There are several strategies U.S. importers may consider to cope with the anticipated tariff increases. Some of the strategies are lessons learned during the first Trump Administration (e.g., to mitigate the impact of the Section 301 tariffs on Chinese-origin imports). The key to success remains to plan ahead, understand the laws, and weigh all options.

Potential New U.S. Import Tariffs

Before turning to strategies, we outline the potential types of tariffs that have been shared by Trump insiders. For each type, we cover the potential tariff action, timing for such imposition, and our assessment of the potential likelihood of imposition. Exporters, please note that we may expect to see other countries impose retaliatory tariffs against imports from the United States following the increase of U.S. import tariffs. China, Canada, Mexico and the EU have all threatened such tariffs.

• Chinese-Origin Goods.
  • Potential Tariff Action: Currently, the Section 301 tariffs on most imports of Chinese-origin goods are largely in the 25-50 percent range. During the Trump presidential campaign, we heard about a 60 percent tariff on all Chinese-origin goods. At the end of November 2024, president-elect Trump announced immediately upon taking office, tariffs on imports from China would increase by 10 percent. When coupled with the existing Section 301 tariffs, that action would result in a 35 to 60 percent tariff on such imports.
  • Timing: Such a tariff could be imposed using the same Section 301 of the Trade Act of 1974, but that method would take several months to implement. The wild card option under consideration (leaked on January 8, 2025) would be to use the president’s emergency authority under the International Emergency Economic Powers Act of 1977 (IEEPA), which would enable the incoming Administration to impose tariffs almost immediately. IEEPA has not been used previously to implement tariffs, so any such tariff action could be a bit of the Wild West.
  • Likelihood: Very likely.
• Chinese-Owned or Operated Ports.
  • Potential Tariff Action: During the Trump presidential campaign, we heard brief threats about the imposition of tariffs on any goods, regardless of country of origin, that entered the United States through any Chinese-owned or operated ports.
  • Timing: Such a tariff could be implemented quickly after inauguration. Congress has delegated broad authority to the Executive Branch to impose tariffs for reasons of national security. Thus, the same IEEPA-type action could authorize such tariffs immediately upon inauguration, or potentially even Section 232 of the Trade Expansion Act. Any Section 232 action would require several months.
  • Likelihood: Not likely.
• Mexico and Canada.
  • Potential Tariff Action: Trump has all but promised a 25 percent tariff on all imports from United States-Mexico-Canada Agreement (USMCA) partners Canada and Mexico. The USMCA was negotiated by the first Trump Administration. The agreement has a national security carveout (a theme here) that enables a party to the agreement to apply measures it considers necessary for protection of its own essential security interests. Thus, the USMCA gives the incoming Administration the pretext it needs to impose such tariffs.
  • Timing: Such a tariff could again be implemented quickly using IEEPA or much longer should negotiations drag on related to any such tariff. The immediate imposition of such a tariff would be aggressive, though not impossible. There is a decent chance the threat is being used as a negotiating tool (or stick) ahead of the 2026 joint review of the USMCA by the member parties.
  • Likelihood: Possible, but more likely used as negotiating leverage.
• Universal Tariff.
  • Potential Tariff Action: The incoming Administration has also announced the potential for a 10 or even 20 percent universal tariff. Such a tariff would apply to all imports from all countries. However, in recent weeks, we have seen leaks that such a universal tariff would be targeted to imports relating to national security as follows: defense industrial supply chain (through tariffs on steel, iron, aluminum and copper); critical medical supplies (syringes, needles, vials and pharmaceutical materials); and energy production (batteries, rare earth minerals and even solar panels).
  • Timing: Such a tariff could again be implemented quickly using national security arguments. There are also recent reports that it would be phased in gradually to minimize disruption to supply chains and financial markets.
  • Likelihood: A broad universal tariff is not likely, but also not impossible. A universal tariff targeting imports relating to national security considerations is fairly likely.
• Antidumping and Countervailing Duties.
  • Potential Tariff Action: President-elect Trump’s team is committed to the fair trade end of the free trade/fair trade spectrum. The main tool in that arsenal is an old one: antidumping duties and countervailing duties (AD/CVD). We expect the use of the AD/CVD laws to increase steadily during the incoming Trump administration. One major focus will be anti-circumvention proceedings that are designed to punish imports from countries where foreign manufacturers under AD/CVD orders may try to shift their production.
  • Timing: AD/CVD cases are slow by nature. No real changes will be noticeable until 2026 or 2027.
  • Likelihood: Very likely.

Top 10 Tariff Coping Strategies

The potential for new tariffs is substantial. We provide the following for consideration in preparing for such actions. Any plan requires tailoring to specific supply chains, products, and compliance realities. Sometimes a combination of the below strategies may be necessary.

1. Contract Negotiation: Review supplier and customer contracts to assess the assignment of liability for tariff increases; and negotiate favorable tariff burden-sharing.
2. Supply Chain Management: Consider suppliers in countries subject to lower tariffs, but be aware of the potential for AD/CVD and circumvention issues. Also consider sourcing a different product or raw material subject to a lower tariff rate. Don’t forget to examine whether manufacture in a third country using raw materials from a high tariff country creates a “substantial transformation,” such that the end product would be considered to originate in the third country. And of course, to the extent possible, review the possibility of sourcing from domestic suppliers.
3. Trade Agreements: Consider sourcing from countries subject to free trade agreements with the United States, which would enable duty-free imports. But do not assume that Canadian and Mexican goods will be duty-free; be aware of the potential of a national security-based tariff or renegotiated USMCA.
4. Trade Preference Programs: Keep an eye on potential programs that provide duty-free imports. For example, past programs included the Generalized System of Preferences (GSP) and the Miscellaneous Tariff Bill (MTB). But be aware that the GSP and MTB programs have been languishing without reauthorization by Congress for years.
5. In-Bond Shipments and Foreign Trade Zones (FTZ): If a company’s supply chain involves goods transiting through the United States, for sale elsewhere, consider use of in-bond shipments or an FTZ, where tariffs do not normally apply. But be aware that in-bond and FTZ schemes can involve high storage fees, rigorous accounting procedures, and other costs.
6. Duty Drawback: If manufacturing products in the United States for export, consider making use of a drawback program. Drawback enables importers to obtain refunds of certain U.S. duties paid on the imported component goods or materials. Section 301 duties are eligible for drawback, but AD/CVD are not.
7. Exclusions: If new tariffs are issued under Sections 301 or 232, consider seeking a tariff exclusion if such an administrative process is provided. 
8. Comments: If Sections 301 or 232 are used, we expect to see a notice and comment period as part of the rulemaking, which should provide interested parties an opportunity to comment on the economic impact of the proposed tariffs.
9. Congressional Relations: Consider whether outreach to congressional delegations could help in any tariff mitigation strategy.
10. Litigation: We expect multiple lawsuits challenging the authority to impose certain tariffs. But U.S. courts have generally been receptive to the national security justifications offered for such tariffs, and the timeline to resolve such actions requires years.

In sum, while the imposition of additional tariffs will be challenging for U.S. importers, there are several possible strategies that may reduce certain negative impacts of these tariffs. All importers must carefully analyze any supply chain changes under the applicable laws, and each decision should be well documented and supported by the company’s written import policies and procedures.

What’s Required?

The EPA has adopted new PFAS reporting requirements under two major data-gathering programs:

• Toxic Substances Control Act (“TSCA”) Retroactive Reporting to 2011. Requires a one-time report on all PFAS and PFAS-containing articles that have been manufactured or imported.
• Emergency Planning and Community Right-to-Know Act (“EPCRA”) Expanded Toxic Release Inventory (“TRI”) Reporting for 2024 and Later. Requires annual reports on the quantity, uses, releases, and disposal of PFAS.

Who Needs to Comply?

TSCA reporting requirements apply to any company that manufactured or imported PFAS or articles containing PFAS for use or sale in the United States. Because so many goods contain PFAS, all companies that manufacture or import goods should evaluate their products.

All companies required to report under the TRI program should determine whether PFAS reporting is required. Even if facilities don’t manufacture goods, PFAS are often used in manufacturing processes and equipment. EPCRA reporting requirements apply to facilities in specific sectors, including manufacturing, mining, electric utilities, energy, and waste treatment, storage and disposal.

When is Action Needed?

Companies should be taking steps now to ensure compliance. Determining whether new federal requirements apply could require investigation and inquiries to suppliers and contractors. Both the EPCRA TRI and TSCA reporting require detailed reports with extensive information on PFAS.

TRI reports under EPCRA are due on July 1, 2025 for the 2024 reporting year. TSCA reports for most companies will be due January 11, 2026. Qualified small businesses that only import goods and do not manufacture them have an additional six months to report (i.e., through July 11, 2026).

Some Products Known to Contain PFAS

This is the first of a series of posts on new PFAS regulations and programs. For more information and updates, contact Jeff Parker (jparker@sheppardmullin.com), Olivier Theard otheard@sheppardmullin.com) or Louise Dyble (ldyble@sheppardmullin.com).

Understanding the Change

On its face, the newly enacted law appears to focus more on egregious consumer refund policies than on settlement agreements in the context of escalated disputes and litigation. A deep dive into its legislative history suggests that it is intended to cover both scenarios.

On one hand, the legislature considered reports about consumer refund policies. Legislative reports cited a case where a company did not allow consumer refunds for defective products unless the consumer signed a non-disclosure agreement, deleted all negative social media comments and reviews, and agreed not to tell anyone about the refund they got.

On the other hand, the legislative reports suggest the new law could extend to clauses in more formal consumer settlement agreements following actually litigated suits. They cited another case where an individual consumer who was charged for his cable service after cancelling ultimately settled a lawsuit with the company. The company conditioned the settlement on the consumer’s agreement not to disclose any of the parties’ negotiations or the terms or amount of the settlement.

Implications for Businesses

Settlement agreements in consumer protection cases frequently prohibit the parties from speaking publicly about the settlement. These provisions often stem from companies’ legitimate reputational concerns that consumer litigants or their attorneys will point to settlements as “proof” that the company did something wrong. Public knowledge of a settlement can create additional risk for companies by encouraging follow-on suits for similar claims, regardless of their merit.

Here are a few steps businesses can take to navigate this change effectively:

1. Legal Review and Update: Conduct a comprehensive review of all consumer settlement agreements and refund policies to identify and remove non-disparagement clauses.
2. Training and Awareness: Ensure that legal teams and customer service representatives are well-versed in the nuances of the new law to prevent inadvertent violations.
3. Embrace Transparency: View this legislative change as an opportunity to foster a culture of transparency and open dialogue with consumers. Encouraging honest feedback can be a catalyst for improvement and innovation.

Putting it into Practice

This change is a reminder of the evolving nature of consumer rights, particularly in California. In light of this legislative change, businesses should review and update their standard refund policies and consumer settlement agreements to ensure that they are in compliance with California law come 2025.

When Does the Law Take Effect?

Most of the law’s requirements will take effect on March 4, 2025, 180 days following the RWSA’s enactment.

Who Is Covered?

The RWSA applies to any person, entity, business, or company with at least 10 retail employees, defined as those working in a retail store for the employer. A “retail store” is defined as “a store that sells consumer commodities at retail and which is not primarily engaged in the sale of food for consumption on the premises.”

Key Requirements:

Workplace Violence Prevention Plan

Employers subject to the law must adopt a workplace violence prevention policy. The RWSA requires the New York State Department of Labor (NYSDOL) to create a model plan for this purpose. Employers must either adopt this model plan or develop their own policy that meets or exceeds the specified minimum standards. Additionally, employers must provide a written copy of the policy to employees upon hiring and annually thereafter. The workplace violence prevention policy must include:

• A list of factors or situations that may place retail employees at risk of workplace violence, including but not limited to working late night or early morning hours; exchanging money with the public; working alone or in small numbers; and uncontrolled access to the workplace;
• Methods that employers may use to prevent incidents of workplace violence, including but not limited to establishing and implementing reporting systems for incidents of workplace violence;
• Information on federal and state statutory provisions concerning violence against retail workers and available remedies for victims, and a statement that there may be applicable local laws; and
• A statement that retaliation against individuals who complain of workplace violence or the presence of factors or situations in the workplace that might place retail employees at risk of workplace violence, or who testify or assist in any proceeding under the law is unlawful.

Employee Training

Covered employers are required to provide workplace violence prevention training to all new hires and conduct training annually thereafter. The RWSA instructs the NYSDOL to create a model training program, which employers can either use or develop their own program that meets or exceeds the NYSDOL’s minimum standards. The training must be interactive and cover the following topics:

• The requirements of the Retail Worker Safety Act;
• Example of measures employees can use to protect themselves when faced with workplace violence from customers or other coworkers;
• De-escalation techniques;
• Active shooter drills;
• Emergency procedures;
• Instructions on using security alarms, panic buttons, and other emergency devices; and
• A site-specific list of emergency exits and meeting places in case of an emergency.

Panic Button

Starting January 1, 2027, retail employers with 500 or more retail employees nationwide will be required to provide access to panic buttons in easily accessible locations throughout the workplace. These panic buttons are physical buttons that, when pressed, immediately alert the local 911 operators to dispatch law enforcement.

Alternatively, employers can opt to provide wearable or mobile phone-based panic buttons to each of their employees. The mobile-phone based panic button can only be installed on employer-provided phones. Employers are not permitted to use the wearable and mobile phone-based panic buttons to track employees’ locations, except when the button is triggered.

Retail employers in New York state should begin preparing to incorporate the new requirements under the RWSA and keep an eye out for incoming guidance from the NYSDOL.

What to Do Now?

Every retail operation covered by the law should:

• Assess their current Health and Safety plans and procedures and perform a gap analysis to confirm best practices;
• Draft and enact a Model Workplace Violence Plan in Accordance with the Act;
• Plan and prepare to deliver annual workplace safety training; and train the trainers on content and delivery of the safety plan; and
• Plan for the installation of Panic Buttons, either physically or digitally as proscribed by the Act.

Most of All — Don’t Panic:

Sheppard Mullin attorneys are prepared to assist with designing, drafting, developing and delivering training and compliance plan materials to meet the forthcoming requirements. Please reach out to your Sheppard Mullin attorney for assistance in complying with the law’s new requirements.

In Loper Bright, a group of commercial herring fishermen challenged a requirement from the National Marine Fisheries Service that they pay an observer approximately $700 per day to monitor compliance with applicable fishing regulations while at sea. Emphasizing its detrimental financial impact, the Plaintiffs contended that the monitoring requirement exceeded the authority granted to the agency under the Magnuson-Stevens Fishery Conservation and Management Act of 1976.[2] The district court granted summary judgment for the government, finding the agency reasonably interpreted its authority under the act. On appeal, the D.C. Circuit affirmed.

The Supreme Court granted certiorari on the limited question of whether Chevron should be overruled or clarified. The judicial doctrine that had come to be known as “Chevron deference” previously empowered government agencies to flexibly adapt and update their interpretations of statutes. Chevron provided courts a strong basis to assume that an agency’s specialization rendered it the expert of its domain. As a result, courts generally deferred to an agency’s interpretation of an ambiguous statute over the court’s independent interpretation. The doctrine historically allowed agencies to change rules with relatively low judicial pushback as technology and other industry conditions evolved over time.

Loper Bright has upended the Chevron deference doctrine because the Supreme Court has now held that courts should no longer defer to an agency’s interpretation of an ambiguous statute. While the Court encourages “respectful consideration” of thorough and well-reasoned agency interpretations, as it contemplated in Skidmore v. Swift & Co.,[3] Loper Bright’s departure from Chevron disrupts the dynamic in a multitude of earlier decisions where courts relied heavily on agency guidance or enforcement strategies to determine how to interpret an unclear statute. Its implications extend to both agency enforcement actions and private lawsuits.

The Loper Bright decision represents a major change to the federal regulatory environment, particularly for sectors like retail and the financial services industry that are heavily influenced by agency rulemaking. At a minimum, granting the power of statutory interpretation more firmly to the judiciary may result in unpredictable and inconsistent rulings across trial and appellate courts. The law could also result in a slower response rate to new market realities because courts will need to more exhaustively evaluate agency decision-making through the use of experts and their own research. Furthermore, because Loper Bright lowers the barriers to challenge agency interpretations, overall litigation volume may increase.

For corporations, this change portends, at a minimum, an adjustment period. Industries like retail and financial services are subject to a wide range of regulatory oversight spanning consumer protection, labor laws, environmental policy, and more. The deference afforded by Chevron allowed federal agencies like the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the Consumer Financial Protection Bureau (CFPB) to autonomously update and refine their regulatory approaches in response to evolving industry conditions and consumer behaviors. With Chevron deference no longer in play, retailers may find themselves navigating a more static regulatory environment where changes to regulatory interpretations could be slower to materialize and subject to increased judicial scrutiny.

While the overruling of Chevron deference in Loper Bright introduces some uncertainty and could lead to increased litigation, corporations may see positive outcomes that result from greater independent review by the courts.

Predictability in Regulation: A move away from Chevron deference could lead to a more predictable regulatory environment. Reducing agencies’ latitude to flexibly interpret statutes might mean fewer sudden changes in regulatory compliance requirements for businesses. This predictability could lend itself to easier long-term planning while reducing the risks associated with seismic regulatory shifts.

Increased Judicial Oversight: The newly increased role of the judiciary to review agency action and rethink agency guidance might result in more thorough scrutiny of regulations that impact a particular sector. Corporations who believe that certain regulations are overly burdensome or not properly grounded in statutory authority may thus have a better chance of seeing such regulations overturned or modified through judicial review.

Opportunities for Legal Challenges: Corporations who feel aggrieved by specific agency interpretations or actions may find it easier bring legal challenges, potentially leading to more business-friendly interpretations of regulatory statutes by the courts.

Greater Clarity and Uniformity: With courts exercising independent judgment over agency action, Congress may strive for greater clarity in new statutory language to properly articulate its legislative intent, thereby leaving less room for interpretation by the courts. For national or multinational corporations, this could simplify compliance efforts by reducing variability in how regulations are enforced across different regions.

Influence on Regulatory Process: The shift in the power dynamic between federal agencies and courts could encourage retailers to engage more proactively in the regulatory process. This may include providing comments during rulemaking and working more closely with legislators and regulators to shape favorable policies. Increased engagement could lead to regulations that work with various industries rather than against them.

Notably, while the Loper Bright decision binds federal courts, a ripple effect across state courts is possible. In some states like New York[4] and Illinois,[5] judicial deference to state agencies akin to Chevron remains intact. California,[6] by contrast, affords different degrees of deference depending on the particulars of each agency decision. In recent years, several states like Arizona[7] and Georgia[8] have passed laws closely cabining the deference afforded to state agencies. Corporations may therefore see a higher degree of deference in litigation outcomes in state versus federal courts where agency regulations are highly relevant.

Putting it into practice: For many industries, this transition could introduce a period of uncertainty as regulators evaluate how to continue issuing regulations responsive to innovation and market dynamics. With greater uncertainty in litigation results comes the possibility that corporations may experience greater success in challenging unfavorable agency actions and guidance. As the implications of Loper Bright unfold, businesses should consider whether and where to engage more actively in the legal processes that will shape the regulations governing the industry.

FOOTNOTES

[1] Chevron U.S.A. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[2] Magnuson-Stevens Fishery Conservation and Management Act, 50 C.F.R. 600 (1976).

[3] Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[4] See Kurcsics v. Merchs. Mut. Ins. Co., 49 N.Y.2d 451, 458 (N.Y. 1980) (calling for deference to agency interpretation when a statute’s application “involves knowledge and understanding” of data or operations, but noting “there is little basis to rely” on agencies for questions of “pure statutory reading and analysis”).

[5] See Denton v. Civ. Serv. Comm’n, 176 Ill.2d. 144, 148 (Ill. 1997) (“While courts afford considerable deference to an agency’s interpretation of a statute it administers, an agency’s determination is not binding as to questions of law and will be rejected if erroneous.”) (citation omitted).

[6] Yamaha Corp. of Am. v. State Bd. of Equalization, 19 Cal.4th 1, 7–8 (Cal. 1998) (“The standard for judicial review of agency interpretation of the law is the independent judgment of the court, giving deference to the determination of the agency appropriate to the circumstances of the agency action.”) (citation and quotation omitted).

[7] Ariz. Rev. Stat. § 12-910 (2021).

[8] Ga. Code Ann. § 50-13-19 (2022).

As currently written, PAGA permits a current or former employee to bring litigation against an employer to recover penalties on behalf of “aggrieved employees”, as well as recover attorney’s fees and costs. PAGA penalties may reach up to $100, $200 or more per pay period per aggrieved employee. The statute of limitations for a PAGA claim is one year, and PAGA claims may be asserted either as part of a larger wage and hour class action or as a standalone “PAGA-only” lawsuit. While PAGA claims might appear to carry lower exposure based on the shorter statute of limitations (1 year as opposed to 3-4 years in a typical wage and hour class action), PAGA-only claims differ in a number of important ways from class actions. First, a PAGA claim is not subject to class certification. Second, California law allows for broad discovery of employee information from the outset of a PAGA case. Third, technical violations that might otherwise be de minimis in a wage and hour class action are subject to the statutory penalties of $100 or $200 per pay period, per employee. 

In light of this, PAGA has been a significant driver of wage and hour litigation in California, and as a result of the recent exponential increase in PAGA litigation in California, a reform measure was placed on the November 2024 ballot by a coalition of non-profits, social justice advocates, family farmers, health care providers, and businesses. 

After months of discussions with labor advocates and the coalition, California’s political leaders agreed on the outlines of a PAGA reform deal to be considered by the California Legislature. The reforms, if passed by the California Legislature and signed by Governor Newsom before June 27, 2024 (the deadline for measures to be withdrawn from the November 2024 ballot), would result in removal of the PAGA reform measure from California’s November ballot.

The core elements of the reform package are to increase the employee share of any recovery, increase penalties for malicious employer conduct, cap penalties for employers who make efforts to comply with the Labor Code, permit employers to cure more alleged Labor Code violations to make employees whole and avoid litigation, and require a representative plaintiff to experience all alleged Labor Code violations to have standing to pursue PAGA litigation. Each of these core elements is discussed further below:

Employee Share of Penalty

Currently, any PAGA penalties awarded, after attorney’s fees and costs are subtracted, are apportioned 75% to the California Labor Workforce Development Agency, and the remaining 25% is distributed amongst the aggrieved employees. The PAGA reform increases the aggrieved employee’s share of the penalties to 35%.

Increased Penalties for Malicious Employer Conduct

The PAGA reform deal will create a new $200 per pay period penalty for instances where an employer acted maliciously, fraudulently, or oppressively. It is presently unclear what constitutes malicious, fraudulent, or oppressive conduct, though this language is similar to the standard for punitive damages applicable to non-wage and hour employment claims.

Caps on Employer Liability

The PAGA reform deal proposes caps on PAGA penalties for employers who attempt to comply with the Labor Code before receiving a PAGA notice and those employers who take steps to fix policies and practices after receiving a PAGA notice.

Those employers who proactively take steps to comply with the Labor Code before receiving a PAGA notice would only be subject to a maximum of 15% of the applicable PAGA penalty for a given claim. 

Those employers who take steps to fix policies and practices after receiving a PAGA notice would only be subject to a maximum of 30% of the applicable PAGA penalty for a given claim. 

While it has not been announced what employer conduct qualifies as proactive compliance efforts or what steps to fix policies or practices are necessary to qualify for the applicable caps, it is clear regular compliance efforts and swift responses to PAGA letters will become only more critical going forward.

Other Penalty Reductions

The reform deal also reduces the maximum penalty by an unknown amount in instances where the alleged violation was brief, as well as for alleged technical wage statement violations that did not cause confusion or economic harm to the employee, such as misspelling of company names.

The reform deal also provides a mechanism for equalizing penalties for those employers who pay their employees on a weekly basis, as opposed to bi-weekly. PAGA penalties are currently assessed on a per pay period basis, making employers who utilize weekly payroll potentially subject to double the amount of PAGA penalties as an employer paying bi-weekly.

Employer Opportunity to Avoid Litigation

The reform deal provides several opportunities for employers to avoid litigation, either by curing the alleged violations or engaging in an early resolution process through the courts.

PAGA currently provides an employer the opportunity to avoid liability if it properly cures certain technical violations of the obligation to provide accurate wage statements. 

The PAGA reform deal proposes an increased, though currently unspecified, number of Labor Code provisions that may be cured by an employer upon notice of the potential violations. 

The reform deal also provides increased cure opportunities for small employers, via an unspecified process through the Labor and Workforce Development Agency.

Lastly, the reform deal provides for early resolution opportunities for large employers in court, presumably through a court-mandated early settlement process.

Standing

Presently, under Kim v. Reins International California, Inc.(2020) 9 Cal.5th 73, a representative plaintiff has standing to bring a PAGA lawsuit so long as the plaintiff was employed by the alleged violator and personally suffered at any point in time at least one Labor Code violation on which the PAGA lawsuit was based. The reform deal proposes that a representative plaintiff must have actually experienced all of the alleged PAGA violations within the one-year statute of limitations for PAGA claims to have standing to pursue the litigation.

Manageability

Presently, under the California Supreme Court’s recent decision in Estrada v. Royalty Carpet Mills, Inc., trial courts lack inherent authority to strike PAGA claims on manageability grounds, even if those claims are complex or time intensive, unlike the authority that trial courts have to bar class action claims. The PAGA reform deal would be a move toward overturning Estrada and codifying a trial court’s ability to limit the scope of claims and the evidence presented at trial for reasons of manageability.

Increased State Enforcement

The PAGA reform deal would also commit the Newsom administration to seeking expedited hiring to fill vacancies at the California Department of Industrial Relations (DIR) to improve and expedite enforcement of employee labor claims by the DIR, instead of by private attorneys general.

Conclusion

The PAGA reform deal, assuming it is passed in the publicly announced form by the Legislature and signed by the Governor before the June 27, 2024 deadline to withdraw the PAGA ballot measure, is likely to curb, but not eliminate PAGA litigation for California employers going forward. The reformed PAGA will, if passed as announced, make it even more critical for employers to proactively monitor their California wage and hour compliance, as well as act swiftly to evaluate their options to fix or cure the alleged violations when they receive notice of a potential PAGA claim.

The new updates under Georgia Act 564 (formerly Senate Bill 472) present minor changes to a few key definitions in Georgia’s online marketplace requirements in ways that deviate from the federal INFORM Act.

Specifically, the law changes the definition of high-volume third-party seller in a way that may wrap in new or additional sales. Under the existing federal and Georgia state laws, high-volume third-party sellers are generally those with at least 200 product sales on that platform totaling $5,000 or more in gross revenue. For the federal law, that can include all sales on the platform. To qualify under the Georgia law, it includes only sales and revenues in that state. Until July 1, 2024, both the federal and Georgia laws considered a sale for this purpose to include only those made through the online platform with payment processing handled by the platform or its processor.

The new Georgia law potentially expands that definition for Georgia sales by removing the requirement that the platform or its payment processor handled the payment, and including all sales made by “utilizing” the platform rather than “through” the platform. Notably, this requirement does not apply to businesses that publicly disclose their own name, address, and contact information, report their identity information to the marketplace, and have ongoing contractual relationships with the marketplace for consumer product manufacturing, distribution, wholesaling, or fulfillment.

As interpreted by NetChoice LLC in its challenge to the law’s implementation, this change would expand the law to include a wide variety of sales occurring offline that were somehow aided by the platform. NetChoice, an industry group serving major ecommerce platforms, filed a lawsuit this month seeking injunctive and declaratory relief to prevent enforcement of the law. The complaint argues that Georgia’s online marketplace amendments overstep reasonable regulatory boundaries by requiring platforms to investigate and record transactions outside of their current visibility.

Dubbed the “Combating Organized Retail Crime Act,” Act 564 was initiated in February 2024 and signed into law by Governor Brian Kemp on May 6, 2024. Its modifications to the Georgia Inform Consumers Act, which first went into effect January 1, 2023, aim to bolster oversight of ecommerce platforms to prevent the sale of stolen and counterfeit goods, a goal on the forefront of retailers’ minds.

Putting it into practice: Georgia is not the only state with unique online marketplace reporting requirements that differ from the federal INFORM Act. Online sellers and platforms alike should periodically review their reporting processes to ensure they are up to date on complying with both federal and state identity verification requirements.

AB 82 Dietary Supplements For Weight Loss and Over-The-Counter Diet Pills

AB 82 would prohibit retail establishments from selling dietary supplements for weight loss and over-the-counter (OTC) diet pills to individuals under 18 years of age without a prescription. Retailers would also be required to post a notice stating that certain supplements for weight loss and OTC diet pills may contribute to specified health conditions or death. Violations would come with a civil penalty of no more than $1,000 for each violation. If passed into law, it would become effective July 1, 2024.

AB 660 Food and Beverage Products Labeling: Quality Dates, Safety Dates, and Sell-By Dates

AB 660 would require food retailers, manufacturers, and processors responsible for labeling to include a date label showing a quality or safety date. It would also prohibit individuals from selling items that are not labeled in accordance with this or items that are labeled with the phrase “sell by.” This would not apply to infant formula, eggs, and pasteurized in-shell eggs. AB 660 would also require food facilities that package food using a reduced-oxygen packing method and Clostridium botulinum to have a plan in place that limits the refrigerated shelf life to no more than 30 calendar days from packing to consumption, except the time that it is maintained frozen, or the original safety date (current law notes the “sell by” or “use by” date), whichever occurs first. If passed, this law could become effective January 1, 2025.

AB 1757 Accessibility: Internet Websites

AB 1757 establishes a uniform standard for website compliance with disability law and creates enforcement mechanisms for individuals and the State. Presently, there is no specific standard for website compliance with disability law (specifically, the Americans with Disabilities Act (“ADA”) and the Unruh Civil Rights Act (“UNRUH”). This lack of uniform standard has created uncertainty and led to litigation. This bill seeks to help small businesses comply with the law and creates a rebuttable presumption of compliance with state accessibility requirements if the business’ website complies with the specified standard. This would ultimately prevent the business from being liable for damages available under the ADA and Unruh. This bill also allows a person to bring a civil cause of action against a person who negligently, intentionally, or knowingly built an inaccessible website. Lastly, the bill allows a business to recover damages paid to website users from the hired website designer responsible for building the inaccessible website; and allows public prosecutors to enforce the law by obtaining injunctive relief.

 AB 2577 Organic Waste: Reduction Regulations

AB 2577 would require the Department of Resources Recycling and Recovery, which has already adopted regulations to reduce organic waste in landfills and require not less than 20% of edible food currently disposed of to be recovered for human consumption by 2025, to also include in its regulations product labeling requirements that reduce food waste.

SB 551 Beverage Containers: Recycling

AB 551 would permit certain beverage manufacturers to comply with the current reporting requirements to the Department of Resources Recycling and Recovery for virgin plastic and post-consumer recycled plastic by submitting a consolidated report with aggregated information covering one or more beverage manufacturers as specified.

SB 1053 Solid Waste: Reusable Grocery Bags, Standards, Plastic Film Prohibition

SB 1053 would prohibit stores from providing single-use carryout bags to customers unless, among other things, those bags are used solely to contain or wrap specified uncooked foods and other items to avoid contamination. Currently, the exception applies to bags used to contain unwrapped food. SB 1053 would also repeal the current requirement that reusable grocery bags sold by stores at the point of sale be made by a certified reusable grocery bag producer; however, the bag would need to meet other requirements including that it not be made from plastic film material. Stores would also be prohibited from selling recycled paper bags at the point of sale unless the bag is made from 100 percent post-consumer recycled materials. If passed, the law would become effective January 1, 2026.

SB 1147 Drinking Water: Bottled Water: Microplastics Levels

SB 1147 would become effective January 1, 2026, and require the Office of Environmental Health Hazard Assessment (OEHHA) to study the health impacts microplastics have on drinking water, including bottled water. OEHHA would also be required to develop public health standards for a safe level of microplastics, and the State Board would have until January 1, 2028, to adopt those health standards. The State Board would also have to establish testing and reporting requirements for annual testing of microplastics in bottled water sold in the state.

Takeaways

Food manufacturers in particular should be aware of these bills as they may impact their business operations. Some bills, such as SB 82, may result in monetary penalties for failure to comply, and others, such as SB 1757, help facilitate safeguards against liability for small businesses. Various bills have effective dates in several years, so businesses may want to consider taking measures now to ensure compliance in the future.

The Court reasoned that, because there is no consensus in the scientific community as to whether glyphosate is carcinogenic, there were less burdensome ways for California to convey its message than requiring businesses to include Prop 65 warning labels on their products. The decision is likely to have far-reaching impacts on ongoing and future Prop 65 litigation, as well as the California Office of Environmental Health Hazard Assessment’s (“OEHHA”) chemical-listing decisions for other “controversial” and “contested” chemicals.

What is Prop 65?

Prop 65 is a California law that requires California consumers receive warnings regarding the presence of chemicals that cause cancer or reproductive toxicity. OEHHA maintains a list of over 900 chemicals for which warnings are required and is continually adding new chemicals to the list.[1]

What is Glyphosate?

Glyphosate is a widely-used herbicide that controls weeds and grasses, best known in products such as Monsanto’s Roundup. Since 1974, when glyphosate was first registered as a pesticide in the U.S., the EPA has reviewed and reassessed its safety every 15 years. Although the EPA has consistently concluded that glyphosate is not likely to be carcinogenic to humans, the International Agency for Research on Cancer (“IARC”) has classified glyphosate as “probably carcinogenic to humans” based on “limited evidence” in humans and “sufficient evidence” in animals.[2] A significant number of international regulatory authorities and organizations disagree with IARC’s classification of glyphosate, and global studies from the European Union, Canada, Australia, New Zealand, Japan, and South Korea have all concluded that glyphosate is unlikely to be carcinogenic to humans.

The First Amendment and Commercial Speech

Under a long line of Supreme Court jurisprudence, the government is permitted to restrict or compel certain categories of speech. As to commercial speech (i.e., speech that promotes a business or commercial activity), the government may restrict or compel speech that is “purely factual and uncontroversial”, ​“as long as disclosure requirements are reasonably related to the State’s interest in preventing deception of consumers.”[3] 

If the commercial speech is not “purely factual and uncontroversial”, the regulation is subject to a higher level of judicial scrutiny (intermediate scrutiny), and the government must show: (1) a substantial interest in regulating speech; (2) that the regulation advances the government interest asserted; and (3) that the regulation is not any more extensive than necessary to serve the government’s interest.[4]

Nat’l Association of Wheat Growers v. Bonta: Agricultural Producers and Businesses Challenge Prop 65 Warning Labels on First Amendment Grounds

In March 2017, OEHHA announced it would be adding glyphosate to its list of chemicals known to cause cancer for purposes of Prop 65 based solely on IARC’s findings.[5] Later that year, a group of agricultural producers and businesses filed a lawsuit in the U.S. District Court for the Eastern District of California, challenging the OEHHA’s decision. Plaintiffs argued that, because the issue of whether glyphosate is carcinogenic is “hotly contested”, California could not compel businesses to provide warnings stating that glyphosate is “known” to cause cancer.

The District Court agreed that Prop 65 warnings for glyphosate did not qualify as “purely factual and uncontroversial” because the EPA and international scientific community disagree with IARC’s categorization of glyphosate as carcinogenic. Therefore, the District Court applied intermediate scrutiny and concluded that the labels did not directly advance California’s interest in informing consumers of cancer risks. The District Court permanently enjoined enforcement of Prop 65 warning labels for glyphosate, and California appealed.

The Ninth Circuit affirmed the District Court on appeal, concluding that because “the overall message that glyphosate is unsafe . . . is, at best disputed”, Prop 65 labels would require “plaintiffs to convey a controversial, fiercely contested message that they fundamentally disagree with.” Accordingly, because California had less burdensome ways to convey its message than to compel plaintiffs to convey it for them, the Prop 65 warning requirement as applied to glyphosate was unconstitutional.

Although the effect of Nat’l Association of Wheat Growers v. Bonta on non-glyphosate Prop 65 litigation remains to be seen, the decision will almost certainly be cited by current and future litigants seeking to contest other chemicals on the Prop 65 list.

FOOTNOTES

[1] https://oehha.ca.gov/media/downloads/proposition-65//p65chemicalslist.pdf

[2] https://www.epa.gov/ingredients-used-pesticide-products/glyphosate

[3] Zauderer v. Office of Disc. Counsel, 471 U.S. 626, 628 (1985)

[4] Central Hudson v. Public Svn. Comm’n, 447 U.S. 557 (1980)

[5] https://oehha.ca.gov/proposition-65/crnr/glyphosate-be-listed-under-proposition-65-known-state-cause-cancer

First, not all are in affect. Only the laws in California, Connecticut, Colorado and Virginia are effective. The others will go into effect between December of this year and 2026, as follows:

• December 31, 2023: Utah
• July 1, 2024:             Florida, Oregon, and Texas
• October 1, 2024:      Montana
• January 1, 2025:      Delaware (pending governor signature) and Iowa
• July 1, 2025:             Tennessee
• January 1, 2026:      Indiana

In addition to the rolling effective dates, the laws do not have universal applicability. They apply only if your organization is doing business in one of these states and cover only “consumer” information (except for California which includes information from employees and employees of third parties). Beyond this, many have a sliding scale of revenue-generation applicability: California ($25 million), Florida ($1 billion), Tennessee ($25 million), and Utah ($25 million). For Florida, Tennessee, and Utah, if this revenue threshold is not met, then the law will not apply. California treats the revenue threshold as one of two mechanisms for determining applicability. Florida, additionally, applies only to a narrow set of companies. Finally, (except California) the laws apply only if the company processes information about a certain number of individuals in the state or sell information about certain threshold number of individuals:

• 175,000: Tennessee
• 100,000: California, Colorado, Indiana, Iowa, Oregon, Utah, and Virginia
• 50,000:   Montana
• 35,000:   Delaware (pending governor signature)

Texas does not provide a numerical threshold – but “small businesses” are exempt from most of the law’s obligations.

From a practical perspective, a few other things to keep in mind:

• Notice: laws require entities to include specific content in their privacy policies. Most who are already addressing existing comprehensive state privacy law obligations will not need to make many changes. More information about these obligations are discussed in our sister blog.
• Choice: Next, companies covered by these laws will have obligations to provide individuals with a set of rights. Which rights to provide vary by state, but usually include access, correction and deletion at a minimum. More information about these obligations are discussed in our sister blog.
• Vendors: Companies who find that these laws apply to them will also want to think about their vendor contracts. Most of the laws require that contracts with entities processing information on your behalf contain certain provisions. These include instructions (and limits) on how data is to be processed and confidentiality requirements. More information about these obligations are discussed in our sister blog.
• Profiling and behavioral targeting: Entities that engage in automatic processing of personal information in a way that produces a “legal or similarly significant effect” have obligations under these laws, discussed here. Organizations also need to keep in mind the opt-out requirements for targeted advertising.

We hope you can join us on August 1, and hope that these thoughts help in the meantime!