In April 2018, the California Supreme Court issued its groundbreaking opinion in Dynamex Operations West, Inc. v. Superior Court, (2018) 4 Cal.5th 903. In Dynamex, the Court articulated an “ABC” test to determine, in the context of claims brought under the California Industrial Commission Wage Orders (“IWC Wage Orders”), whether workers are employees or independent contractors. To establish that a workers is an independent contractor under the ABC test, a principal must meet three “prongs”:
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 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.
Since Dynamex was issued, state and federal courts have grappled with whether the new test articulated in this decision applies retroactively. On May 2, 2019, the Ninth Circuit held in Gerardo Vazquez v. Jan-Pro Franchising International Inc., 923 F.3d 575 (9th Cir. 2019), that the California Supreme Court’s decision in Dynamex applied retroactively to the plaintiffs in that case. In Jan-Pro, a putative class of janitors sued for unpaid minimum wages and overtime, alleging that the defendant had created a “three-tier” franchising model in the effort to avoid a direct employment relationship with the janitors. In determining whether the plaintiffs were independent contractors, the Ninth Circuit applied the ABC test articulated in Dynamex, and ultimately held that the class members were misclassified. The Jan-Pro court recognized that Dynamex did not explicitly address the issue of retroactivity, but took it upon themselves to expand the application of the ABC test. Though this issue remains unsettled under California law, California employers that rely on independent contractors should be aware of the Jan-Pro case.