On July 22, 2019, the Ninth Circuit withdrew its recent decision in Vazquez v. Jan-Pro Franchising International, Inc., and ordered that it would certify to the California Supreme Court the question of whether the worker classification test articulated in Dynamex Operations West v. Superior Court applies retroactively.
In Dynamex, the California Supreme Court replaced the longstanding Borello test for determining whether workers are independent contractors or employees with a less flexible test, the so-called ABC test, for claims arising under California’s Wage Orders. For details about Dynamex and the ABC test, read our prior coverage here.
In its now-withdrawn Vazquez opinion, the Ninth Circuit had held that California law required retroactive application of the Dynamex standard, and that doing so was consistent with constitutional due process. Accordingly, had the Ninth Circuit not withdrawn Vazquez, federal courts could be applying the ABC test to misclassification claims reaching back as far as the four-year statute of limitations under California’s Unfair Competition Law, potentially exposing employers who relied upon and applied the pre-Dynamex test to substantially increased liability.
While the Ninth Circuit’s withdrawal of Vazquez is a win for California employers, it may be a temporary one for a number of reasons:
- Judicial interpretations of California law are often given retroactive effect;
- While the California Supreme Court has recognized exceptions to the general application of retroactivity, in Dynamex, it concluded that the ABC test was “faithful to [the test’s] history and to the fundamental purpose of the wage orders[,]” suggesting that it may regard Dynamex as a clarification of existing law rather than a departure from it; and
- After deciding Dynamex, the California Supreme Court denied a petition for rehearing that sought (a) clarification as to whether Dynamex was retroactive and (b) modification of the decision to expressly state that it applied prospectively, which could signal a propensity toward the general rule of retroactivity.
Accordingly, while the Ninth Circuit has given employers a reprieve for now, employers should remain cognizant of the uncertainty surrounding this issue while we wait for the California Supreme Court to weigh in. Finally, we should remember that regardless of the Court’s ultimate decision on retroactivity, post-April 2018, the ABC test is the law for misclassification claims arising under California’s Wage Orders, and employers should exercise caution to ensure that their policies are up to date and in compliance.