Small Businesses Showing Complacency Toward Y2K Compliance Law

WASHINGTON—New legislation that imposes fines on small companies that don’t correct Y2K failures is not causing much of a stir in the supplements industry.

The Year 2000 Readiness and Responsibility Act calls for government fines for companies with fewer than 50 employees that have Y2K noncompliance that results in “actual harm, or constitutes or creates an imminent threat to public health, safety or the environment.”

Companies will not be fined for first-time violations but may have civil money-penalties imposed if they fail to correct a violation later than a month after being notified by a federal agency. Small businesses also will not be fined if they notify an appropriate government agency within five business days after identifying a Y2K problem or if they initiate “reasonable and prompt measures to correct the violation.”

While at first glance the legislation appears like a bad bet for small supplements companies, an attorney, who asked not to be named, says the new law may actually prevent big lawsuits by large companies whose systems are thrown off by a small company’s Y2K failure.

The legislation limits punitive damages to small firms at $250,000 or three times compensatory damages, whichever is less. The limits don’t apply in cases of fraud or intent to injure.

The law also protects, through Jan. 31, 2000, small businesses that have made a “reasonable good-faith effort to anticipate, prevent and effectively remediate a potential Y2K failure.”

Member companies of the Washington-based Council for Responsible Nutrition haven’t paid much attention to the new legislation, says spokeswoman and science writer Cathy Fomous. “We tried to call a member meeting about it, but there wasn’t much of a response,” she says.