California Supreme Court says ABC test can be applied retroactively

The California Supreme Court has ruled that the ABC test used to determine worker classification can be applied retroactively.

Issuing the opinion on Jan. 14, the court concluded that its Dynamex decision could apply retroactively “to all cases not yet final as of the date our decision in Dynamex became final.”

On April 30, 2018, the California Supreme Court’s Dynamex decision adopted the ABC test, which considers all workers to be employees unless the hiring business demonstrates that a worker satisfies each of three conditions.

ABC test

(A) That the worker is free from the control and the direction of the hirer in the connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) That the worker performs work that is outside the usual course of the hiring entity’s business.

(C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

In the California Supreme Court’s recent decision it found that before Dynamex there had not been a “definitive ruling” on the issue.

“We rely primarily on the fact that Dynamex addressed an issue of first impression,” the court wrote in its opinion. “It did not change a settled rule on which the parties below had relied. No decision of this court prior to Dynamex had determined how the ‘suffer or permit to work’ definition in California’s wage orders should be applied in distinguishing employees from independent contractors.”

The defendant, Jan-Pro Franchising International, a commercial cleaning company based in Georgia, argued that the less-stringent Borello standard should apply to cases launched before Dynamex.

“Borello addressed whether farmworkers hired by a grower under a written sharefarmer agreement were independent contractors or employees for purposes of the workers’ compensation statutes,” the court wrote. “The Borello decision, however, did not address whether a worker should be considered an employee or an independent contractor for purposes of the obligations imposed by a wage order.”

The court also dismissed Jan-Pro’s arguments that the company couldn’t have anticipated the ABC test’s distinction between employees and independent contractors.

“But defendant’s argument carries little weight when, as here, the underlying decision changes no settled rule,” the court wrote. “Thus, we do not view the retroactive application of the ABC test to cases pending at the time Dynamex became final as improper or unfair.”

Controversy

The ABC test and California’s subsequent AB5 law codifying the ruling sparked controversy across a variety of industries, including the gig economy, newspapers and magazines, and trucking.

Opponents of the ABC test contend that the B prong makes it impossible for most workers to qualify as an independent contractor.

In a separate case, the California Trucking Association says the test would end the leased-on owner-operator model in the trucking industry and is arguing that AB5 is preempted by the Federal Aviation Administration Authorization Act, which prevents states from enforcing a law or regulation related to a price, route or service of motor carriers.

Shortly after AB5 went into effect in January 2020, the U.S. Southern District Court granted a preliminary injunction that blocked California from enforcing it against motor carriers. In September, the U.S. Court of Appeals for the Ninth Circuit listened to oral arguments before deciding whether in injunction should remain in effect.

The Ninth Circuit’s decision is expected soon. LL