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Dynamex Retroactive? US Ninth Circuit Says: “Let’s Ask the California Supreme Court”

We wrote recently about the US federal Ninth Circuit’s decision in Vazquez v. Jan-Pro Franchising International, Inc., 923 F.3d 575 (9th Cir. May 2, 2019). In that decision, the federal judges on the Ninth Circuit held that the Dynamex decision should apply retroactively. See Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018). See our discussion here. The Ninth Circuit has now reversed course and has withdrawn its earlier decision. The Ninth Circuit will ask the California Supreme Court to decide the question of Dynamex’s retroactivity. See here.

Dynamex is now a famous California Supreme Court case that changed the criteria for when a worker is to be classified as an “employee” or an “independent contractor.” Essentially, under the new criteria — the so-called “ABC test” — almost every worker in California will be deemed an employee. As such, those employees will be entitled to all of the protections of California’s labor laws including overtime benefits, the rights to meal and rest breaks, reimbursements, worker’s compensation benefits, minimum wages, and more. Under the old standards, a worker was properly classified as an “independent contractor” based on a list of “control factors.” That is, the old test was about how much control the employer exercised over the worker. For example, did the worker have to appear at a particular location, wear a uniform, use certain tools or computer programs, work designated hours, work under the direction of a supervisor, etc.? The new ABC test includes the “control factors” as part A, but adds two additional components. The “B” part of the ABC test is whether the worker works in a traditionally independent profession and the “C” part of the test is whether the worker is engaged in an activity that is part of the “core business” of the employer. To be classified as an “independent contractor,” all three parts of the ABC test must be met. Few workers will satisfy the ABC test and, as such, most will be not be properly classified as “independent contractors.”

Dyanmex was decided in April 2018 and was limited by the California Supreme Court to its facts. Since then, other courts have been struggling with the question of the retroactive application of Dynamex.

The question of the “retroactive-ness” of Dynamex is very important to Golden State employers. A lot of money is at stake. There are millions of California workers who were classified as “independent contractors” under the old criteria and the potential cost to employers is staggering. If Dynamex is held to apply retroactively, then all of those independent contractors, properly classified under the old standards, can potentially sue for various benefits that would have been available to them if they were classified as “employees.”

As noted, in May 2019, the Ninth Circuit held that Dynamex should be applied retroactively. However, on July 22, 2019, the Ninth Circuit reversed course and withdrew its earlier opinion in Vazquez. Now the court has sent an official request — certifying the question — to the California Supreme Court about whether Dynamex should be applied retroactively. This is good news — at least temporarily — for California and San Diego employers.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard has been named a “Rising Star” for four years running by Mr. Leonard’s law practice is focused on corporate, securities, contract, and intellectual property law for small and medium businesses in the San Diego metro area. Like us on Facebook.

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