Looking back, the California Supreme Court doubles down on its decision to retroactively impose the state’s ABC test for workers. Our Labor & Employment Group delves into what the future holds for employers, employees, and independent contractors.
- ABC test isn’t always as easy as 1-2-3
- What did Dynamex do to the 30+ year-old Borello case?
- How will AB 5 and Proposition 22 change things?
In Vazquez v. Jan-Pro Franchising International, S258191, the California Supreme Court answered the question of whether its 2018 decision in Dynamex Operations West Inc. v. Superior Court, 4 Cal.5th 903 (2018), applies retroactively with an emphatic “yes.” In doing so, the court reaffirmed the application of the “ABC” test to worker classification cases not yet finalized at the time the Dynamex decision was rendered. As we know, Dynamex imposed the “ABC” test on worker classification determinations by holding that a worker can be found to be an independent contractor only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. The court emphasized the definitive and retroactive nature of its decision in Dynamex by observing that it saw “… no reason to depart from the general rule that judicial decisions are given retroactive effect.”
In arguing against the retroactive application of Dynamex, defendant Jan-Pro noted that before Dynamex, the decision of how to classify a worker was made under the standards enunciated in the seminal case S.G. Borello & Sons v. Department of Industrial Relations, 48 Cal.3d 341 (1989). In imposing the new “ABC” test, the defendant argued, the Dynamex decision had changed a settled rule the parties had relied on, thus making the Dynamex decision fall under the exception to the general rule of retroactivity and not applicable to its case. The court gave short shrift to the argument that it would be unfair to apply the ABC standard to California businesses that reasonably believed Borello applied to cases that predated the Dynamex decision. Holding that Borello did not rule on how the “suffer or permit to work” definition found in the industrial wage orders should be applied to distinguish employees from independent contractors for purposes of those wage orders, the court concluded that Dynamex did not change any settled rule. The court thus took a narrow view of Borello despite its application in 30 years of misclassification cases. The court emphasized that Borello did not determine who should be an employee for purposes of a wage order and that it was therefore not reasonable to rely on it.
To support its position, the court noted that its decision in Martinez v Combs, 49 Cal.4th 35 (201...
