Dynamex “ABC” Independent Contractor Test Applies Retroactively
On Thursday, the Ninth Circuit ruled that Dynamex Operation West, Inc., v. Superior Court., (“Dynamex”) the California Supreme Court landmark decision which made it significantly more difficult for employers to classify workers as independent contractor, applies retroactively.
As we previously reported here, in May of 2018 the California Supreme Court abandoned its previous multi-factor independent contractor standard that required a worker to demonstrate an employer had sufficient control to find that there is an employee-employer relationship. Rather, the California Supreme Court now embraces a standard that presumes all workers are employees instead of independent contractors, and places the burden on the employer classifying an individual as an independent contractor to establish that such classification is proper under the “ABC” test. As such, an employer now bears the burden that a worker satisfies all 3 factors of the “ABC” test in order to be properly classified as an independent contractor: A) the individual is free from the employer’s control and direction; B) the individual performs work that is outside the usual course of the employer’s business; and C) the individual has an independently established trade, occupation, or business.
In Vasquez v. Jan-Pro Franchising International, a complaint was brought by putative class members in 2008 against an international cleaning business franchise, claiming that they were improperly misclassified as independent contractors through a three-tier franchising system. In 2017, prior to the Dynamex decision, the district court dismissed this case on summary judgement and recognized that “no binding decision had addressed the standard applicable to determining whether a franchisor is an employer of a franchisee” and “in the absence of controlling authority it applied the more forgiving independent contractor standard.”
After the California Supreme Court published its Dynamex decision, Plaintiffs appealed and urged the Ninth Circuit to revive their case, arguing that the Dynamex standard should apply to them rather than the more forgiving previous standard. Defendant argued that the extent of reliance of whether Dynamex applied retroactively was a factual question and the Ninth Circuit should remand the case to allow the district court to determine how much pre-Dynamex law was relied upon in that decision before deciding whether to apply Dynamex retroactively. Defendant further argued that the applicability of Dynamex in this case would present an unfair situation because this case was brought forth over a decade ago and will now have to be analyzed under a legal standard adopted just last year.
The Ninth Circuit rejected Defendant’s argument and further brushed off the argument that the retroactive application of Dynamex would be unfair to business owners. Instead, the Ninth Circuit recognized that California courts have already held that Dynamex applied retroactively and that it is basic “legal tradition” that “judicial decisions are given retroactive effect.” As a result, the Ninth Circuit has remanded the case to the Northern District of California where the case had been dismissed to now apply the Dynamex “ABC” standard.
COUNSEL TO MANAGEMENT:
While this case should not come as a surprise as some California courts had already determined Dynamex applied retroactively, this decision still can be categorized as another loss for employers. It is likely that Plaintiff attorneys will use this to their advantage to revive old cases as they did in this matter, meaning employers should review that practice and ensure that they can rebut the Dynamex standard presumption. Should you have any questions about the effect of the Dynamex decision and whether your workers are properly classified, please contact the experts at The Saqui Law Group, a division of Dowling Aaron
Reminder: New Poster Requirement
As many of you know, on January 1, 2018, California enacted the New Parent Leave Act (“NPLA”) which expanded baby-bonding benefits to employees of smaller employers that have 20-49 employees. Previously this benefit had only been provided to employees of larger employers that had 50 or more employees. Employers are required to display a poster that discusses the NPLA, California Family Rights Act and Pregnancy Disability Leave. California’s Department of Fair Employment and Housing has recently revised the poster and made it available on their website.
As such, this is a friendly reminder that employers with 20 to 49 employees need to post the new notice in their workplace, and employers with 50 or more employees need to replace their existing notice with the new version. You can find a copy of the English poster here and a copy of the Spanish poster here.
Mid-Size and Large Employers Must Provide Pay Data to EEOC by September 30, 2019
Mid-size and large employers have until Sept. 30 to tell the U.S. Equal Employment Opportunity Commission (“EEOC”) how much they paid workers of different sexes, races and ethnicities, referred to at EEO-1 Component 2 data, last year, a federal judge ruled on April 25, 2019. The form supplements the agency's long-running collection of employers' demographic data. Both components apply to all employers with 100 or more employees and federal contractors with 50 or more employees.
The federal judge accepted the EEOC’s proposal to make employers submit their 2018 pay data this fall in a bench ruling and also ordered the EEOC to collect a second year of pay data, giving it a choice between collecting employers' 2017 data or making it collect 2019 data down the road. The EEOC opted to collect the 2017 data. The EEOC expects to begin collecting EEO-1 Component 2 data for calendar years 2017 and 2018 in mid-July, 2019, and will notify filers of the precise date the survey will open as soon as it is available.