Dynamex Applies Retroactively Because It Was a Case of First Impression and Did Not Change a Settled Rule.

Vazquez v. Jan-Pro Franchising Int’l, Inc., 2021 WL 127201 (Jan. 14, 2021)

The United States Court of Appeals for the Ninth Circuit certified this question to the California Supreme Court: Does the decision in Dynamex Operations West, Inc. v. Super. Ct. (2018) 4 Cal.5th 903 apply retroactively? The California high court answered that it does since no decision prior to Dynamex had addressed how the “suffer or permit to work” definition of the term “employ” in wage orders should apply to the analysis of whether workers who performed work for a business were employees or independent contractors. The interpretation of the “suffer or permit” language in Dynamex was intended to apply retroactively because the decision was a judicial interpretation of language that has been included in wage orders for over 100 years and that since at least 1937 has been given the broadest definition of employment possible.

Defendant argued that prior to Dynamex it had reasonably relied on the common law standard set forth in S.G. Borello & Sons v. Dept. of Indus. Relations (1989) 48 Cal.3d 341 and that businesses could not have anticipated California would adopt the “ABC” test for classifying workers according to the wage order definition. As to Defendant’s reasonable reliance, the high court distinguished Borello from Dynamex in that Borello had not analyzed the employee/independent contractor issue pursuant to employer wage order obligations. The Court further noted that twice in the past decade it had indicated that the classification issue should remain an open question,[i] and that well before its decision in Dynamex employers were on notice that the “suffer or permit” standard could be used in the employee/independent contractor analysis. The Court also highlighted that in Dynamex it had explained that the numerous factors in the Borello analysis was one of its chief shortcomings and that such a standard “makes it difficult for both hiring businesses and workers to determine in advance how a particular category of workers will be classified,” and that therefore, as a practical matter, Defendant here overstated how much declining to extend the Borello standard to the wage order language truly disrupted Defendant’s reasonable expectations.

As to the argument that businesses could not have anticipated California would adopt the ABC test as the appropriate standard, the Supreme Court rejected the contention that litigants must predict the exact rule the Court will adopt before the rule may apply retroactively and noted that adoption of the ABC test was reasonably foreseeable in any event based on prior decisions.

Finally, because there was no settled rule, the high court found the Dynamex decision did not unfairly prejudice Defendant and other businesses. In addition, public policy and fairness considerations, like ensuring worker protections or not penalizing competing businesses who complied with wage order obligations, favored giving the Dynamex decision retroactive effect.

[i] Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, Martinez v. Combs (2010) 49 Cal.4th 35.

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