Tina Tellado is a Partner in our Los Angeles office.
Samuel J Stone is an Associate in our Los Angeles office.
A panel of the U.S. Court of Appeals for the Ninth Circuit issued its decision in Vazquez et al. v. Jan-Pro Franchising Int'l., Inc., No. 17-16096 (Jan-Pro) on May 2, 2019, holding that the recently adopted, three-pronged "ABC" test used to determine independent contractor status under California's Wage Orders operates retroactively. In Dynamex Ops. W. Inc. v. Superior Court, 4 Cal. 5th 903 (Cal. 2018) (Dynamex), the California Supreme Court adopted the "ABC" test but left open the question of whether it would be applied retroactively to determine classification status. Relying on longstanding California law, the Dynamex decision itself and a subsequent decision by the California Supreme Court not to clarify Dynamex, as well as other California cases, the Ninth Circuit definitively answered the unresolved issue in favor of retroactive application.
The "ABC" test adopted in Dynamex is used to determine whether an individual is classified as an employee or an independent contractor for purposes of the California Industrial Welfare Commission's Wage Orders, which regulate working conditions across certain industries. See Jan-Pro, Slip Op. at 7, 28. The "ABC" test applies only under the Wage Orders, and different standards apply to different statutory claims. See Dynamex, at 942, 948; see also Garcia v. Border Transp. Grp., LLC, 28 Cal. App. 5th 558, 571 (2018). In order to show that an individual was an independent contractor, the hiring entity bears the burden to establish each of the three prongs in the "ABC" test. See Dynamex, at 958-964. However, as noted by a California Court of Appeal, Dynamex itself addressed only the "class certification question before it," and left the retroactivity question open. Garcia, 28 Cal. App. 5th at 572 n.12.
The Ninth Circuit's Decision
In Jan-Pro, the district court granted summary judgment on the misclassification issue in the employer's favor before Dynamex issued; the parties were subsequently ordered to brief Dynamex's impact on the merits of the matter. Jan-Pro, Slip Op. at 9. After disposing with Jan-Pro's attempts to avoid reaching the retroactivity question, the Ninth Circuit started from the premise that it is settled law that "judicial decisions are given retroactive effect." Id. at 22. While the panel noted that "there is an exception to the rule of retroactivity" based on the...