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Mr. Wolff is a partner and Mr. Dombroski is an associate in the New York office of Manatt, Phelps & Phillips, LLP.
Industrial producers generally have understood for some time that their generation of hazardous waste, even in small volumes, may subject them to regulation under state and federal hazardous waste laws. Many retail businesses, on the other hand, have only recently begun to understand that their operations may also generate hazardous waste that is subject to regulation under these same laws. A major source of confusion for many retail businesses is that, counterintuitively, products that are not subject to regulation under hazardous waste laws if sold to and later discarded by a household (such as products commonly found in household medicine cabinets and laundry rooms) may be subject to regulation under hazardous waste laws when discarded by the retailer. Given the growing number and scope of products offered by typical retail establishments, including “super centers,” specialty stores, pharmacies, grocery stores, and other retailers, and given the breadth of applicable laws, most retailers have the potential to be subject to requirements regarding the management and disposal of hazardous waste.
The federal Resource, Conservation, and Recovery Act (RCRA), 42 U.S.C. § 6901, et seq. and implementing regulations, 40 C.F.R. Parts 260–272, set forth the minimum applicable standards for the most common waste generation activities, including those of retailers. However, RCRA was not conceived of or designed with retailers in mind, but was instead largely intended to address waste management and disposal challenges posed by industrial waste generators, waste haulers, and waste disposal facilities. Since RCRA first took effect, its implementing regulations (and their state analogues) have evolved to specifically target industries from mining to healthcare, and to exempt waste generated by individual households from regulation. These regulations have, in contrast, changed little to address the unique circumstances applicable to retailers, although the Environmental Protection Agency (EPA) is beginning to take note of the particular environmental regulatory challenges faced by retailers. See U.S. EPA, Retail Industry Portal (last visited Dec. 1, 2011), at www.epa.gov/retailindustry.
This relative lack of change in RCRA has led to a substantial amount of confusion surrounding its application to retail operations. The difficulties involved in (1) identifying “hazardous waste,” (2) applying these legal classifications to a retailer’s operations in practice, and (3) training employees to be able to make these extremely nuanced determinations in their day-to-day operations create ample opportunity for regulators to allege violations of RCRA and similar state laws, even against retailers with sophisticated hazardous waste management programs.
In one widely reported case, Wal-Mart was alleged to have violated California state laws and regulations regarding “the storage, handling, treatment, transportation, and disposal of hazardous waste materials” at more than 230 California stores. Stipulation for Entry of Final Judgment on Consent, California v. Wal-Mart Stores, Inc., No. 37-2010-00089145-CU-TT-CTL (Cal. Sup. Ct. San Diego County Apr. 2, 2010). Without admitting to any violations, Wal-Mart entered into a Judgment on Consent with the State of California and various California counties pursuant to which it agreed to pay about $27.6 million in civil penalties, to reimburse attorney fees, and to institute supplemental environmental projects. While the Judgment on Consent does not specify the types of violations alleged, the media reports describe relatively minor but numerous violations (particularly when multiplied by the number of stores at issue) resulting from an allegedly inadequate hazardous waste management program rather than any deliberate effort by the company to circumvent the law.
The allegations leading to settlements in California by K-Mart (settlement of about $8 million for alleged violations at its more-than 100 California stores) (Stipulation for Entry of Final Judgment and Final Judgment, California v. KMart Corp., No. 56-2009-00344058-CU-MC-VTA (Cal. Sup. Ct. Ventura County May 22, 2009) and Target (settlement of about $22.5 million for alleged violations at its more-than 200 California stores) (Final Judgment and Permanent Injunction on Consent, California v. Target Corp., No. RG09457686 (Cal. Sup. Ct. Alameda County July 7, 2009) are similar in nature. All in all, these settlements demonstrate that even when the volume of hazardous waste at any given facility is limited, violations at stores, distribution centers, and return centers, when aggregated, can yield penalties that far outweigh the costs of implementing an effective hazardous waste management program and result in media coverage that can negatively impact the retailer’s image.
This article will provide an overview of RCRA and its one-size-fits-all approach, the specific challenges these requirements pose for retailers, and some general strategies that retailers can use to conform their operations to applicable hazardous waste requirements.
RCRA was enacted in 1976, with initial implementing regulations promulgated in 1980, to address a multitude of problems resulting from the ever-increasing volumes of solid waste being generated in the United States. At the time of enactment, Congress asserted that RCRA “eliminate[d] the last remaining loophole in environmental law, that of unregulated land disposal of discarded materials and hazardous waste.” H.R. REP. No. 1491, 94th Cong., 2d Sess. 3-4, reprinted in 1976 U.S. Code Cong. & Admin. News 6241-42.
Notwithstanding Congress’s optimism, RCRA was subsequently amended several times to address certain issues critical to achieving RCRA’s lofty goals. In particular, the 1984 Federal Hazardous and Solid Waste Amendments strengthened RCRA’s “cradle-to-grave” regulation of hazardous waste. Pub. L. No. 98-616, § 402, 98 Stat. 3221, 3271 (1984).
Despite RCRA’s broad regulation of solid waste in general, in the years since initial enactment and the 1984 amendment, an inordinate amount of regulatory and scholarly attention seems to have been given to RCRA’s “cradle-to-grave” regulation of hazardous waste. An explanation for this level of attention is that (a) the population subject to this regulation is diverse and potentially large because the hazardous waste regulations apply to any “generator” of hazardous waste unless such person falls under one of RCRA’s express exclusions; and (b) RCRA compliance (or penalties for failure to comply) can be cost and time intensive.
As regulators and the regulated community have become more facile with RCRA, much of the complexity in applying and implementing RCRA has been resolved, particularly among industrial waste-generating operators, which have been the historical focus of regulators. Nonetheless, emerging regulatory scrutiny of retail stores, distributors, universities, and even medical offices is creating hazardous waste compliance concerns for entirely new sectors of the economy.
RCRA broadly applies to “generators,” which are defined as “any person . . . whose act or process produces hazardous waste.” 40 C.F.R. § 260.10. As further discussed below, most retailers engage in many activities that can be deemed to “produce” hazardous waste.
To be a hazardous waste under RCRA, a substance or item must first be a “solid waste.” 40 C.F.R. § 261.3. “Solid waste” has a detailed technical definition at 40 C.F.R. § 261.2, but for purposes of this article it can generally be assumed to mean “discarded material.” “Discarded material,” in turn, has its own nuanced definition. As applicable to retailers, “discarded material” can generally be assumed to mean materials that are actually disposed or accumulated with an intent to dispose, as well as materials that are “inherently waste like” or “ordinarily disposed.” 40 C.F.R. § 261.2. Thus, solid waste includes not only trash actually deposited in a trash receptacle or dumpster but also items that have no reasonably defensible use, such as a ruptured, open, used, or unidentifiable (e.g., because of a missing label) container of a likely nonhazardous item such as a cosmetic or a potentially hazardous item such as an antibacterial hand sanitizer (which may be hazardous due to its “ignitability”). On the other hand, if the item can be safely reused (e.g., damaged cleaning supplies employed for store janitorial use), resold (e.g., open but unadulterated hair shampoo being sold on a “half-off” rack), or donated (e.g., soap and car wash supplies given to a local Scout troop), then arguably the items are not “solid waste.”
If an item has been determined to be a “solid waste,” it may be further classified as a “hazardous waste” if (a) it is specifically listed in the RCRA regulations at 40 C.F.R. Part 261, Subpart D; (b) it exhibits the characteristic of ignitability, corrosivity, reactivity, or toxicity; or (c) it is otherwise regulated as a hazardous waste under applicable state or local laws or regulations. 40 C.F.R. § 261.3. Many retailers sell or use a variety of substances—such as pesticides, paint, antifreeze, lighter fluid, cleaners, pharmaceuticals, and cosmetics—that upon disposal may constitute hazardous waste under RCRA. RCRA contains an exemption for household hazardous wastes, but that exemption only extends to waste “derived from households.” 40 C.F.R. § 261.4(b). Therefore, while businesses may be subject to RCRA if they discard listed or characteristic hazardous waste in the course of their operations, individual consumers may be able to discard these same items without being subject to RCRA compliance.
Examples of common retail products that may be considered hazardous waste under RCRA if discarded include the following:
Ignitables: kerosene, paint thinners, lamp oil, lighters, lighter fluid, easy-light charcoal, oil-based paints, certain hand sanitizers, certain cleaners, sterno fuel, fireworks, rubbing alcohol, nail polish, nail polish remover, adhesives, motor oil, alcohol swabs.
Oxidizers: pool chemicals, chlorine, hair dyes, bleach, hydrogen peroxide.
Corrosives: drain cleaner, degreasers, lye, ammonia, tarnish remover, lime/scale removers.
Toxics: fertilizer, herbicides and pesticides, fluorescent bulbs, batteries, insect repellant, cosmetics, antifreeze, pharmaceuticals.
Further complicating the matter is that states are free to—and often do—impose more stringent requirements on what may be considered hazardous waste within the state. For example, California classifies a greater universe of wastes as hazardous wastes, often referred to as “non-RCRA hazardous wastes.” Cal. Code Regs. Tit. 22, § 66261.101. Virginia regulations include a unique category of “special wastes,” including certain chemicals, pesticides, and their containers, as well as some contaminated foods. 9 Va. Admin. Code 20-80-10 et seq. Likewise, Illinois’ “special waste” definition, in certain instances, could include recalled or contaminated retail products. 35 Ill. Admin. Code 808.110. All in, more than 20 states have specific waste classification criteria that may deviate from EPA’s general prescriptions. Therefore, reliance on generalized lists is often insufficient, as it may result in both under- and over-identification of hazardous waste.
Most retailers receive inventory through a distribution chain that begins with the producer, may involve intermediate importers and distributors, and may involve one or more of the retailer’s own centralized distribution centers before ultimately arriving on the shelves of a retail outlet. Ideally, this inventory will leave the store as a consumer purchase. In some cases, “shrinkage” occurs in the form of theft, damaged products, and expired products, to name a few. Items may also leave the store through recalls. More often than not, however, these recalled items are managed by ownership or their agents. Occasionally, a product will be returned and may be in a condition suitable for immediate resale, but in others the returned product (or its packaging) may be damaged or defective.
In these instances when a product is in the retailer’s possession but is not saleable, the retailer (or, more particularly, the retailer’s employees) must determine (1) whether the item is a solid waste that must be properly disposed of; or (2) whether it can be sent back through the distribution chain for credit. Another option is the donation by a store of non-waste items directly to local charities. See, e.g., U.S. EPA, Guidance Document: Best Management Practices for Unused Pharmaceuticals at Health Care Facilities Appx. A (August 2010) (describing state laws permitting the donation of pharmaceutical items). Donation of non-waste items should, however, only be pursued following a thorough consideration of the attendant logistical and liability risks under a documented program to avoid regulators alleging that the donation is a disguised waste transaction.
If the item is sent up the distribution chain for credit, the up-the-chain recipient of the product, such as the distributor or original manufacturer, may refurbish and/or redistribute the item as a product, redistribute the item on the secondary market, repurpose the item for a use other than its original intended use, or possibly recycle the item or destroy and dispose of the item as a waste. This process by which a product makes its way back through the distribution chain for credit is referred to through the largely interchangeable terms “reverse logistics” and “reverse distribution.”
In general, if the item is not a waste and may be sent through reverse logistics, the retailer may receive a full or partial credit for the item. On the other hand, if the item is waste, it must be disposed of by the retail outlet—in which case the retailer may be left not only to absorb the loss, but it may also incur the additional costs of having a permitted waste hauler transport and properly dispose of the waste.
The risks of under-identification of hazardous waste may seem obvious—a retailer that disposes of hazardous waste as ordinary solid waste may be subject to enforcement action, including administrative and civil penalties, and associated negative publicity. Perhaps less obvious is that a retailer that sends hazardous waste through reverse logistics as a non-waste runs these same risks. Indeed, if hazardous waste is improperly sent by a retailer to its own distribution or return center before ultimately being disposed of, regulators could argue that this intermediate facility is improperly operating as a waste transfer station or a treatment, storage, and disposal facility (TSDF). See 40 C.F.R. Parts 246, 265, 268, & 270 (establishing regulatory requirements for TSDFs).
The risks of over-identification of hazardous waste are somewhat less obvious but still potentially costly. First, on a per-unit basis, disposal of hazardous waste is more costly than disposal of ordinary solid waste.
Second, RCRA affirmatively requires generators of solid waste to “determine if that waste is a hazardous waste” based upon tests or “knowledge of the hazardous characteristics of the waste in light of the materials or the process used.” 40 C.F.R. § 262.11. Thus, simply assuming that a particular solid waste is (or is not) also a hazardous waste is contrary to RCRA’s express requirements, and at least one state regulatory agency has threatened enforcement action against a retailer for overidentifying certain solid wastes as hazardous waste without actually making the determination required by RCRA.
Third, RCRA regulates generators according to their generator “status.” Under federal law, there are three primary generator statuses (although several states, including California, have adopted criteria that are more stringent than the federal criteria). “Large quantity generators” or “LQGs” of hazardous waste are those that, in addition to satisfying other criteria, generate at least 1,000 kilograms of hazardous waste each month. “Small quantity generators” or “SQGs” of hazardous waste are those that, in addition to satisfying other criteria, generate between 100 and 1,000 kilograms of hazardous waste each month. “Conditionally exempt small quantity generators” or “CESQGs” of hazardous waste are those that, in addition to satisfying other criteria, generate fewer than 100 kilograms of hazardous waste each month. 40 C.F.R. §§ 261.5 & 262.34.
LQGs are subject to more regulatory requirements (and greater compliance cost) than SQGs, and SQGs are subject to more regulatory requirements (and greater compliance cost) than CESQGs. See, e.g., 40 C.F.R. § 262.34. Therefore, in a particular store or distribution center, overidentification of hazardous waste may artificially inflate the facility’s waste volumes, thereby causing the facility to move from a CESQG to an SQG status or from an SQG to an LQG status, each of which entails additional compliance requirements.
For example, among other requirements, SQGs and LQGs are required to obtain an EPA identification number as a “generator” and are subject to certain hazardous waste manifest preparation and maintenance requirements, whereas CESQGs are not subject to these requirements under federal law. See, e.g., 40 C.F.R. §§ 261.5, 262.12, 262.20, & 262.34. LQGs are subject to additional requirements that either do not apply to SQGs or CESQGs at all or apply in a more limited form, such as (a) biennial reporting requirements, which apply to LQGs but not SQGs or CESQGs; (b) personnel training requirements, which apply to LQGs and (in a more limited form) SQGs, but not CESQGs; and (c) limitations on the amount of time hazardous waste can be accumulated onsite, which apply to LQGs (up to 90 days) and SQGs (up to 180 days in most cases) but not CESQGs. 40 C.F.R. §§ 261.5, 262.34, 262.41, & 262.44.
Clearly, the proper identification of hazardous waste versus non-waste is critical. Unfortunately, the contours of what constitutes solid waste (including for purposes of identifying a hazardous waste) is one of the areas in which RCRA is unnecessarily vague and can create special compliance concerns for retailers.
Questions arise when a product is damaged, not saleable, or otherwise arguably “inherently waste like” or “ordinarily disposed of” (the standards included in the definition of “discarded material” at 40 C.F.R. § 261.2) but is eligible for credit when sent through the reverse logistics process. For example, if the item would otherwise be a solid waste but only produces a credit if it is physically returned through reverse logistics, is it still a solid waste in the hands of the retailer? Similarly, questions arise when an item is determined by the retailer in good faith to be appropriate for reverse logistics (i.e., it is not a solid waste) but the item is ultimately discarded at some point up the reverse logistics chain.
In these instances, there is a risk that the ultimate disposition of the item as waste will lead a regulator to conclude that the item was a waste at the time the retailer sent it through reverse logistics. As a result, the retailer may be deemed the “generator” of such waste, and the sending of such waste through reverse logistics may be deemed a prohibited waste transaction. Such conclusions could subject the parties involved to enforcement for failing to comply with the multitude of permitting and other requirements (potentially including Department of Transportation packaging and labeling requirements set forth at 49 C.F.R. Part 172) applicable to waste transactions.
Furthermore, even where the determination of whether an item is a solid waste is straightforward, such as where an item is leaking or otherwise clearly not useable for its intended purpose, the determination of what constitutes a hazardous waste may not be straightforward. There are tens of thousands of common retail products that may be considered hazardous waste if discarded under applicable federal and state laws, and retailers’ inventories are constantly changing and expanding. Whether a product may be considered a hazardous waste if discarded may also depend on the specific active ingredients and concentrations contained in such products.
Ultimately, these complex legal and technical characterizations must be implemented at a retailer’s facilities in the form of a hazardous waste management program. However, most retailers will not have dedicated technical experts at each store who are capable of determining whether a particular item is a waste or whether a particular waste is hazardous. These determinations will usually be made by employees whose day-to-day responsibilities involve performing tasks necessary to the retailer’s primary business—that is, selling merchandise or otherwise generating revenue. One of the most difficult aspects of implementing any hazardous waste management program is achieving the correct balance between legal and technical sophistication and ease of implementation. After all, even the best program can be undermined if it is too complex to be implemented.
In some cases, technology can facilitate the implementation of the program, for example, by enabling employees to use a handheld scanner to determine whether a particular item, if discarded as a solid waste, would also be considered hazardous waste. Such a scanner may also be useful for determining whether, pursuant to a particular vendor agreement, a non-waste item is eligible for return through reverse logistics at all, or whether it might be considered a solid waste. Indeed, some retailers have implemented programs by which handheld scanners assist not only in inventory reconciliation but also in spill response and safety protocols for particular items.
Technology, however, has its limitations. A technological solution is only as reliable as the data on which it is based. Even if material safety data sheets (MSDSs) are available for reference, the specific hazardous ingredients of some items may not be easily discernible due to the item’s proprietary formulation and the “black box” manner in which manufacturers often disclose product formulations. Furthermore, larger retailers may well have tens of thousands of SKUs, and each season and each new vendor may result in hundreds more. Tracking the potential hazardous constituents, even if they are reasonably ascertainable, may be an untenable task. While there are third-party services from which this information may be obtained, such information may be incorrect, incomplete, or quickly outdated because new SKUs are always being introduced to the market. Finally, there are certain tasks that current technological solutions are simply unable to perform. For example, a handheld scanner is unable to make the subjective determination of whether a damaged container renders a cosmetic item a waste that must be discarded, or whether the item is useable for its intended purpose and is otherwise not a waste that may be sent through reverse logistics for credit. For the foreseeable future, these types of determinations will need to be performed by human employees using the guidelines set forth in the retailer’s hazardous waste management program.
While there are certain common elements to most retail hazardous waste management programs, there is no one-size-fits-all approach to developing a program. Each retailer must contend with its own unique product selection, its own physical space limitations, whether to implement a one-size-fits-all approach for facilities in different jurisdictions (subjecting all facilities to the most stringent jurisdiction’s requirements) or to implement jurisdiction-specific programs (each of which entails its own unique regulatory scheme and attendant costs), and the specific terms of its vendor agreements (e.g., whether “credit and destroy” or “credit and return” is the norm), among other considerations too numerous to list.
One common element among all programs, however, is that they must be thorough enough to enable employees to reach the correct conclusions yet not so complicated that they are confusing or, worse yet, ultimately ignored. Although there is no magic formula for achieving this goal, there are certain elements common to most successful retail hazardous waste management programs.
First is the implementation of a clear and comprehensive written hazardous waste management program. Program materials typically include a detailed training module (in-person, computer-based, or both), detailed materials addressing waste characterization measures and common hazardous waste management scenarios, and more general “quick-reference” materials (such as posters and flip charts) describing waste classification, management, and disposal procedures. It is also recommended that follow-up training be conducted periodically.
Another critical element is the installation of a dedicated hazardous waste management area (which can range in size from a few square feet to much larger, depending on the scale of the operation). This area typically includes plastic bins or other mechanisms for the proper segregation of incompatible wastes, labeling materials, manifests and waste logs, self-inspection reports, personal protective equipment for use while handling hazardous wastes, training and other reference materials, and emergency contact information. Programs should also include basic strategies for quantifying waste volumes and holding times to comply with volume and storage requirements under RCRA.
Further, as sustainability and life-cycle management of materials becomes more state of the art, so too is hazardous waste minimization. Reducing the amount of waste generated in the first instance (including through pollution prevention and safe handling programs, such as avoiding spills and breakage in the first place) is the easiest way to reduce waste volumes. Retailers can partner with vendors and manufacturers to require “take backs” of non-waste returned items, to reduce the hazardous constituents in items, and to employ packaging that minimizes breakage to reduce the strain on retailers’ hazardous waste management programs. Other strategies for compliance include partnering with third-party waste management professionals (such as environmental consultants), employing licensed hazardous (and biomedical, if required) waste haulers using only licensed destruction and disposal facilities, and working closely with environmental and health and safety counsel to evaluate and implement programs and risk management steps to best fit a company’s needs.
Given the common objectives of sustainability, waste minimization, and recycling/reuse, industry representatives continue to work with regulators and elected officials to address some of the legitimate concerns identified by retailers in complying with the one-size-fits-all RCRA requirements. One such approach might be to seek EPA clarification and endorsement of permitted reverse logistics/distribution procedures to clearly allow management of certain materials at reverse distribution facilities regardless of the ultimate disposition of the materials. In addition to providing clarity and predictability, centralized hazardous materials management by sophisticated materials managers would ultimately result in less mishandling of waste. A single reverse distribution facility (or distribution/return center) with specialized expertise and knowledge can more efficiently make appropriate waste determinations than hourly employees at individual retail locations. In addition, in appreciation of the true “household” nature of these retail items, consumables and personal care products could be excluded from “hazardous waste” or, at least, treated as less-stringently regulated “universal waste.” Finally, retailers have proposed that items such as aerosol should be treated as recyclables, and manufacturers should be required to “take back” or provide end-of-life disposal requirements for their products (such as in MSDSs).
Although the compliance hurdles can be challenging, even modest waste management programs can achieve increased compliance, reduced penalties, and enhanced environmental stewardship. Retailers’ compliance with the intent of RCRA, despite its vagueness, will minimize criminal and civil enforcement by myriad federal, state, and local regulators while concurrently enhancing retailers’ green reputations with customers and shareholders alike.