Ninth Circuit: The Dynamex Independent Contractor Test Applies Retroactively

In Vazquez v. Jan-Pro Franchising, Inc., the Ninth Circuit stated that the California Supreme Court Dynamex decision applies retroactively. Specifically, Dynamex created the ABC test for determining whether an individual is an independent contractor for purposes of state wage and hour laws. Unfortunately, at the time, the California Supreme Court did not indicate whether or not Dynamex was to apply retroactively. Now, the Ninth Circuit has officially answered that question.

In Vazquez, a janitorial cleaning service allegedly misclassified its janitors as independent contractors. The case was originally filed in 2008, and was pending on appeal in the Ninth Circuit when Dynamex was decided. The Ninth Circuit stated that the ABC test should be applied, resulting in re-litigation of the case in federal district court. In applying Dynamex retroactively, this means that employers can be held to the narrow ABC standard before the Court even established the test. An important nuance of Dynamex is that it replaced the multi-factor Borello test only for purposes of wage and hour claims. Borello still applies in other instances.

To complicate matters further, the Vazquez decision is mandatory for federal courts in California to follow; California state courts are not required to follow it, but may choose to do so as a persuasive ruling. Regardless, lower California courts are reportedly already applying the Dynamex decision retroactively. Consequently, employers are strongly advised to audit historical independent contractor relationships for potential exposure.