The California Supreme Court last year adopted a new test, called the ABC Test, for use in cases involving the question of when is a worker an employee versus an independent contractor under IWC Wage orders. That case, Dynamex Operations West Inc. v. The Superior Court of Los Angeles County, (“Dynamex”) was a class action which involved delivery drivers suing their employer for misclassifying them as independent contractors rather than employees. The ABC test, intended to simplify the legal analysis on these types of cases, was a win for plaintiffs and made it more likely that a worker would be found an employee than before. You can read our previously posted E-Blast about the Dynamex decision here.
The new ABC Test has far-ranging implications for employers but it potentially has the ability to affect ongoing litigation. Following the Dynamex decision, in another wage and hour class action, Vasquez v. Jan-Pro Franchising Int’l Inc. (“Vazquez”), the District Court had previously entered summary judgment against the workers in 2017, finding them properly classified as independent contractors under California law, which Vazquez appealed. On appeal, the plaintiff requested the Ninth Circuit apply the ABC Test adopted in Dynamex retroactively, which would increase the chance of the summary judgment being overturned. The Ninth Circuit agreed and held that California law calls for the retroactive application of Dynamex. The panel also held that applying Dynamex retroactively was consistent with due process.
Defendant Jan-Pro disagreed and filed for a panel rehearing of the May ruling. On July 22, 2019, the Ninth Circuit panel undid its May finding and punted the question of whether this decision was a clarification or a departure from established law to the California Supreme Court.
COUNSEL TO MANAGEMENT:
This decision in no way impacts the current requirement to follow the ABC Test when determining if a worker is properly classified as an employee versus an independent contractor. This decision is about whether the ABC test will be applied retroactively, which would increase an employer’s prospective liability for misclassification claims pre-dating the April 30, 2018 Dynamex decision and lead to even more lawsuits on this issue. Given that employers can have wage and hour exposure going back four years, this is a critical question that needs answering. If you are currently dealing with a potential misclassification issue, contact the experts at Dowling Aaron Incorporated, The Saqui Law Group Division.