On April 30, 2018, the California Supreme Court in Dynamex Operations West, Inc. v. Super. Ct., (2018) 4 Cal. 5th 903, adopted the “ABC” test when evaluating whether a worker is an employee or independent contractor. Under this test, companies have the burden to establish the following in order to classify a worker as an independent contractor:
- 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 for the performance of the work and in fact; and
- that the worker performs work that is outside the usual course of the hiring entity’s business; and
- that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Dynamex, 4 Cal. 5th at 957.
Recently, in Vazquez v. Jan-Pro Franchising Int’l, Inc., (9th Cir. May 2, 2019) No. 17-16096, 2019 WL 1945001, the Ninth Circuit ruled that the Dynamex decision applies retroactively. In Vazquez, a putative class action was filed by janitors alleging that a janitorial cleaning business misclassified them as independent contractors, thus, avoiding paying them minimum wages and overtime compensation. Id.
As stated above, the court held that the “ABC” test should be applied retroactively. The court reasoned that the California Supreme Court in Dynamex “strongly suggested that the usual retroactive application…should apply to its newly announced rule” and California lower courts have been applying the “ABC” test retroactively. Id. at *9.
The holding in Vazquez should lead to an increase in cases alleging misclassification of workers as independent contractors, even for companies that corrected their practices following the ruling in Dynamex. All California companies that classify workers as independent contractors should review their policies and practices to ensure that they can establish compliance with the “ABC” test.
Leech Tishman’s Employment Practice Group can help clients ensure compliance with California’s complex and technical employment laws and can assist clients with defending against civil or administrative actions.
If you have any questions regarding California’s unique employment laws or these employment law updates, please contact Fadi K. Rasheed. Fadi is Counsel with Leech Tishman and a member of the firm’s Employment, Litigation and Corporate Practice Groups. Fadi is based in the Leech Tishman’s El Segundo, CA office. and can be reached at 424.738.4400 or frasheed@leechtishman.com.
Leech Tishman’s Facebook Page: https://www.facebook.com/leechtishman
Leech Tishman’s Twitter: https://twitter.com/LeechTishman
Leech Tishman’s Company Page on LinkedIn: https://www.linkedin.com/company/leech-tishman
Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, aviation & aerospace, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, internal investigations, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in El Segundo, CA, Chicago, Los Angeles, New York, Sarasota and Wilmington, DE.