The Cost of Ignoring California Prop 65

The label can be found just about anywhere—affixed to furniture, toys, apparel, even food products. It typically includes a pictogram featuring a black exclamation point inside a yellow triangle. The image is accompanied by a bolded “WARNING,” and language explaining that the product the label has been affixed to can expose you to chemicals which are known to the state of California to cause cancer, birth defects, or other reproductive harm. Finally, there is an internet address: www.P65Warnings.ca.gov. 

These labels, which in recent years have turned into pervasive fixtures on packaging, containers, and merchandise tags, are the result of California Proposition 65. The law, administered by California’s Office of Environmental Health Hazard Assessment (OEHHA), requires businesses to inform Californians if their products could expose them to chemicals that cause the aforementioned adverse health effects. While the regulation, which is officially known as the Safe Drinking Water and Toxic Enforcement Act of 1986, has been around for close to four decades, it has seen some pivotal new developments in recent years. For one, the specific requirements of the legislation itself have expanded.

In addition, the enforcement mechanisms the state of California relies on to punish noncompliant organizations have evolved in several striking, noteworthy ways.

One upshot to these recent changes to Prop 65 is that the stakes for actors choosing to ignore the environmental regulation are much different now than they were, say, a decade ago.  

While many companies doing business in California have historically demonstrated a certain level of nonchalance, if not outright indifference, to Prop 65, the law’s shifting regulatory landscape is making that approach an increasingly tenuous compliance strategy. Businesses that decline to use the legislation’s warning labels or fail to test their products for the chemicals that fall under California Prop 65’s purview are putting themselves at greater risk than they probably realize. Professionals that neglect to sufficiently prepare their organizations for the regulation’s stringent requirements and uniquely punitive means of enforcement now do so at their peril. 

The Evolution of California Prop 65 

The Safe Drinking Water and Toxic Enforcement Act of 1986 went into effect in 1988. At the time, it included a total of 235 chemicals. These included compounds like arsenic, cadmium, and dichlorodiphenyltrichloroethane, or DDT, the notorious insecticide known for its slew of detrimental effects on human beings and the environment. The regulation obligates businesses to provide warning labels if their products contain “significant exposures” to any of the chemicals listed under the law. While some chemicals on the act’s list require a warning label under all conditions, others only need to be accompanied by the warning if they exceed specific “safe harbor” levels. As outlined by the OEHHA, a safe harbor level “identifies a level of exposure to a listed chemical that does not require a Proposition 65 warning.” Businesses, in other words, are granted “safe harbor” from Proposition 65 warning requirements when the chemical in their product occurs at or below these levels. (Of the 900-plus chemicals currently on the regulation’s list, the OEHHA has designated safe harbor levels for around 300.) The financial penalty for noncompliance with Proposition 65 can be as high as $2,500 per day for each individual violation. 

The OEHHA adopted new regulations for Prop 65 in August 2016, and those changes took effect two years later, in the summer of 2018. Among the most notable amendments are new requirements for the warning labels, which must now include the name of at least one of the chemicals on the agency’s list; the address for the OEHHA’s Proposition 65 website; and the triangular yellow symbol that has become an all but inescapable visual element in so many commercial products. 

Perhaps more importantly, the agency has widened the scope of businesses that are responsible for including the warning label.

E-commerce sites such as Amazon are now required to provide Prop 65 warnings for products that are bound for California. To protect themselves against any prospect of litigation, however, many of these websites are simply including the labels on nearly everything they sell.

The effect has arguably been a kind of oversaturation of the Prop 65 label within the marketplace, diluting the efficacy of the warning. We’ve grown desensitized to the alarmist language and imagery the regulation is wrapped in, conditioned to disregard visual information that has lost its urgency and punch.

As a result, when many consumers see the distinctive yellow pictogram on products or product pages today, their eyes glaze over. 

But while these regulatory changes explain the growing ubiquity of these warnings, they are not responsible for the rising level of risk for noncompliant businesses. To appreciate the financial repercussions organizations face for failing to adequately warn Californians about toxic chemicals in their products, you need to start with the sprawling enforcement system that’s been gradually built up around Prop 65 over the past few decades. 

The Wild West of California Prop 65 Enforcement 

It may baffle some people to learn that neither the state of California, the OEHHA, nor the Attorney General’s Office carry out any enforcement measures for Prop 65. Instead, they rely on a myriad of nongovernmental entities, including consumer protection and environmental advocacy groups, to bring lawsuits against the corporations that are out of compliance with the regulation. Groups like the Center for Advanced Public Awareness, the Ecological Rights Foundation, and Keep America Safe and Beautiful effectively operate as post-market surveillance companies, searching for products and businesses that are not adhering to Prop 65’s requirements and bringing suits against them. 

In addition to the phalanx of nonprofits and LLCs, there is another collection of unusual actors engaged in the business of holding violating enterprises accountable for noncompliance. These are the private citizens, lawyers, and law firms that file suits under the auspices of California Prop 65. Over the years, though, this group has come to be known by another, more derisive name: “bounty hunters.” 

These figures hitch much of their careers and incomes to filing lawsuits against companies they believe are in violation of Prop 65, and they all generally subscribe to a similar playbook.

First, they target an individual product they have a high degree of conviction is out of compliance, often because they suspect it contains one of the Prop 65 chemicals but has failed to issue the requisite warning label. The California Attorney General requires plaintiffs to include a “certificate of merit” in their suits, asserting that they have “consulted with one or more persons with relevant and appropriate experience or expertise who has reviewed facts, studies, or other data regarding the exposure to the listed chemical that is the subject of the action.” Because of this legal requirement for filing suits, plaintiffs will typically conduct independent testing to verify the chemical’s presence in the product, or else carry out some other measure to substantiate their claim. 

Once one of these parties issues the notice of violation (NOV) and files the lawsuit against a business, the burden of proof shifts to the defendant, which must demonstrate that its product does not contain the chemical in question at levels out of California Prop 65 compliance.

Because most companies simply do not want to endure the steep financial costs associated with lengthy litigation, the vast majority of these lawsuits end in settlements and never go to trial. 

As the California Health and Welfare Agency undersecretary Thomas E. Warriner put it back in 1988, when the law was just coming into force, the effect of Proposition 65 is to “deputize everyone in the state.” The lucrative opportunities created by Prop 65’s decentralized, freewheeling enforcement system has created a veritable cottage industry of bounty hunters, enforcers, and other acquisitive entities focused on extracting settlements from large, well-heeled corporations. (It’s worth remembering, of course, that there is also a contingent of individuals who use the legislation’s enforcement mechanism to seek damages for personal experiences related to a product’s injurious effects.) The results of the law on the whole, however, have been to create an entire ecosystem—acting in either good faith or bad faith, depending on your perspective—that buttresses the environmental regulation and makes it a singularly dangerous piece of legislation to run afoul of. 

The Rise of Prop 65 Litigation and Its Victims

The economics of California Prop 65 enforcement and litigation are fairly straightforward. The financial penalty for violators is up to $2,500 per day for each product that is out of compliance with the law. The plaintiffs—or “private enforcers,” as they are often called—who succeed in their lawsuits are entitled to 25% of the civil penalties assessed by the court, plus reimbursement for attorneys’ fees. The latter detail is important. It’s not plaintiffs or even the OEHHA that receives the lion’s share of funds awarded for California Prop 65 suits. Instead, the chief beneficiaries of these judgments are attorneys.

In any given year, lawyers and their firms collect somewhere between 70 and 80 percent of the total funds awarded from Proposition 65 suits. Taking 2018 as an example, over $35 million was paid out in Prop 65 settlements.

Of that total, around $27 million—or 77 percent—went to the attorneys and law firms representing the private enforcers. 

The size and volume of payouts for California Prop 65 settlements have grown significantly during this century. In 2002, there was a total of just over $8 million in settlements related to the regulation. Two decades later, in 2022, that figure had ballooned by over 200%, touching nearly $26 million (the settlement figures have actually plateaued somewhat over the past few years). Enforcers and bounty hunters are filing thousands of Proposition 65 notices every year, which are yielding hundreds of settlements. In some instances, specific companies are targeted in multiple suits from multiple plaintiffs, resulting in substantial collective payouts. In others, businesses are forced into large, six-figure settlements by a single advocacy group and the law firm it’s partnered with. 

• In 2022, Home Essentials & Beyond, Inc., a houseware and home decor business headquartered in Jersey City, NJ, was sued by three different plaintiffs for lead exposure. The resulting settlements totaled $130,000. 

• That same year, Montalvan’s Sales, a family-owned ethnic food distributor based in Ontario, California, was forced to pay out $260,000 for lead and lead compounds exposure. 

• In 2021, Mystic Apparel, a now-defunct apparel company based in New York City, was sued by the Consumer Advocacy Group for exposing consumers to di(2-ethylhexyl)phthalate, otherwise known as DEHP. The Attorney General’s judgment resulted in a staggering total settlement of $450,000. 

• Finally, in 2017, Dollar Tree, the popular national discount chain, had to pay nearly $1 million after several products sold in the store were found to contain DEHP exceeding safe harbor levels. 

These judgements might not serve as a major deterrent for a Fortune 500 company like Dollar Tree. But settlements of this magnitude could deal smaller businesses a serious, even irrecoverable, financial blow. And because there are so many “deputized” individuals, advocacy groups, and law firms with extensive expertise at securing such payouts, any enterprise operating in California and violating Prop 65 is putting themselves at significant economic risk. 

Good Intentions, Questionable Actors, and Vulnerable Businesses

When it was first passed in 1986, California Proposition 65 had a commendable objective. Not only were the state of California and the OEHHA seeking to punish corporations exposing citizens to potentially harmful chemicals, they also wanted to pressure businesses into rethinking their product formulations in order to remain competitive and profitable. The warning label would be bad for business, the thinking went. In order to keep their sales steady and their PR from cratering, companies would eventually remove pernicious substances from their products. 

In some instances, the state has successfully fulfilled that objective. In 2013, Coke changed its use of 4-MEI, a potential carcinogen found in its flagship soda, in response to Prop 65. Other major corporations, including Gillette, have carried out similar reformulations to comply with the law. But the totality of Proposition 65’s effects and its democratization of enforcement extend beyond compelling conglomerates into creating safer products.

The regulation has created a minefield for businesses of all sizes, making both multinationals and SMBs appealing targets for litigation.

Organizations that do not provide warning labels on products that contain one of the 900-plus chemicals on the Prop 65 list, or that have not carried out the due diligence to learn their products’ chemical profiles, are putting themselves at risk of paying out hundreds of thousands of dollars. 

Because of the sheer volume of California Prop 65 warning labels circulating in stores, shelves, and warehouses today, it’s easy to grow numb to the legitimate health implications they’re earnestly imparting. This is undoubtedly how the majority of Americans have begun to regard the yellow-triangle-and-exclamation-point. For many consumers, the labels are vague and unsubstantiated, and may say more about the unique politics of California than they do about the contents of a given product. Businesses, however, cannot afford to treat the regulation with the same disinterested skepticism. If they want to protect themselves from potentially serious financial penalties, they must account for the legion of attorneys, citizen enforcers, and consumer protection firms that are determined to extract settlements from any and all businesses wittingly or unwittingly neglecting California Proposition 65.