Ninth Circuit Applies Dynamex “ABC Test” for Determining Independent Contractor Retroactively

Ninth Circuit Applies Dynamex “ABC Test” for Determining Independent Contractor Retroactively

On May 2, 2019, the U.S. Court of Appeals for the Ninth Circuit in Vazquez v. Jan-Pro Franchising International, Inc. vacated a summary judgment in favor of an international janitorial cleaning business that had classified its janitors as “independent contractors” rather than “employees” under California law. The plaintiffs in Vazquez alleged in their wage and hour class action that the defendant had developed a sophisticated “three-tier” franchising model to avoid paying its janitors minimum wages and overtime compensation by misclassifying them as independent contractors.

The Vazquez court noted that the California Supreme Court in April 2018 had adopted the “ABC test” for determining whether workers are employees under California wage order laws in its Dynamex decision. For a worker to be a true independent contractor, an employer must establish that the worker:

A) is free from the control of the hiring entity in connection with work performance – both under the performance contract and in fact;

B) performs work outside the hiring entity’s usual business; and

C) is customarily engaged in an independent business of the same nature as the work performed.

In remanding the case, the Ninth Circuit held that the Dynamex decision applied retroactively, following the general rule that “statutes operate only prospectively, while judicial decisions operate retrospectively,” and provided guidance to the district court for applying the Dynamex ABC test to the facts presented in the case.