Looking Back and Looking Forward: Retroactivity and Expansion of the California Independent Contractor Test
In April 2018, the California Supreme Court issued its ruling in Dynamex Operations West v. Superior Court (2018) 4 Cal. 5th 903, 916-17 and set forth the standards for determining independent contractor status for purposes of the California Industrial Welfare Commission Wage Orders. The Court presumed that a worker is an employee unless he or she meets the requirements of the “ABC Test.”
To satisfy the ABC Test and thus be legally considered an independent contractor, the worker must: (a) be “free from control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;” (b) perform work outside the “usual course of the hiring entity’s business;” and (c) be “customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.” Dynamex, 4 Cal. 5th at 916-17.
On May 2, 2019, the Ninth Circuit Court of Appeals issued a decision that took the Dynamex decision one step further. In Vazquez v. Jan-Pro Franchising Int’l, Inc., 2019 U.S. App. LEXIS 13237, the Ninth Circuit determined that Dynamex should apply retroactively. The Court in Dynamex had presumed that the ABC Test would apply retroactively, reasoning that it was merely clarifying the state of established California law and not creating new law.
Shortly thereafter, on May 3, 2019, the Division of Labor Standards Enforcement (“DLSE”) issued a letter opining the ABC Test applies to both the Wage Orders and any Labor Code provisions that enforce requirements set forth in the Wage Orders, including Labor Code §§ 226 (itemized wage statements); 226.7 (meal and rest periods ); 510 (overtime); 512 (meal and rest periods); 1182.12 (minimum wage); 1194 (overtime); 1194.2 (liquidated damages); 1197 (minimum wage); and 2802 (reimbursement of expenses).
In light of Dynamex, Vazquez, and the May 3, 2019 DLSE opinion letter, claims brought regarding potential employee misclassifications (even if the claims pre-date Dynamex) could be reviewed under the ABC Test by California courts.