[co-author: Michelle Lappen]
On January 14, 2021, the California Supreme Court decided, at the request of the Ninth Circuit, that its decision in
Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018) applies retroactively.
Dynamex adopted the “ABC test” for determining whether a worker is an employee or independent contractor for purposes of the obligations imposed by California’s wage orders. This holding makes it more difficult for a hiring entity to properly classify a worker as an independent contractor. The three-prong test requires the hiring entity to prove that the worker is: (A) free from the control and direction of the hiring entity; (B) performing work outside of the usual course of the hiring entity’s business; and (C) customarily engaged in an independently established trade of the same nature as the work performed.
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On January 14, 2021, the California Supreme Court held that the ABC Test, as articulated in
Dynamex, applies retroactively to claims under California’s Industrial Welfare Commission Wage Orders.
ABC Test Background
In 2018, in notable
Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court held that for purposes of compliance with California’s IWC wage orders, workers are presumed employees, unless the hiring entity proves ALL of the following under the so called “ABC” test:
(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
Let Me Tell You What It’s All About
Jan-Pro Franchising, International, Inc. is a franchisor whose franchisees offer cleaning and janitorial services. In
Vazquez v. Jan- Pro (“
Vazquez”), in May 2017, the Northern District of California granted Jan-Pro summary judgment in a case brought by independent contractor franchisees claiming they should have been treated as Jan-Pro employees. The plaintiffs then appealed the ruling to the U.S. Court of Appeals for the Ninth Circuit.
While the appeal was pending, the California Supreme Court issued its decision in
Dynamex (which we previously posted about here). In
Dynamex, the court held that, for purposes of claims arising from the Wage Orders, the “ABC” test governs whether workers are properly classified as independent contractors rather than employees.
Seyfarth Synopsis:
In a unanimous decision, the California Supreme Court held that the worker friendly “ABC” test set forth by the Court in its 2018 landmark ruling, Dynamex Operations West, Inc. v. Superior Court, applies retroactively. The ABC test thus applies to all pending cases governed by the California Wage Orders in determining whether a worker is an independent contractor or an employee. Vazquez v. Jan-Pro Franchising Int’l, Inc.
The Facts
Jan-Pro Franchising, International, Inc. is a franchisor whose franchisees offer cleaning and janitorial services. In May 2017, the U.S. District Court for the Northern District of California granted Jan-Pro summary judgment in a case brought by independent contractor franchisees claiming they should have been treated as Jan-Pro employees. The plaintiffs then appealed the ruling to the U.S. Court of Appeals for the Ninth Circuit.
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Today, in responding to a certified question from the United States Court of Appeals for the Ninth Circuit, the California Supreme Court held in
Vazquez v. Jan-Pro Franchise International, Inc., S258191 (2020) that the three-part test announced in
Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018) applies retroactively.
In
Dynamex, the court considered what standard applies under California law to determine whether workers should be classified as employees or independent contractors when considering claims under the California Wage Orders. In that case, the court held that a hiring entity may classify a worker as an independent contractor only if it establishes: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact; (B) that the worker performs work that is outside the usual course o