by Michelle R. Ferber and Connor M. Day

On May 2, 2019, the Ninth Circuit Court of Appeals held that the California Supreme Court’s landmark decision in Dynamex should apply retroactively.  In Vazquez v. Jan-Pro Franchising Int’l (9th Cir. 17-16096 5/2/210), the Ninth Circuit stated that California law calls for the retroactive application of Dynamex and that doing so is consistent with due process.

In Vazquez, the Ninth Circuit reversed a district court’s decision granting the employer defendant’s motion for summary judgment, effectively reviving the plaintiffs’ wage claim case against the defendants.  The panel directed the Northern District of California to apply the recently adopted ABC test in Dynamex, under which workers are employees unless they are free from their hiring entity’s control, work outside its “usual business,” and “customarily” do the work they do for their alleged employer as part of an “independent business.”

The panel noted that California Supreme Court rulings are generally retroactive, except in some cases in which “a judicial decision changes a settled rule on which the parties below have relied.”  The panel stated that “[g]iven the strong presumption of retroactivity, the emphasis in Dynamex on its holding as a clarification rather than as a departure from established law, and the lack of any indication that California courts are likely to hold that Dynamex applies only prospectively, we see no basis to do so either.”

The panel also found that its decision is consistent with due process, since applying Dynamex retroactively is “neither arbitrary nor irrational.”  The panel noted that the California Supreme Court said that “wage orders are the type of remedial legislation that must be liberally construed in a manner that services its remedial purpose” and that embracing the ABC test was “faithful to the history of California’s employment classification law and to the fundamental purpose of the wage orders.”  By applying Dynamex retroactively, that panel stated that it ensures the California Supreme Court’s concerns are respected.

Dynamex was a departure from over three decades of case law.  In Dynamex, the California Supreme Court adopted the State Industrial Welfare Commission’s definition of employment for wage class claims, which makes anyone whom a business “engage[s], suffer[s] or permit[s]” to work, an employee.  In its ruling, the Dynamex court adopted the ABC test which presumes that all workers are employees, unless the employer can prove: (A) that the worker is free from the control of the hiring entity in connection with work performance – both under the performance contract and in fact; (B) that the worker performs the work outside the hiring entity’s usual business; and (C) that the worker is customarily engaged in an independent business of the same nature as the work performed.

In sum, Vazquez presents another issue to be carefully considered and weighed by employers in the post Dynamex era.

Ferber Law has the expertise and knowledge to assist you with any questions you may have about employee payroll or your contracts with your payroll company, and welcomes your inquiries.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.