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Beware Employers – Dynamex (ABC Test) Applies Retroactively

| Feb 26, 2021 | Employment |

By: Kiara Gebhart, Partner

After nearly two years of uncertainty as to whether the independent contractor test (“ABC test”) of Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018) would be applied retroactively, on January 14, 2021, the California Supreme Court in Vasquez v. Jan-Pro Franchising International, Inc., 10 Cal.5th 944 (2021) clarified the issue, holding that the Dynamex ABC test applies retroactively.

Pursuant to Dynamex, a worker must satisfy all three elements of a three part test to be properly classified as an independent contractor: the worker must (1) be 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 the work and in fact; (2) perform work that is outside the usual course of the hirer’s business; and (3) be customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hirer.  The hiring entity bears the burden to prove each element to overcome the presumption that the worker is an employee.

California businesses already struggling to comply with the Dynamex ABC test (which is drastically different than the common law test articulated in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, 48 Cal.3d 341 (1989) and which was in effect for nearly two decades prior to Dynamex) will certainly view the Vasquez decision as incorrect.  California employers will ask “how can we be expected to comply with the ABC test prior to the time that test was articulated by Dynamex in April 2018?” Although the Vasquez Court considered this valid question, it was unpersuaded and held that the Dynamex ABC test applies even prior to April 2018.

Vasquez highlights the importance of reviewing employee/independent contractor classifications on an ongoing basis, especially since this decision is likely to lead to an increase in employee misclassification claims.

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