SAN FRANCISCO — Earlier this month, the California Supreme Court ruled that the 2018 “Dynamex ABC test” to determine if a worker is an employee or an independent contractor applies retroactively to labor relationships that predate the Dynamex decision.
In a January 14 decision regarding Vazquez v. Jan-Pro Franchising International, Inc., the state’s highest tribunal concluded that “the Dynamex decision constitutes an authoritative judicial interpretation of language — suffer or permit to work — that has long been included in California's wage orders to define the scope of the employment relationships governed by the wage orders.”
Thus, the decision continued, “under well-established jurisprudential principles, our interpretation of that language in Dynamex applies retroactively to all cases not yet final that were governed by wage orders containing that definition.”
The ABC Test
The 2018 Dynamex decision ruled on the question of “what standard applies under California law in determining whether workers should be classified as employees or independent contractors for purposes of the obligations imposed by California's wage orders.”
The Supreme Court concluded that “any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order” versus “an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is 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 such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity's business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”
This standard, the Vazquez ruling explained, “is commonly referred to as the ‘ABC test.’”
'Substantial Liability' for Employers
The “employee vs. contractor” issue has been at the center of the controversy around California labor bill AB5, which went into effect January 1, 2020.
As XBIZ has been reporting, AB5 — which was introduced in 2019 by Assemblyperson Lorena Gonzalez (D-San Diego), and was nicknamed by the public the "Uber Bill" (AB5) — sought to codify the Dynamex decision into a California statute.
AB5 initially reclassified millions of independent contractors — including many adult performers, strippers and cam models — as employees, but it was later amended by a “clean-up” bill, AB2257, which made exceptions for “performance artists.”
Regarding the January 2021 Vazquez decision, adult industry attorney Lawrence Walters, of the Walters Law Group, told XBIZ that “the decision to apply the Dynamex employee/independent contractor test retroactively creates substantial liability for any employer who miscategorized employees in California.”
“The court rejected any due process concerns with applying this test retroactively leaving many California companies exposed to claims that are still within the statute of limitations,” Walters added.
