On July 22, 2019, a three-judge panel for the Ninth Circuit withdrew its holding that Dynamex Operations West, Inc. v. Superior Court—the landmark California Supreme Court decision that makes it harder for companies to rely on independent contractors—applies retroactively. The panel held instead that the question should be decided by the state’s highest court.

Background

As we have discussed in previous blog posts, the independent contractor landscape has evolved since April 30, 2018 when the California Supreme Court decided Dynamex.

  • Before Dynamex, courts applied a malleable, multi-factor test that focused primarily on the extent of the alleged employer’s control over its workers.
  • Because of the flexible nature of that test, companies adopted business models that permitted them to rely on independent contractors by allowing those workers to exercise control over their own working conditions.
  • But all of that changed in Dynamex, when the California Supreme Court held that the ABC test, an inflexible three-part test, should determine a workers’ independent contractor status.
  • Under the ABC test (read more HERE), a worker is presumed to be an employee unless an alleged employer can satisfy three conditions, only one of which focuses on whether the alleged employer exercises control.

The Dynamex court did not address whether its decision would apply retroactively. However, earlier this year in Vazquez v. Jan-Pro Franchising International, Inc., the Ninth Circuit Court of Appeal held that the Dynamex decision should be given retroactive application. Companies that had been lawfully relying on independent contractors for decades suddenly found themselves exposed to million-dollar lawsuits.

Glimmer Of Hope For Employers

The Ninth Circuit’s July 22 ruling offers a glimmer of hope for employers that rely on contractors. The Ninth Circuit not only withdrew its previous opinion, but also indicated its intent to file an order certifying to the California Supreme Court the question of whether Dynamex applies retroactively.

However, it should be noted that AB-5—a bill aimed at codifying the Dynamex decision and addressing questions left unanswered by the Dynamex Court—is making its way through the state Senate. To learn more about AB-5, read our post HERE.

Please contact your Baker McKenzie lawyer for more details.