What You Need To Know About Changes To California's Prop 65
Cannabis companies will be affected. Here's how to protect your liability.
A new and notable change is on the cannabis horizon, and it will affect a wide swath of cannabis and CBD products.
Beginning January 3, 2021, the sweeping labeling requirements of California’s Proposition 65 will apply more broadly to cannabis and CBD products. California’s Office of Environmental Health Hazard Assessment (OEHHA) has added THC to its list of approximately 1,000 chemicals that may cause reproductive harm. While marijuana smoke has been included since 2009, the addition of THC means that Proposition 65 warnings will now be required for all products sold in California that contain any detectable amount of THC. This covers a range of cannabis or hemp-derived CBD products and importantly includes those that are not smoked such as edibles, vape cartridges, and topicals.
The updates to Prop 65 merit taking a closer look at the statute, who it impacts, and how cannabis businesses and manufacturers should prepare in order to mitigate risk and avoid getting drawn into costly litigation. Here are some answers to frequently asked questions.
What is Proposition 65?
Also known as the Safe Drinking Water and Toxic Enforcement Act, Prop 65 was enacted in California in 1986. It requires a consumer warning on products that contain chemicals known to the state of California to cause cancer or reproductive harm. California regularly updates the naturally occurring and synthetic chemicals on its Proposition 65 list. Marijuana smoke has been included since 2009, and THC was recently added.
My business isn’t located in California, am I still impacted by Proposition 65?
In short, yes. The requirement to provide a consumer warning applies regardless of whether a business is headquartered or manufactures products in California or out-of-state. It covers any company that sells products in California whether via the store, through the mail, or on the internet.
In fact, according to a 2018 Prop 65 State Impact Report prepared by the Center for Accountability in Science, 75 percent of businesses that have had to litigate or settle Proposition 65 claims were actually headquartered outside the state of California.
My product contains very low levels of THC. Do I still have to label it with a Proposition 65 warning?
Some companies that sell CBD or hemp extract products may wrongly believe that these new labeling requirements do not apply to them. Confusion may stem from the fact that the 2018 Farm Bill exempted products that contained 0.3% or less of THC from the Federal Controlled Substances Act. But federal law does not apply directly to Proposition 65.
In addition, although the OEHHA has defined “safe harbor” levels for many of the chemicals listed under Proposition 65, which means that a business does not need to provide a warning if exposure to a chemical occurs at or below an established level, the Office has not established a safe harbor level for THC. Thus, even companies whose products contain negligible amounts of THC, well below the 0.3% threshold stated in the 2018 Farm Bill, are strongly advised to use a Proposition 65 warning in order to avoid potential liability under the statute.
How is Proposition 65 enforced and what are the penalties?
The California Attorney General's Office enforces Proposition 65, but any district attorney or city attorney (for cities whose population exceeds 750,000) may also enforce the statute. In addition, any individual acting in the public interest may enforce Proposition 65 by filing a lawsuit against a business alleged to be in violation of this law. Lawsuits have been filed by the Attorney General’s Office, district attorneys, consumer advocacy groups, private citizens, and law firms. Businesses that violate Proposition 65 by failing to provide notices can be subject to fines as high as $2,500 per violation, per day.
While the citizen-suit provision helps limit the state’s cost of enforcement, it also means that Proposition 65 lawsuits have become fertile ground for private plaintiffs who bear a relatively low burden of proof in alleging that exposure occurred—in any level— and, in the case of a win, are entitled to 25 percent of the penalty amounts, with the remaining 75 percent paid to the State of California.
Additionally, losing defendants can also be held responsible for paying plaintiffs attorneys fees and costs.
All of which makes Proposition 65 a lucrative area of litigation for private attorneys and means it's especially critical for businesses to protect themselves from costly litigation by using the appropriate Proposition 65 labeling.
What should I be doing now to ensure compliance with Proposition 65 labeling regulations?
Manufacturers of cannabis and CBD products that may contain trace amounts of THC and that are available for sale to any California consumer should seek legal counsel. Choose an attorney or firm that has experience in not only the cannabis industry, but also in Proposition 65 or similar regulatory matters. From there, it will be necessary to evaluate the specific products being sold, a process that may include laboratory testing to determine THC levels, and develop new packaging, website and/or labeling language that is fully compliant with the complex and specific Proposition 65 requirements.
Cannabis companies often face a slew of extra regulations and potential legal minefields at both the state and federal level. That’s why it’s particularly important to stay a step ahead of the latest potential roadblocks to profitability through proper preparation and full compliance.