California Independent Contractor Classification Becomes Even More Thorny, as California Supreme Court Holds Strict ABC Test Applies Retroactively

Proskauer - Employee Benefits & Executive Compensation Blog

[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. See our California Employment Law Update for more on this significant decision.

Applying the strict “ABC test” for determining whether a worker is an employee or independent contractor retroactively adds yet another, complicating, angle to worker classification in California. In the wake of this decision, businesses that have classified their workers appropriately for federal purposes and that historically classified their workers appropriately for purposes of California state law pre-Dynamex, are left with the perplexing result of nevertheless having potential exposure to liability arising from California’s wage orders (but not, notably, the full panoply of statutes addressed by California’s much broader worker classification law known as Assembly Bill 5 (AB 5”)). In the transactional context, the California Supreme Court’s decision underscores the importance of diligence and attention to worker classification processes and practices where businesses engage independent contractors in California.

To learn more about the California Supreme Court’s decision in Dynamex, listen to our podcast on The Proskauer Benefits Brief: Legal Insight on Employee Benefits and Executive Compensation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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