California Supreme Court Determines Dynamex ABC Test Applies Retroactively

Jan 19, 2021

In a decision published on Thursday, January 14, 2021 in Vazquez v. Jan-Pro (“Vazquez”), the California Supreme Court held that the 2018 Dynamex decision, which outlined a standard for classifying workers as independent contractors, applies retroactively. The decision in Dynamex will now apply to all nonfinal cases predating the effective date of the Dynamex ruling.

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As we reported last November, while weighing arguments presented by the parties in Vazquez, the Ninth Circuit Court asked the California Supreme Court to determine whether or not Dynamex applied retroactively. Although the general rule in California is that Supreme Court rulings apply retroactively, the court makes an exception for when a decision materially changes a settled rule of law. Jan-Pro’s attorneys argued to the Ninth Circuit that Dynamex is a “sea change in the law,” as opposed to a clarification of an existing rule, and does not apply retroactively.

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Answering the Ninth Circuit’s questions in its decision in Vazquez, the California Supreme Court states that “because we had not previously issued a definitive ruling on the issue addressed in Dynamex, we see no reason to depart from the general rule that judicial decisions are given retroactive effect.”

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The California Supreme Court did not address the second question posed in Vazquez regarding whether Jan-Pro’s multitiered franchising business structure affects Dynamex’s applicability to the business. As the Ninth Circuit previously held that franchising operations are within the scope of the Dynamex decision, the court wrote that “the question of California law posed by the Ninth Circuit that we agreed to answer does not involve any inquiry into the general relationship or applicability of the Dynamex decision to franchise agreements or arrangements, and we do not address that subject.”

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The Supreme Court’s decision to adopt the ABC Test has been met with significant resistance, especially from the app-based gig economy. Although the 2018 ruling created a rigid test for classifying workers as independent contractors, the court left several crucial questions unanswered. Last September, California lawmakers adopted Assembly Bill 2257 (AB 2257) to clarify which industries would be exempted from the ABC Test. The Supreme Court’s opinion in Vazquez closes a critical loop in determining the retroactive effect of the Dynamex decision.

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Resources for California Employers

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Read the California Supreme Court’s full opinion here.

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Read more about AB 2257 and applying the ABC Test here.

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Read our 2021 California Employment Law Update here.

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If you have questions about applying independent contractor classification laws to your business, please contact one of the following attorneys in The Maloney Firm’s Employment Law Department: Patrick MaloneyLisa Von EschenSamantha Botros, or Nicholas Grether.


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