New California Independent Contractor Test Applies Retroactively According to the Ninth Circuit
By Procopio Partner Tyler M. Paetkau
As we have previously reported, the California Supreme Court last year set forth a revolutionary new “ABC test” for determining whether workers are properly classified as employees or independent contractors, making it dramatically more difficult for California employers to lawfully retain independent contractors.
On May 2, 2019, in Vazquez v. Jan-Pro Franchising Int’l, Inc., the Ninth Circuit Court of Appeals determined that the Supreme Court of California’s landmark “ABC” decision, Dynamex Ops. West Inc. v. Superior Court, 4 Cal. 5th 903 (2018), applies retroactively. Vazquez does not bind state courts, and employers may still argue that Dynamex does not apply in some circumstances (e.g., if a claim does not arise under the wage orders or if the defendant is an alleged joint employer). But California businesses must be prepared to address the ABC test and consider its retroactive application.
In applying Dynamex retroactively, the Ninth Circuit noted the “default rule” that judicial decisions have retroactive effect, and reasoned that Dynamex did not fall into an exception under California law for decisions that “change[d] a settled rule on which the parties below have relied.” Vazquez, slip op. at 23. The Ninth Circuit also found persuasive that the Supreme Court of California summarily denied the defendant’s petition for review in Dynamex, which “strongly suggested that the usual retroactive application, rather than the exception, should apply to its newly announced rule.” Id. at 24. The Ninth Circuit also concluded that retroactive application of Dynamex did not violation constitutional due process but instead served the remedial purposes of the wage orders. Id. at 27-28.
All California businesses that use the services of independent contractors should consult counsel and audit their contractor practices in light of Dynamex and Vasquez.
Tyler M. Paetkau is a member of Procopio's Labor and Employment practice group and is based in Silicon Valley. He has represented employers in labor and employment law matters for more than 25 years. He has handled numerous litigation cases and has extensive employment counseling experience. Tyler’s areas of practice include defending employers against claims of wrongful termination, discrimination, retaliation, sexual harassment, defamation, wage and hour violations, unpaid commissions, collective and class actions, and unfair labor practice charges. Tyler also represents employers in litigation involving unfair competition, misappropriation of trade secrets, restrictive covenants, and employee mobility issues. He also has extensive experience representing employers in union-management labor relations matters, including union organizing campaigns, strikes, and collective bargaining negotiations.