The Ninth Circuit ruled that the Dynamex decision was meant to be applied retroactively and the Court reinstated the case for the plaintiffs. That's because under well settled California law, most decisions published by the Supreme Court and appellate courts apply retroactively - even if the decision overrules prior decisions. One exception to this rule is where a decision "changes a settled rule on which the parties...have relied." According to the Court, this exception did not apply here.
Technically. the Ninth Circuit's decision is binding only on federal courts in California. However, the Ninth Circuit concluded that a recent state Court of Appeal case from 2018 essentially came to the same conclusion - that Dynamex is retroactive. So far, no court appears to have disagreed.
Since the Ninth Circuit did not decide whether Jan-Pro's workers were employees or independent contractors, it sent the case back to the lower court to make that determination under Dynamex.
What This Means for Your Business
The Ninth Circuit emphasized that
makes it much easier for workers to prove they are employees rather than independent contractors. The Court did a detailed analysis of how the new three-part test has been applied elsewhere, and emphasized how the so-called "B" factor is likely to be the one that will trip up most employers.
The "B" factor essentially requires that a worker cannot be an independent contractor unless the work that the contractor is being hired to do is outside the usual course of the hiring entity's business. The Court cited to common sense examples of a retail store needing a plumber or electrician to fix broken equipment (plumbing and electrical work are not part of the retailer's ordinary business).
highlights the necessity for businesses that routinely engage independent contractors to review the bona fides of the relationship, before a suit is filed for misclassification. With a presumption that most workers are employees, and with the "B" factor being so hard to satisfy, it will be very difficult under Dynamex for most businesses to establish true independent contractor status.
If you have any questions about the matters discussed in this issue of Compliance Matters, please call your firm contact at (818) 508-3700, or visit us online at www.brgslaw.com.
John J. Manier
Richard S. Rosenberg
Ballard Rosenberg Golper & Savitt, LLP