Dynamex decision applies retroactively, appeals court says

Adding to the saga over the California Supreme Court’s landmark Dynamex decision, the U.S. Court of Appeals for the Ninth Circuit has determined that the standard for classifying workers applies retroactively.

As part of a wage case between a class of janitors and an international cleaning business (Jan-Pro Franchising) that dates back to 2008, the Ninth Circuit panel ruled on Thursday, May 2, that the ABC test adopted in the Dynamex decision applies and vacated a lower court’s grant of summary judgment. The Ninth Circuit kicked the case back to the district court, saying it should consider all three prongs of the ABC test.

“We conclude that Dynamex does apply retroactively, that none of Jan-Pro’s other efforts to avoid reaching the merits are viable, and that the case must be remanded to the district court to consider the merits in light of Dynamex,” Judge Frederic Block wrote in his opinion for the Ninth Circuit.

In 2018, the California Supreme Court’s Dynamex decision established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that all of the factors are established:

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 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.

The decision created an uproar in the trucking industry and for other California businesses, which make a habit of using independent contractors.

While the Jan-Pro lawsuit involves a cleaning company, the Ninth Circuit’s ruling could lead to an increase in wage suits in the trucking industry as well.

The ruling “could be devastating to many businesses and requires their attention now,” Jeffrey Horton Thomas, a lawyer at Akerman LLP’s California office, told Bloomberg Law.

The case against Jan-Pro was originally filed in 2008, accusing the company of developing a “three-tier” franchising model to avoid paying its janitors minimum wages and overtime compensation by misclassifying them as independent contractors.

A lower court dismissed the claims, but now must factor in the ABC test when making its decision.

“By applying Dynamex retroactively, we ensure that the California Supreme Court’s concerns are respected,” Block wrote. “Besides ensuring that plaintiffs can provide for themselves and their families, retroactivity protects the janitorial industry as a whole, putting Jan-Pro on equal footing with other industry participants who treated those providing services for them as employees for purposes of California’s wage order laws prior to Dynamex.”

The Western States Trucking Association and California Trucking Association are both challenging the Dynamex decision, arguing that it creates an excessive burden on interstate commerce and is pre-empted by federal law.

The trucking groups contend that the B-prong of the test makes it impossible for trucking companies to hire independent contractors to haul freight. A U.S. District Court dismissed Western States’ challenge, but the group filed an appeal with the Ninth Circuit on April 18.

“We are looking forward to our legal arguments being heard on appeal,” Western States wrote in its online newsletter on March 29. “We … remain committed to taking this question to the U.S. Supreme Court if necessary.”