SAN FRANCISCO – The future of business across the state of California may be riding on the state Supreme Court’s ruling over a case decided by Dynamex by an appellate court.
In the case of Gerardo Vazquez, Gloria Roman and Juan Aguilar v. Jan-Pro Franchising International Inc., the 9th Circuit Court of Appeals ruled in October that the Dynamex decision applies retroactively but later withdrew that opinion, handing over the potential decision to the California Supreme Court, where the request is now under consideration and is expected to be answered within the upcoming month.
According to the 9th Circuit of Appeals case background, the plaintiffs are “seeking a determination of whether workers are independent contractors or employees under California wage order laws.” Last week, the 9th Circuit denied Jan-Pro’s request to rehear its ruling.
The final decision could have a devastating impact on businesses that rely upon independent contractors if the law is said to apply retroactively as they could be exposed to wage and hour claims based on a legal standard that did not even exist before the passage of Assembly Bill 5, which classifies the difference between employees and independent contractors.
A three-factor test was established in the passing bill to decide a worker’s status. The test requires that (a) the worker is free from the hiring company’s control and direction in the performance of work; (b) the worker is doing work that is outside the company’s usual course of business; and (c) the worker is engaged in an established trade, occupation or business of the same nature as the work performed.
Since then, experts and state business advocates alike have pushed for answers and called for reforming the bill, fearful of the consequences that may lie ahead.
“To my knowledge, we are still waiting to see if the California Supreme Court will take up the question of whether Dynamex applies retroactively,” Luke Wake, senior staff attorney with the NFIB Small Business Legal Center, said. “So of course, we remain deeply concerned about the implications of retroactive application for businesses that had operated in good faith under the old Borello standard; they had no way of knowing that the rug would be pulled out from underneath them and that they might suddenly be held liable under a standard that no one had ever contemplated in California."
Wake said that in Dynamex, the Supreme Court was interpreting vague language "from wage orders from the Industrial Wage Commission that were promulgated in the early 20th century."
"No one would have expected that the court would redefine the independent contractor test so radically, much less to reach across the country to pull a standard that was adopted in Massachusetts of all places,” Wake said.
This case, as well as several similar ongoing cases, is expected to be a breaking point for conducting business in the future and a gateway for how past business can potentially be exposed to lawsuits.
“If the court does not accept review, I suspect we’ll continue to see these cases percolating and a torrent of lawsuits against businesses that had relied on the old Borello factors before Dynamex was decided. That would be a miscarriage of justice,” Wake said. “If the court does accept review, then of course we’ll have a chance to make our case, which I think is hugely important for many businesses across the state who thought that they were playing by the rules.”