California Supreme Court Holds That Dynamex is Retroactive

In 2019, the Ninth Circuit asked the California Supreme Court to resolve an open question of California state law and certified the question of whether the ABC test, as outlined in the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court, was retroactive.

Vazquez v. Jan-Pro Franchising International, Inc., __ F.3d __, 2019 WL 3271969, at *1 (9th Cir. No. 17-16096 (July 22, 2019). On January 14, 2021, the California Supreme Court issued an opinion and held that the ABC test was retroactive and applied to all wage order claims. 

In Dynamex, the Court was faced with the question of which standard – the Borello factors or the ABC test – should apply when determining whether an individual is an employee (who is covered and protected by an applicable wage order), or an independent contractor (who is not covered and protected by wage orders). 

Ultimately, the California Supreme Court held that the ABC test applied to all claims covered by wage orders.

As such, in order to prevail in demonstrating that an individual was properly classified as an independent contractor, the employer must establish each of the following three factors:

(A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and

(B) The worker performs work that is outside the usual course of the hiring entity’s business, and

(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. 

In answering the Ninth Circuit’s certified question, the Court relied on the general principle that the California Supreme Court’s rulings are generally deemed to be retroactive unless the Court creates a new rule.

In doing so, the Court stated that the Dynamex decision simply follows the judicial interpretation of California’s wage orders and that a new rule was not created by the Court in Dynamex. 

The Court’s decision will have a large impact on employees and employers alike, especially given that Proposition 22 does not protect employers retroactively. Thus, employers – especially those involved in the gig economy – may be subject to increased liability, and it is anticipated that misclassification suits will rise following this decisions.

For employees, this decision brings a clear test so that employees can determine whether they have a claim for misclassification. 

Whether you are an employer seeking advice on how to adhere to the Court’s ruling, or an employee who believes that they were misclassified, the attorneys at the Dhillon Law Group are ready and able to help with your employment matters. 

 Michael Fleming is an associate who handles employment litigation and counseling at Dhillon Law Group Inc.