By: Chad T. Wishchuk and Marlene C. Nowlin of Finch, Thornton & Baird, LLP.
On January 14, 2021, the California Supreme Court announced that its April 2018 decision in Dynamex Operations West, Inc. v. Superior Court (“Dynamex”) applies retroactively. In Dynamex, the Supreme Court decided that the “ABC” test is the standard to be applied in determining whether workers should be classified as employees or independent contractors for purposes of the obligations imposed by California’s wage orders. Under the “ABC” test, any worker who performs work is presumed to be an employee who falls within the protections of a wage order unless the hiring entity establishes each of the three factors of the 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;
(B) The worker performs work that is outside the usual course of the hiring entity’s business;
(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
On January 1, 2020, AB 5 went into effect, codifying the Dynamex decision and its ABC test. Now, at the request of the Ninth Circuit, the California Supreme Court has clarified that Dynamex and the “ABC” test apply retroactively to nonfinal cases that predate the Dynamex decision. (See Vazquez v. Jan-Pro Franchising International, Inc., 2021 Cal. LEXIS 1 (“Vasquez”). The Supreme Court explained that it sees no reason to deviate from the well-established general principle that judicial decisions “interpreting legislative measures” are retroactive. The Court attempted to soften the impact of its Vasquez decision by pointing out that, in practice, retroactive application of Dynamex will affect a limited number of cases. Nonetheless, retroactive application of Dynamex will increase the number of employers and cases that are subject to the burdensome “ABC” test.
Don’t wait: Audit worker relationships and independent contractor agreements.
Construction contractors and employers should audit all of their worker relationships and independent contractor agreements, and make sure they are classifying everyone they work with appropriately under AB 5 and the Dynamex “ABC test” and are otherwise best protected under the current law.
Please contact Chad Wishchuk or Marlene Nowlin of Finch, Thornton & Baird, LLP at (858) 737-3100 for additional strategies to avoid potential worker claims resulting from the Vasquez decision.
