2025 Issue 3 | GearedUp
60
Prop 65 Continued from page 59
Second, supply chains should be evaluated to identify chemicals that may trigger warning requirements, taking into consideration the ever-growing list of chemicals listed on www. P65warnings. ca. gov / chemicals. Franchisees could even consider contacting a toxicologist familiar with Prop 65 to help conduct an exposure assessment.
Third, get familiar with your rights and obligations in vendor and supplier agreements to clarify which party bears responsibility for warnings, testing and indemnification, and negotiate contractual protections where appropriate. Finally, train your employees to ensure proper compliance and stay informed with any updates to chemical disclosure laws, such as Prop 65.
The good news is that the new amendments to Prop 65 warning regulations provide ample time for businesses to review their current warnings and develop a plan to implement the new warning requirements. Although effective as of Jan. 1, businesses have three years( until Jan. 1, 2028) to comply with the new shortform warning labels and other requirements.
Bear in mind that PF franchise agreements, like most franchise agreements, include a standard provision requiring franchisees to“ operate your [ business ] in full compliance with all applicable laws, ordinances and regulations.” The franchise agreement further states that“[ y ] ou are responsible for ensuring that your membership agreement... compl [ ies ] with applicable law.” In other words, franchisees are ultimately responsible for ensuring that their operations meet legal and regulatory requirements, including labeling, signage and disclosure obligations under Prop 65.
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PF franchise agreement insurance provisions also intersect with Prop 65 liability. Although general liability and umbrella coverages are designed to protect against a broad range of claims, many policies exclude statutory penalties – such as those arising from Prop 65 – and thus may not expressly cover Prop 65 enforcement actions. Franchisees should review their policies carefully and consult with insurance advisors to determine whether coverages extend to Prop 65 claims and consider whether additional coverage is advisable. It is important to keep in mind that even if coverage extends to Prop 65 claims, insurance coverage may be limited or even denied if the franchisee fails to show proactive and demonstrated compliance steps. In other words, always document compliance measures and keep signage and online warnings up to date, all the while being mindful of any new developments as Prop 65 continues to evolve. Similarly, franchisees should be aware of their indemnity obligations. Franchise agreements typically require franchisees to indemnify the franchisor for any claims related to the operation of the franchised business, especially if the claim is for any omission, act or error on behalf of the franchisee. Prop 65 claims fall squarely within these parameters. For example, if a franchisee fails to display proper warning labels and a Prop 65 bounty hunter comes knocking on your door with a lawsuit in hand, the franchisee will likely be on the hook for any liability the franchisor is faced with as a result thereof. Similarly, if it is the case that a Prop 65 claim is driven by a franchisor-mandated finish or product, such as flooring specifications or cleaning products, franchisees may nonetheless be on the hook unless there are specific carve outs in place that the franchisee has negotiated prior to entering into a franchise agreement.
Although it can be said that California is the driving force behind such“ right-to-know” laws, particularly chemical disclosure laws, keep in mind that many other states are following the trend and adopting statutes with similar disclosure obligations. For example, Vermont and Connecticut have implemented their own form of chemical disclosure requirements. Massachusetts has enacted its Toxic Use Reduction Act aimed at implementing reduction plans for toxic chemicals. New York’ s Child Safe Products Act and Washington’ s Children’ s Safe Products Act focus on protecting against toxic chemicals in children’ s products. While these laws are not as robust as California’ s Prop 65, they illustrate a growing nationwide trend in emphasizing chemical transparency. Therefore, it would be wise for businesses operating across multiple states to consider a broader compliance strategy that extends beyond the requirements of Prop 65.
As Prop 65 continues to evolve, it is clear that generic warnings will no longer cut it. Franchisees must identify specific chemicals, post clear signage and update membership agreements. Franchisees should stay proactive and minimize risk by aligning compliance programs, insurance coverage and indemnity obligations now, and not just within California but across all jurisdictions where they operate. By treating Prop 65 as a baseline, PF franchisees will be better prepared to tackle the nationwide trend in chemical disclosure laws. G
Justin M. Klein is a franchise and business attorney and a partner with the nationally recognized franchise law firm of Marks & Klein, which represents Planet Fitness ® franchise operators throughout the United States and internationally. You can contact Klein at justin @ marksklein. com. Matilda Barseghian is a lawyer with Marks & Klein and can be reached at matilda @ marksklein. com.