Why This Matters

On Thursday, May 2, in Vazquez v. Jan-Pro Franchising International, Inc., a three-judge panel of the Ninth Circuit Court of Appeals held that the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court applies retroactively. In Dynamex, the Supreme Court adopted a new standard for determining whether a California worker is an employee or independent contractor under the California Industrial Welfare Commission’s (“IWC”) wage orders. As we have previously discussed (see here, here, and here), Dynamex’s reach continues to grow and the Ninth Circuit’s ruling in Vazquez should be of particular concern to employers, who now face potential liability for their past decisions to classify workers as independent contractors rather than employees under a standard that did not exist at the time.

Background

In Vazquez, a case that had been pending for almost a decade prior to the Dynamex decision, the employer, a janitorial cleaning business, was awarded summary judgment on minimum wage and overtime claims stemming from allegations that janitors had been misclassified as independent contractors. The employees appealed. The Dynamex decision was issued while the case was on appeal.

The employer argued to the Ninth Circuit, in relevant part, that Dynamex did not apply retroactively. The Ninth Circuit disagreed. It based its decision in large part on the DynamexCourt’s statement that it was merely “clarifying” existing law rather than departing from it. The Ninth Circuit remanded the case to the district court for further proceedings in which it is to apply Dynamex’s “ABC” test retroactively.

This latest decision is yet another wake up call to California employers to review all independent contractor classifications to ensure compliance with California’s new (and more onerous) classification standard.