It makes a big difference whether
a worker is an employee or an independent contractor. Employees benefit from
the protections of labor, employment, and other valuable statutory protections
that do not cover independent contractors.
The breadth of “employee” status has
been clarified under developing California law. Last year, the California
Supreme Court decided the landmark case Dynamex
Operations W. v. Superior Court (2018) 4 Cal.5th 903, about
which Bryan Schwartz Law has written previously. This
case established the “ABC” test for determining whether a worker is an employee
or an independent contractor, with a presumption that a worker is an employee, i.e., with the burden on putative
employers to demonstrate that workers are independent contractors. Id. at 957. To meet this burden, the putative employer must show (a) that the
worker is free from the control and direction of the hiring entity, (b) the
worker performs work outside the usual scope of the entity’s business, and (c)
the worker is engaged in an independently established trade, occupation, or business.
Id. at 964. Failing to demonstrate
any one of these elements is sufficient to show an employee-employer
relationship. Id. at 964.
But does the Dynamex test apply retroactively to cases arising before it was
decided? It does, according to the decision in Vazquez v. Jan-Pro Franchising International,
Inc., which the Ninth
Circuit Court of Appeals issued on May 2, 2019. Workers for international
janitorial giant Jan-Pro filed this case in 2008, alleging Jan-Pro implements a
business model to misclassify workers as independent contractors and escape the
company’s minimum wage and overtime responsibilities. Jan-Pro contracts with
franchises of “master owners,” which in turn contracts with “unit franchisees.”
Master owners themselves do not clean but instead engage in various managerial
or administrative duties; unit franchisees clean. The plaintiffs, janitorial workers
at unit franchisees, alleged they were misclassified as independent
contractors.
The case had a tortured
procedural history with over a decade of litigation, dispositive decisions, and
appeals in federal and state courts in California, Georgia, and Massachusetts. In
the Ninth Circuit, Jan-Pro argued that a judicial ruling in Georgia had already
decided the issue, thereby conclusively resolving the Ninth Circuit case as
well under the doctrine of res judicata.
Regardless, Jan-Pro argued, the Dynamex
decision should not apply retroactively to cases arising before it was decided in 2018.
The Ninth Circuit rejected both
arguments. The Court disposed of the res
judicata arguments on grounds specific to the procedural history of the
litigation. In brief, the Court held that the Massachusetts plaintiff was not
in privity with the California plaintiffs, nor did he legally represent their
interests—the California plaintiffs could not lose their day in court simply
because of a similar case involving someone else on the east coast.
Next the Court addressed the
important issue at stake for California workers: whether the Dynamex decision applied retroactively. The
answer was a resounding “yes.” California’s judicial decisions traditionally
apply retroactively, even when overruling past precedent. The Court adhered to this
traditional rule, drawing further support from other California courts’
retroactive application of the Dynamex decision
and the California Supreme Court’s summary denial of a petition to modify Dynamex to clarify that it was prospective
only. Notably, despite its considerable impact on the lives of workers and
employment law practice, the Dynamex decision
did not create new law but instead hewed close to the fundamental purpose of
existing California law. Because the lower court had dismissed the workers’
claims on summary judgment before Dynamex
was decided, the Ninth Circuit remanded the case for a decision in light of
Dynamex.
If you believe you are
misclassified as an independent contractor and should enjoy the same rights as
an employee, contact
Bryan Schwartz Law.
