If you are fully compliant with the regulation and the NOV appears off-base, you could go to court to prove you are compliant; however, your company would need to be ready to pay legal and expert witness fees, which could easily add up to several hundreds of thousands of dollars (or more), depending on the complexity of the case. If you lose your case, you may have to pay the legal fees of the enforcing side as well. And on top of that could face fines of $2,500/day per violation! The potential costs could be exorbitant, or...                 

b) Settle with the plaintiff and avoid a full legal battle. This has been the default approach for hundreds of companies, and typically the most begrudgingly "cost-effective" (although still punitive) route. The average settlement value has been ~$40,000/settlement over the last 5 years of available data. Approximately 75% of this money goes directly into the pockets of the plaintiff lawyers.    

This means that if your company is targeted with an NOV under Proposition 65, you could be facing the prospect of paying out tens of thousands of dollars just in settlement fees. In addition, you would still need to factor in legal fees to stick-handle and negotiate the settlement process to ensure you get the best possible outcome,  as well as the costs of product recalls, reformulation, testing, and/or re-labeling.  These costs can add up very quickly.                                

And companies from all sectors have been targeted: food, dietary supplements, consumer products, electronics, building materials, toys, home and garden, furniture.

That is why it is critical to be proactive about Prop 65 compliance to make sure your risks are managed as much as possible, before you are targeted. This will give you a stronger foundation to push back against any NOV you do receive, which will ideally eliminate or at least reduce the settlement amounts.                                                                                                     

RegTox Solutions provides comprehensive but affordable Proposition 65 compliance services to meet your needs. Contact our experts for a free consultation to learn more!

Prop 65 Backgrounder

New to California Proposition 65? 

Here is a short summary.

Officially  known as the “Safe Drinking Water and Toxic Enforcement Act of 1986”  (or “Prop 65”), this regulation requires businesses to warn citizens of  California if their products or locations expose people to certain  levels of chemicals. 

The regulation is administered by the Office of Environmental Health Hazard Assessment (OEHHA), who maintains and updates a list of chemicals that may require warnings if exposures occur above certain thresholds (the “Prop 65  List”). Chemicals on the list are carcinogens (cause cancer) or reproductive/developmental toxicity, or both, and cover a wide range of chemicals, from heavy metals to certain drugs, solvents, residues, and others. 

Whether a product requires a Prop 65 warning depends on the level of exposure to listed chemicals on a daily basis from use of the product. If exposure exceeds the Safe Harbor Level (SHL) for that chemical, which is the daily exposure threshold that triggers a warning requirement, then a product warning would be needed. If exposure does not exceed the SHL, then no warning is required. 

More specifically, the SHL for carcinogens is called a No Significant Risk Level (NSRL), while the SHL for reproductive toxins is called a Maximum Allowable Dose Level (MADL). 

A very unique aspect of Prop 65 is that it is not enforced through OEHHA, but through civil litigation. So if a private citizen (typically assisted by a lawyer) allege that your product is not compliant with the regulation they will issue your company a “Notice of Violation” or NOV and can threaten to take your company to court. 

Court action can be avoided if the company agrees to “settle” with the enforcing party, which typically entails paying out a settlement fee (the average for 2017 was ~$40,000 USD/settlement), as well as complying with certain conditions, such as reformulation of the product or addition of product  warnings.  

So, if you sell a product into the state of California (or are upstream in the supply chain), then this regulation will likely apply, one way or another. However, the specific requirements may differ depending on where you are in the supply chain.

Once a product is alleged to be non-compliant, the plaintiffs will send out NOVs to many companies with similar products to try to profit from the lucrative settlement process. Companies caught unaware are likely more susceptible to paying higher settlements compared to those that have conducted their due diligence.

If you have questions about Prop 65 or what can be done to proactively address your company’s compliance, contact RegTox today!