by Michelle R. Ferber and Julie Ann Giammona

On July 22, 2019, a three-judge panel for the Ninth Circuit reversed its May 2, 2019 Vazquez et al. v. Jan-Pro Franchising International decision concluding that the California Supreme Court’s Dynamex decision — which overturned 30 years of case law allowing employers to classify their workers as independent contractors utilizing a multi-factor test — applies retroactively. Instead, the panel concluded the California Supreme Court should have final say on retroactive application of Dynamex, and thus issued an order certifying the question before the Supreme Court.

By issuing such an order, the Ninth Circuit expunged its May 2 ruling wherein the panel had determined that “[g]iven the strong presumption of retroactivity, the emphasis in Dynamex on its holding as a clarification rather than as a departure from established law, and the lack of any indication that California courts are likely to hold that Dynamex applies only prospectively, we see no basis to do so either.”

The May 2 panel had also found that its decision was consistent with due process, stating that applying Dynamex retroactively is “neither arbitrary nor irrational.”  The panel noted that the California Supreme Court said that “wage orders are the type of remedial legislation that must be liberally construed in a manner that services its remedial purpose” and that embracing the ABC test was “faithful to the history of California’s employment classification law and to the fundamental purpose of the wage orders.”

Dynamex was a departure from over three decades of case law.  In Dynamex, the California Supreme Court adopted the State Industrial Welfare Commission’s definition of employment for wage order claims, which makes anyone whom a business “engage[s], suffer[s] or permit[s]” to work, an employee.  In its ruling, the Dynamex court adopted the ABC test which presumes that all workers are employees, unless the employer can prove: (A) that the worker is free from the control of the hiring entity in connection with work performance – both under the performance contract and in fact; (B) that the worker performs the work outside the hiring entity’s usual business; and (C) that the worker is customarily engaged in an independent business of the same nature as the work performed.

At first glance, the Ninth Circuit’s action in certifying the question of retroactive application of Dynamex to the California Supreme Court presents a glimmer of hope to employers. However, given the Supreme Court’s prior rulings in favor of employees, and the current legislative efforts to codify the Dynamex decision, Ferber Law expects the Supreme Court to reach the same conclusion as the Ninth Circuit May 2 panel which applied Dynamex retroactively. Ferber Law has the expertise to assist you with this complex area of the law and we welcome your inquiries.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.