Assemblyman Mike Gatto’s  legislation to reform Proposition 65 and protect small businesses from meritless lawsuits passed the Senate Judiciary Committee yesterday with a 7-0 vote.  The bill, AB 227, would allow small-business owners who receive notice of a technical signage violation of Prop. 65 to achieve compliance within fourteen days and pay a small civil fine.  In doing so, these businesses would avoid facing exorbitant retrospective fines and the prospect of paying thousands of dollars in settlements for neglecting to put up a simple sign.  

AB 227 essentially provides for a “fix-it ticket” for signage violations for the most common, everyday substances covered under Prop. 65, such as alcoholic beverages or those that naturally occur when grilling food.

“I am proud to have brought together groups that are normally on opposite sides of this issue to craft a common-sense bill that will help California businesses avoid costly litigation, while ensuring that the public has prompt and proper warnings,” said Gatto.  “It’s not every day that business groups, environmental justice coalitions, organized labor, and attorneys’ organizations agree on anything, much less how to reform Prop. 65—a measure that has been substantively amended just once in nearly 30 years.”

Previous attempts to reform the proposition in the past decade have not even reached the Senate for full consideration due to the difficulty in achieving consensus on such matters.

Prop. 65 was passed by voters in 1986, and requires warnings for a long list of products.  It also allows for fines of $2,500 per day, enforced by any person, for failure to comply.  Unfortunately, a small number of attorneys have recently used Prop.65 to target small businesses, which lack resources for a legal defense, with the goal of reaching quick settlements.  In the last several months, more than two-dozen brick-and-mortar businesses in Southern California, including restaurants and cafés in Burbank, Glendale, Pasadena, and Los Angeles, have been threatened with Prop. 65 lawsuits for simply neglecting to have posted signs (or signs of the right size), that warn about beer, wine, or chemicals that result from the natural process of cooking food.  Some businesses have paid settlements of $5,000 or more.

“Threatening a small business with a lawsuit for serving its customers coffee with their breakfast, a burger with their lunch, or a glass of beer or wine with dinner is absurd,” said Gatto.  “The voters passed Prop. 65 to be protected from chemicals that would hurt them.  They did not intend to create a situation where shakedowns of California’s small-business owners would cause businesses to want to close their doors.”

The idea for the legislation came from Assemblyman Gatto’s Small Business Advisory Commission, formed earlier this year to advise him on challenges facing local small-business owners.  Since its creation by the commission in January, AB 227 has received increasing support from a variety of sectors including community organizations, small-business groups, and environmental and consumer advocates.

“Most business owners work hard to follow the law and protect customers so they return.  This is especially true with small-business owners whose customers are neighbors, friends, and relatives,” continued Gatto.  “It is my hope that AB 227 will provide a balanced approach to the posting of Prop. 65 warnings in brick-and-mortar establishments, that protects small-business owners from having to pay outrageous settlements while maintaining the public’s informational rights.”

AB 227 now moves to the Senate Appropriations Committee for further consideration.