In April 2018, the California Supreme Court issued a ground-breaking decision related to the test for analyzing whether a worker is properly classified as an employee or independent contractor. In adopting the “ABC Test” in Dynamex Operations West v. Superior Court, the Court made it significantly more challenging for businesses to classify workers as independent contractors. In doing so, the Court replaced the longstanding, multi-factored Borello test with the less flexible ABC Test for claims arising under California’s Wage Orders.
In May 2019, the Ninth Circuit ruled that Dynamex applied retroactively, meaning that the ABC Test would be used to evaluate independent contractor classifications that pre-dated the Dynamex decision. Vazquez v. Jan-Pro Franchising, Inc., 923 F.3d 575 (9th Cir. 2019). A month later, the Ninth Circuit withdrew its decision and ordered that it would certify to the California Supreme Court the question of whether Dynamex applies retroactively.
This morning, the California Supreme Court issued its opinion, holding definitively that Dynamex applies retroactively to all independent contractor misclassification claims within the statutory period. In reaching its conclusion, the Court was persuaded by the traditional rule that judicial decisions interpreting legislative measures are given retroactive effect. The Court expressly rejected the contention that a departure from the general rule is warranted based on the reasonable reliance of putative employers on settled law. The Court referenced two decisions after Borello — Martinez v. Combs, 49 Cal. 4th 35, 57-58 (2010) and Ayala v. Antelope Valley Newspapers, Inc., 59 Cal. 4th 522 (2014) — which, according to the Court, put employers on notice, before the Dynamex decision, that the law on the standard for determining a worker’s status as an employee or independent contractor for purposes of the Wage Orders was not settled. Rather, the standard which applies in determining whether workers should be classified as employees or independent contractors in the Wage Orders remained an open question under Borello and was a matter of first impression addressed in Dynamex. Because the Dynamex decision did not overrule any prior California Supreme Court decision or disapprove any prior California Court of Appeal decision, the Court found no reason to depart from the general principle affirming the retroactive application of judicial decisions.
The Court indicated it also was guided by fairness and public policy considerations that favor the retroactive application of Dynamex¸ noting that mere prospective application may deprive workers of the protections under the Wage Orders and allow businesses to improperly benefit from misclassifying workers.
The Court’s slip opinion may be found here.
This information has been prepared by Keesal, Young & Logan for informational purposes only and is not legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between you and Keesal, Young & Logan. You should not act upon this information without seeking professional counsel.