Law and the Business of Furniture

Interview With California’s Lead Formaldehyde Inspector

As I discussed in a previous post, California’s new formaldehyde regulations that affect manufacturers of composite wood products and furniture fabricators, importers/exporters and retailers will be effective on January 1, 2009. Judging from the emails I’m receiving, there is a tremendous amount of confusion concerning how to comply with the regulations. We discussed these issues with Darrell Hawkins, the lead formaldehyde inspector at California’s Enforcement Division, and below is a summary of his comments and other statements from the Enforcement Division.

1. What questions are most frequently asked regarding complying with the regulations?

Questions usually relate to labeling requirements, sell-through dates, statements that are required to be placed on invoices or bills of lading, and letters required to be sent to each supplier to show one is using “reasonable prudent precautions.” [ME: if you would like to see labeling samples, samples of required statements to be placed on invoices/bills of lading, and required letters to suppliers, please email me at “jcohen@homefurnishingslaw.com]. An issue that is less controversial today is the number of certification boards in place to test and certify composite wood products.

2. How do you envision the regulations will be enforced?

The Enforcement Division is committed to being reasonable and not heavy handed; however, the regulations won’t be bent and corners won’t be cut. The Enforcement Division will be using the sell-through period (the period of 12 or 18 months beginning January 1, 2009 to dispose of non-compliant inventories, depending on the product and certain circumstances) to work out procedures and educate the industry (e.g., there probably can’t be violations during the sell-through “grace” period unless a product is falsely labeled compliant). The Enforcement Division is still working out a field test method because the furniture needs to be deconstructed. The Division envisions purchasing furniture from retail, commercial and internet channels, and delivering the samples to the lab for deconstruction, testing and determination of responsible parties that may have violated the regulations. The Division will also inspect product for labeling compliance and chain of custody (e.g., records need to be stored for at least 2 years). The Division will also rely on “whistle-blowers” as it has in the past.

3. How will penalties, if any, be assessed:

[ME: California’s Health & Safety Code Section 39674(a) calls for strict liability with civil penalties not to exceed one thousand dollars ($1,000) for each day in which the violation occurs. And Section 39674(b)(1) calls for strict liability with a civil penalties not to exceed ten thousand dollars ($10,000) for each day in which the violation occurs. “Each violation” may be loosely defined.]

The Enforcement Division does not foresee a fixed penalty. Each case will stand on its own. The Division is committed to having the industry comply with the regulations and will take a “heavy hand” if necessary; however they don’t anticipate drastic action against offenders early on. The Division will be flexible and is willing to give the benefit of the doubt to first time offenders depending on the circumstances. Such circumstances may include the extent of the damage caused, whether the violator is a repeat offender, how long the violation occurred, and any action the violator may have taken to mitigate the damage. Depending on the violation, the Enforcement Division would enter into a mutual settlement with the violator, refer the matter to the legal office for settlement, or refer the matter to the Attorney General office or District Attorney for prosecution.

4. Mr. Hawkin’s Last Words

We’re all reasonable people trying to reduce formaldehyde emissions, not devastate the industry or have some sort of power play. It’s helpful for all to have formaldehyde emissions reduced.

[ME: I was impressed with Mr. Hawkin’s candor and recognition that the regulations are complicated and not easily understood. He often spoke about educating the industry, being flexible and reasonable, working together, etc. However he was also resolute that the regulations will be enforced and “cheaters” would be caught. The lessons for the industry is to continue to educate ourselves regarding the regulations and compliance, and perhaps continue to lobby the California legislature about the hardship to the industry (e.g., can the sell through “grace” period be extended since non-compliant inventories are not moving in these tough economic conditions). Please share your thoughts by posting a comment or emailing to me at jcohen@homefurnishingslaw.com.

California’s Formaldehyde Regulations: Compliance Primer

California means business. Despite the confusion, the lack of infrastructure for required third party testing, and numerous other unanswered questions, California is rolling out and is poised to vigorously enforce its new formaldehyde regulations on January 1, 2009. We’ll leave the wisdom of the regulations to the legislators and lobbyists. The guidelines below should help fabricators (i.e., users of composite wood products to make finished goods and producers of laminated products), importers/distributors, and retailers stay out of the regulators’ cross-hairs.

1. Fabricators.

(a) Use “reasonable prudent precautions” that the composite wood products are in compliance. This includes at a minimum notifying each supplier in writing that they must comply with the regulations (this should be done by certified mail return receipt required – feel free to email me at jcohen@homefurnishingslaw.com for a sample letter), and obtaining written documentation from each supplier that this is so.

(b) Properly label the product (see Section 93120.7(d) of the regulations).

(c) Provide a statement on the bill of lading or invoice that the product complies with the regulations.

(d) Keep all records with respect to compliance for at least two years, including dates of purchases, suppliers’ names, and precautions taken to ensure compliance.

2. Importers/Distributors.

(a) Use “reasonable prudent precautions.” (see paragraph 1(a) above).

(b) Label the products if the product was modified.

(c) Provide a statement on the bill of lading or invoice that the product complies with the regulations.

(d) Keep all records with respect to compliance for at least two years, including dates of purchases, suppliers’ names, and precautions taken to ensure compliance.

3. Retailers.

(a) Use “reasonable prudent precautions.” (see paragraph 1(a) above).

(b) Keep all records with respect to compliance for at least two years, including dates of purchases, suppliers’ names and precautions taken to ensure compliance.

4. Sell-through Periods. Fabricators, importers/distributors and retailers generally have a period of between 12 months and 18 months to dispose of non-compliant inventories, depending on the particular product and other circumstances, beginning January 1, 2009.

5. Enforcement. There is strict liability for violations, and fines can be steep, so negligence or ignorance of the regulations is not a defense.

I’m receiving numerous emails from our loyal readers about the regulations, a few are pro-regulation (or at least favoring the intent), but most vent about the additional cost and time necessary to comply with the requirements. Feel free to post a comment below or email me at jcohen@homefurnishingslaw.com. This post does not discuss compliance by manufacturers/producers of composite wood products (the requirements are extensive) — if you have any questions, please email me separately.

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Industries: Furniture Retailing

Avoid Lawsuits Through Effective Customer Service

When our clients call us to defend a customer lawsuit, or to reply to the applicable State consumer protection agency, a governmental authority, or the Better Business Bureau, it’s too late. As the Wall Street Journal (“WSJ”) recently stated: “…it’s crucial for companies to realize that the way they handle customer complaints is every bit as important as trying to provide great service in the fist place.” If you want to save time and money and give your lawyer a pink slip, read on.

1. Why is it important to have an effective customer service program: At the recent WithIt conference, Patricia Sherrill, Operations Manager at Neiman Marcus, discussed the importance of service recovery:

* Customers that complain can identify weaknesses in an organization. The WSJ points out that learning from failures is more important than fixing problems for individual customers, because process improvements have a direct impact on the bottom line. Unfortunately many companies have untrained personnel or salespeople address the complaint, offer an apology or compensation and hope for the best, thus failing to address the underlying problem and guaranteeing its reoccurrence.

* Individuals that have suffered from an unresolved complaint will turnoff a multitude of potential customers, whereas customers that have had their complaint satisfactorily resolved are positioned to become your most loyal customers.

* It costs an average of five times more to buy a new customer prospect than retaining an existing customer.

2. Effective customer service: The WSJ reports that “customers judge a company first on how it handles the problem, then on its willingness to make sure similar problems don’t happen in the future.” It continues that fairness is the biggest concern of customers and therefore service recovery must re-establish justice from the customers’ perspective. Ms. Sherrill suggests the following:

* Just LISTEN.

* Use positive body language and words. Be aware of your tone of voice.

* Call people by name (but be respectful).

* Defuse the situation with empathy, not excuses.

* Say “Thank You” and take responsibility.

* Apologize (but avoid “I’m sorry”.)

* Never make them wrong

* Follow-up

3. Preventing a customer complaint from escalating into an ugly legal dispute, by providing a fair hearing and assurances that the problem won’t happen again, is too often ignored. Give customer recovery your full attention and you’ll be sure to see profits increase and business grow. And I won’t be lonely, because you’ll send me “Thank You” cards.

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