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At the request of the United States Court of Appeals for the Ninth Circuit, the California Supreme Court agreed to decide the following question of California law: Does this court’s decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex) apply retroactively?

In Dynamex, the Supreme Court was faced with a question of first impression: 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?

It held that such a worker can properly be found to be “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 is now referred to as the A-B-C test.

Defendant argued that an exception to the general retroactivity principle should be applied here because, prior to Dynamex, businesses could not reasonably have anticipated that the ABC test would govern at the time when they classified workers as independent contractors rather than employees.

In answer to the question posed by the Ninth Circuit, the Supreme Court concluded in Gerardo Vazquez v Jan-Pro Franchising International, Inc.,that it’s decision in Dynamex applies retroactively to all nonfinal cases that predate the effective date of the Dynamex decision.

Employers were clearly on notice well before the Dynamex decision that, for purposes of the obligations imposed by a wage order, a worker’s status as an employee or independent contractor might well depend on the suffer or permit to work prong of an applicable wage order – and that the law was not settled in this area.