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In July, we reported that a three-judge panel for the Ninth Circuit withdrew its holding in Vazquez v. Jan-Pro Franchising Int’l 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. Rather than answering the question of Dynamexs retroactivity, the Court stated its intent to file an order certifying that question.

The Day Has Come

On September 24, 2019, the Ninth Circuit filed its Order Certifying Question to the California Supreme Court.

The Ninth Circuit acknowledged that the question of Dynamexs retroactive application has potentially broad ramifications for California employers. It further acknowledged Jan-Pro’s argument that if the Dynamex test applied retroactively it could lead to substantially greater liability for California businesses for conduct that occurred before Dynamex than the pre-Dynamex legal regime.

Given the importance of the retroactivity issue and the significant ramifications, the Ninth Circuit confirmed that the California Supreme Court should answer this question. It should be noted, however, that the California Supreme Court has the discretion to grant or deny the request.

Twist: AB-5’s Impact on Employers

Employers, however, should be aware that Governor Newsom signed AB-5, the legislation that codified the Dynamex decision, and it will officially take effect on January 1, 2020. Under AB5, Californians will be considered employees (as opposed to contractors) of a business unless the employer can establish:

  1. That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. That the worker performs work that is outside the usual course of the hiring entity’s business; and
  3. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

So, regardless of whether Dynamex applies retroactively, it will be difficult for employers to classify their workers as independent contractors and companies who rely on independent contractors should carefully evaluate their use of those contractors.

Please contact your Baker McKenzie lawyer for more details.