Retailers: Potential Problems When Dealing with Hazardous Waste

Recently, Dana Palmer, a partner at Allen Matkins, presented a webinar entitled Hazardous Waste Management & Regulatory Interpretations: Perils & Pitfalls for Companies Regarding Salvageable/Usable Goods vs. Waste. The webinar focused on the challenges of complying with federal and state environmental laws regarding the proper disposal of hazardous waste, particularly as they relate to retail goods moving through the supply chain.

Why is this important? Because California and other states’ environmental laws are different and sometimes more stringent than federal laws, often tripping up companies operating nationally with the same handling processes in each state. What is not hazardous waste in one state might be hazardous waste in another. The failure to recognize this, in California in particular, can (and has) cost retailers and transporters millions of dollars in settlements.

Where do the potential problems lie, and what can companies do to protect themselves from such large penalties? Here are five main takeaways from the webinar:

1. What Constitutes Hazardous Waste?

This is an easy-sounding question with a complex answer that may vary from state to state, and which sometimes requires environmental lawyers or other specialists to answer. As applied to retail goods, the answer may in fact be even tougher to determine and subject to greater disagreement. At the federal level, hazardous waste generally has one or more of these four characteristics: ignitability, corrosivity, reactivity, or toxicity. It can be a solid, liquid, or gas. Outside of these characteristics, the federal and state governments have specified additional items as hazardous wastes. While it is readily apparent that oils, solvents, cleaning fluids, and pesticides might be classified as hazardous waste, the “hazardous” nature of other materials may not be so obvious. Simple household items like light bulbs, alkaline batteries, aerosol cans, expired drugs, electric toys, office equipment, body lotion, and baby shampoo have been found to meet the criteria as hazardous waste in California. Other states regulate idiosyncratically in this area, and it is important to check the law and not assume standard disposal is appropriate.

2. Who Is at Risk?

Retailers, distributors, transporters, and any other companies handling goods going to the retailer or rejected upon delivery to the retailer can be prosecuted for improper disposal of hazardous waste. In the trucking context, a carrier transports goods to a retail store and the store could reject the shipment due to damage occurring en route, and now the carrier now must decide what to do with it. In some cases, goods are directed from carriers to salvage centers that resell, salvage, donate, or dispose of the goods. Goods that have become unsalable at a retail location are often sent to reverse logistics centers. When discarding products, both reverse logistics and salvage centers must be careful to handle and dispose of these goods in compliance with applicable hazardous materials and hazardous waste laws. Failure to do so could subject those centers, as well as arguably the retailers and carriers sending goods to them, to liability and fines.

If retailers themselves discard products because they have become unsaleable due to damage, a lack of demand, the introduction of new versions, recalls, or seasonal products being out of date, they must also ensure that goods that can be classified as hazardous waste are disposed of properly. Any entity that does not do so can be held legally responsible and is subject to prosecution.

3. How Do Prosecutors Discover Violations?

The phrase “dumpster diving” doesn’t just apply to a frugal soul looking for discarded items that might be useful or valuable. Prosecutors engage in a form of dumpster diving to identify businesses that improperly dispose of hazardous materials. They monitor when trash is being picked up (often at a retail location) and follow the trash truck to the transfer station. They detain the truck and, keeping the waste separate from other incoming waste, sort through the waste from that store and look for items that do not belong in the municipal waste. Even a few small items disposed of improperly can raise red flags and prompt further investigation. In recent years, prosecutors have become less willing to accept improper materials in municipal waste streams, even when the violation seems less than flagrant, unintentional, or not involving an obviously questionable item.

4. Why Is This Especially Challenging for Retailers?

The laws regarding hazardous waste disposal were enacted with large industrial companies in mind. When applied to retailers, compliance becomes a much more complicated matter. While an industrial company usually deals with, at most, a couple dozen hazardous waste streams that most people would instinctively understand to be hazardous, a large retailer can stock literally thousands of different items on the shelves and have hundreds of locations throughout the country. The waste stream is extremely complex, and employees — which can number into the tens of thousands with frequent turnover — have multiple responsibilities and may not be trained to know which items are classified as hazardous waste when discarded. The simple act of an employee throwing old light bulbs into the dumpster behind the store can result in legal troubles.

5. How Can Companies Protect Themselves?

In the webinar, Palmer recommends three main ways that businesses can protect themselves.

• Watch the trash because dumpster-diving prosecutors are. No items that qualify as “hazardous waste” or “hazardous material” should be discarded in the municipal trash. If they are found, remove them for proper disposal. While this may seem like a hassle, it could end up saving millions of dollars and potential criminal liability in the long run.
• Train employees to recognize what constitutes hazardous wastes and to dispose of them properly. A business-wide training program is an investment that is well worth the expense.
• A third-party audit can reveal non-compliance issues that employees and even managers are likely to miss. Palmer recommends hiring an outside company to perform such an audit to help avoid costly — albeit innocent — mistakes. Palmer notes that hiring such a company directly through legal counsel can provide a better (if not infallible) basis on which to later claim privilege over the audit’s results.

Because the retail space involves different players and an enormous number of products, it can be a challenge to comply with strict laws regarding the proper management and disposal of hazardous materials and hazardous wastes. But taking the proper steps to do so will result in benefits to the environment, to the company’s bottom line, and to the company’s reputation.