Vazquez Determines that Dynamex ABC Test for Independent Contractors Applies Retroactively
by Jake Madden on June 7, 2019
posted in Employment Law,
In Vazquez v. Jan-Pro Franchising International, Inc., 923 F.3d 575 (2019) (Vazquez) the United States Court of Appeals for the Ninth Circuit ruled that the ABC test established in Dynamex Operations W. v. Superior Court, 4 Cal.5th 903 (2018) (Dynamex) can be applied retroactively.
At issue in Dynamex was whether or not delivery drivers working for Dynamex Operations West Inc., a transportation company, should be classified as independent contractors or employees. In that case the Supreme Court of California established an ABC test to determine whether a person is to be classified as an independent contractor or employee for a company. The test involves the following three prongs:
- That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
- That the worker performs work that is outside the usual course of the hiring entity’s business; and
- That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
There is a presumption that workers are employees, and the burden falls on the hiring entity to meet each of the three prongs above to show that a worker is an independent contractor.
Vazquez presented a similar situation to Dynamex. Janitors involved in Jan-Pro Franchising International, Inc.’s multi-leveled franchise model alleged that the company had misclassified them as independent contractors, allowing Jan-Pro to avoid paying minimum wages and overtime compensation. The United States District Court for the Northern District of California ruled in favor of Jan-Pro in 2017, before the decision rendered in Dynamex. On appeal, the question before the Ninth Circuit became whether or not the ABC test in Dynamex could be retroactively applied. The court answered yes.
What is important now for companies that hire independent contractors is to determine if the classification of workers as independent contractors satisfies the three prongs of the ABC test. This will help to protect against future liability. Past practices should also be reviewed, as the ruling issued in Vasquez may open the door to greater litigation.