(May 16, 2019) - Last year, the California Supreme Court held in Dynamex Operations v. Superior Court that the "ABC test" determines whether a worker should be classified as an independent contractor or an employee, replacing the more lenient Borello test. Several California court opinions clarifying Dynamex have come out since then, including Garcia v. Border Transportation Group, LLP, specifying that Dynamex only replaces Borello for wage and hour claims under the IWC Orders, and Duffey v. Tender Heart, distinguishing a separate test from both Borello  and Dynamex under the Domestic Worker Bill of Rights for domestic caregivers.

What was not entirely clear was whether Dynamex and its ABC test apply retroactively to disputes that arose before the case was decided, or if it only had a proactive effect. Although this issue has not been decided by California state courts yet, the federal Ninth Circuit Court of Appeals held that the ABC test is retroactive.

Vazquez v. Jan-Pro Franchising Int'l

Jan-Pro is a company that provides commercial cleaning services throughout the country. As explained by the court, Jan-Pro's business model has several layers, with Jan-Pro as the central franchisor to its master owners, and the master owners as franchisors to the individual unit franchisees. Jan-Pro itself reserved the right to inspect any of the franchised premises at any time to ensure that they were meeting its standards, but the master owners determined their own internal business structures, marketing methods, and general operations.

At its core, the Vazquez litigation centered around whether the Jan-Pro franchisees were actually direct employees of Jan-Pro. The Ninth Circuit determined that the Dynamex  ABC test should be applied to franchisees, so that both the individual franchisee and the central franchisor can be held liable for wage and hour violations. The court also determined that Dynamex should be applied retroactively, reasoning that limiting the ruling to new cases would defeat the remedial purposes that California's wage laws are intended to serve. The court ultimately remanded the case for reexamination under the Dynamex ABC test.

Future Implications

This ruling exposes Jan-Pro, and many other franchisors, to potential liability for wage and hour claims from a vast number of workers who were potentially misclassified as independent contractors, even in the years before Dynamex came out.

Employers, particularly franchisors, will want to keep a close eye on Vazquez on remand to see how the federal court applies the Dynamex ABC test to franchise workers, as well as how California state courts will rule on the issue of retroactivity.

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