California Supreme Court Rules Dynamex Applies Retroactively In a January 2021 California Supreme Court decision, the Court held that Dynamex applies retroactively.
The Dynamex decision, which was codified by Assembly Bill 5, enacted the three-part ABC test to determine the eligibility of an individual or business to be considered an independent contractor.
In January, the Supreme Court issued a decision in the Vazquez v. Jan-Pro Franchising International, Inc. case that Dynamex does apply retroactively.
In the decision, Chief Justice Tani Cantil-Sakauye wrote, “Public policy and fairness concerns, such as protecting workers and benefitting businesses that comply with the wage order obligations, favor retroactive application of Dynamex.”
In Vazquez, the plaintiffs were individual employees; they alleged Jan-Pro Franchising developed a “threetier” franchising model to misclassify them as independent contractors to avoid paying minimum wages and overtime. In the “three-tier” model, individual employees contract with intermediary entities who sell Jan-Pro business plans and individual franchises to them. However, Jan-Pro retains the right to enforce any agreement between the intermediary entity and the individual franchisee.
In considering this case, the California Supreme Court grappled with the issues decided in the Dynamex case. Specifically, in the Dynamex decisions, the Court held that one of the definitions of “employ” is to “suffer or permit to work” and “any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order.” The Court set up the ABC test to determine whether a worker can be classified as an independent contractor.
Jan-Pro argued they could not have anticipated a decision on Dynamex that distinguished between employees and independent contractors for any obligations imposed by a wage order; therefore, the ABC test should not apply retroactively. However, the Court noted the Dynamex ruling did not change any settled rule and, for purposes of public policy and fairness for businesses that comply with wage order obligations, favored retroactive application.
POLITICO reported this decision to apply Dynamex retroactively would mean many companies, including the proponents of Prop 22, could have to pay retroactive wage claims.
Although Prop 22 passed, it does not provide retroactive protection.
To see how the Dynamex decision and AB 5 apply to you, the California Pool and Spa Association has created a detailed backgrounder of current independent contractor law.
The Association also has several webinars on the topic available to members at the website www.thecpsa. org.
