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California Supreme Court:
Dynamex Holding Applies Retroactively to Non-Final Cases
Opinion Comes in Response to Question Certified to State High Court by Ninth Circuit
By a MetNews Staff Writer
The California Supreme Court declared yesterday that its decision in Dynamex Operations West, Inc. v. Superior Court, creating an “ABC” test as to whether a worker is an employee or an independent contractor, applies retroactively to cases that were not yet final as of April 30, 2018, the date of the opinion in that case.
Chief Justice Tani Cantil-Sakauye wrote the opinion in Dynamex, and also authored yesterday’s opinion, which comes in response to a question certified to it by the Ninth U.S. Circuit Court of Appeals.
In Dynamex, the high court interpreted the meaning of the phrase “suffer or permit to work”—the definition of “employ” contained in wage orders promulgated by the Industrial Welfare Commission. Although that agency is defunct, its orders remain viable.
2018 Opinion
Cantil-Sakauye said in Dynamex:
“[W]e conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the ‘ABC’ test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply 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 Ninth Circuit’s inquiry comes in Vazquez v. Jan-Pro Franchising International, Inc.
On May 2, 2019, a three-judge panel—comprised of Circuit Judges: Ronald M. Gould and Marsha S. Berzon, joined by District Court Judge Frederic Block of the Eastern District of New York, sitting by designation—determined that Dynamex applies retroactively. However, on July 22 of that year, it withdrew its opinion and announced: “A revised disposition and an order certifying to the California Supreme Court the question of whether Dynamex…applies retroactively will be filed in due course.”
Answer to Inquiry
In yesterday’s response to the Ninth Circuit, Cantil-Sakauye wrote:
“In concluding that the standard set forth in Dynamex applies retroactively—that is, to all cases not yet final as of the date our decision in Dynamex became final—we rely primarily on the fact that Dynamex addressed an issue of first impression. It did not change a settled rule on which the parties below had relied. No decision of this court prior to Dynamex had determined how the ‘suffer or permit to work’ definition in California’s wage orders should be applied in distinguishing employees from independent contractors. Particularly because we had not previously issued a definitive ruling on the issue addressed in Dynamex, we see no reason to depart from the general rule that judicial decisions are given retroactive effect.”
The defendant in the federal case, Jan Pro, a franchisor of janitorial cleaning outfits, argued that retroactive application of Dynamex would be unfair because businesses, in classifying workers as independent contractors or employees, could not have anticipated the new test. Cantil-Sakauye responded:
“[D]efendant’s argument carries little weight when, as here, the underlying decision changes no settled rule. Moreover, public policy and fairness concerns, such as protecting workers and benefitting businesses that comply with the wage order obligations, favor retroactive application of Dynamex. Thus, we do not view the retroactive application of the ABC test to cases pending at the time Dynamex became final as improper or unfair.”
The case appears at 2021 S.O.S. 193.
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