The California Supreme Court decided Dynamex Operations West, Inc. v. Superior Court in 2018. Dynamex determined how the term “suffer or permit to work,” as used in the California wage orders, should be interpreted for purposes of distinguishing between employees who are covered by the wage orders and independent contractors who are not.
The Dynamex decision also adopted the so-called “ABC test.” Under the ABC test, a worker is an independent contractor to whom a wage order does not apply only if the employer establishes that the worker:
A) 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;
B) Performs work that is outside the usual course of the hiring entity’s business; and
C) Is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
In Vazquez v. Jan-Pro Franchising International, Inc., the Ninth Circuit requested the California Supreme Court to determine whether the Dynamex decision applies retroactively. The California Supreme Court noted that its decision in Dynamex did not overrule any prior California Supreme Court cases, nor disapprove of any prior California Court of Appeal decisions. These facts supported the retroactive application of Dynamex.
Jan-Pro argued that a narrow exception to the general retroactivity rules applied because it reasonably believed that the question of whether a worker should be considered an employee or an independent contractor would be determined by the application of the multi-factor test established in S.G. Borello and Sons, Inc. v. Department of Industrial Relations.
The Supreme Court disagreed. The Court reasoned that California wage orders have included the “suffer or permit to work” standard as one basis for defining who should be treated as an employee for purposes of the wage order for more than a century. Additionally, the Court noted that at least since the 1930s, the “suffer or permit to work” standard has been understood as embodying “the broadest definition” of employment. Further, the Court pointed out that the multi-factor Borello test Jan-Pro attempted to rely on was not a wage order case. Moreover, that decision did not analyze who is an employee for purposes of a wage order. Finally, the Court noted that the factors articulated in the Dynamex case drew on the factors articulated in Borello. Thus, they were not beyond the bounds of what employers could reasonably have expected.
For these reasons, the Court determined employers were clearly on notice well before the Dynamex decision that, for purposes of the obligations imposed by a California wage order, a worker’s status as an employee or independent contractor might depend on the suffer or permit to work prong of an applicable wage order. Accordingly, the Court confirmed that the Dynamex decision applies retroactively
Vazquez v. Jan-Pro Franchising Int’l, Inc. (Cal. Jan. 14, 2021) 2021 WL 127201.
NOTE:
Liebert Cassidy Whitmore reported about the Dynamex decision in the May 2018 Private Education Matters newsletter.