California Supreme Court Grants Review of Dynamex Retroactivity – Again

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On Wednesday, January 15, 2020, the California Supreme Court agreed to review a second case raising questions as to the scope and retroactivity of its landmark 2018 Dynamex decision.

Last October, the Second Appellate District of California ruled in Gonzales v. San Gabriel Transit, Inc., that Dynamex and its codification of the “ABC test” for determining independent contractor status under California state wage orders, applied retroactively.  In Dynamex, the California Supreme Court overturned three decades of precedent and ruled that the ABC test was the appropriate standard for determining whether a given worker was an employee or an independent contractor.  Under the ABC test, a worker is generally considered to be an employee unless the putative employer can prove:  (a) the worker was not under its direction and control in performance of the work in question; (b) the worker’s business was not in the hiring company’s usual course of business; and (c) the worker was customarily engaged in an independent trade or business.  As a practical matter, the ABC test results in dramatically more workers being classified as statutory employees, rather than contractors. 

In May 2019, in Vazquez v. Jan-Pro Franchising, International, the federal U.S. Court of Appeals for the Ninth Circuit held that Dynamex applies retroactively.  The appeals court subsequently withdrew its order, however, and instead asked the California Supreme Court to answer the question of retroactivity, which it agreed to do.  In now agreeing to review the question presented in San Gabriel Transit, the court indicated that it would defer briefing in the case pending its ruling in Jan-Pro.  As a practical matter, this means that the San Gabriel Transit decision is not binding on lower courts until its appeal is resolved.

Meanwhile, the California state legislature passed AB 5, legislation expanding and codifying the ABC test into state labor law, which was signed into law by Governor Gavin Newsom (D) in September 2019.  AB 5 is currently subject to numerous legal challenges independent of the review of the scope and effect of Dynamex.

Littler’s Workplace Policy Institute and its AB 5 Task Force will continue to report on future developments relating to California’s new independent contractor laws.

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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