Proposition 65 can spell bankruptcy for many California small businesses

Proposition 65 warnings on potential cancer-causing chemicals are common in California businesses.
Proposition 65 warnings on potential cancer-causing chemicals are common in California businesses.

In California, the only train wreck worse than the controversial high-speed rail project might be a ubiquitous state law that puts trial lawyers and small businesses on a collision course.

Almost three decades ago, California voters approved Proposition 65, which requires state regulators to produce a list of chemicals “known to the state of California to cause cancer” or reproductive harm.

Businesses that sell products in California containing any of these chemicals – like my home-goods store in Sacramento – must label their products as potentially harmful, even if the risk is miniscule, or face fines.

Over the years, the list of chemicals has grown to almost 900, many of which are found in common consumer products such as coffee and luggage. The warning labels have become so common that most people just ignore them.

While Proposition 65 may not do much to promote public health, it’s a windfall for trial lawyers and a threat to small-business owners like me. The law allows “concerned” citizens to file lawsuits and extract penalties from noncompliant businesses. Trial lawyers have pounced at the chance to cash in.

Take, for example, one group that’s suing a series of large coffee chains. According to the group, the chains failed to warn consumers that their coffee might contain a chemical linked to cancer in animals. But acrylamide – the common chemical in question – is only considered harmful in extremely high doses. The amount you might find in a cup of coffee is nothing to worry about.

Unfortunately, cases like these are characteristic of Proposition 65 litigation. Trial lawyers frequently manipulate the letter of the law to line their pockets – all ostensibly in the name of improving public health. But while this particular plaintiff is tackling some big prey, most bully small businesses instead. This preference is no accident. Provisions of the law leave me and other small-business owners particularly vulnerable.

Last year, California legislators passed a bill reforming Proposition 65 to lessen the law’s disproportionate burden on small businesses. Under the new law, a business with fewer than 25 employees can avoid a lawsuit by putting up Proposition 65 signs and paying a $500 fine within a two-week period. The reform is a step in the right direction, but it’s not nearly enough. The new legislation applies only to a small subset of violators and continues to leave small businesses vulnerable to punitive fees.

Private citizens who sue are not required to prove injury from the violation they are claiming. This means that if individuals can find just one of the more than 800 chemicals in a place of business, they have grounds for a lawsuit.

Unlike large chains and companies, small businesses like mine typically lack the resources to weather a long and expensive trial. This means that even if the defendant is innocent – and could thus conceivably get the case dismissed – it’s safer for small businesses to settle out of court.

Suing a business under Proposition 65 isn’t just easy, it’s also enticing. The law deliberately encourages citizens to file lawsuits, and then rewards them for doing so. Individuals who bring charges against businesses are awarded one-fourth of the civil penalty paid by a business found in violation. An active “bounty hunter” can earn upwards of $100,000 per year in enforcement fees.

For large businesses operating in multiple states, Proposition 65 is a regulatory headache. But for local, family-owned businesses like mine, the law can mean bankruptcy. Ultimately, a well-intentioned public health initiative has been perverted into a trial lawyer’s dream and an entrepreneur’s worst nightmare. It’s time for California to dismantle Proposition 65.

Mark Snyder is proprietor of William Glen Inc. in Sacramento and a member of Log Cabin Republicans.