Employee-Friendly ABC Test Applies Retroactively, According to California Supreme Court

State and federal courts utilize several tests to analyze whether a worker qualifies as an employee. One of the more employee-friendly tests is labeled the “ABC” Test. The ABC Test rose to prominence in California in 2018 when the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. Superior Court, 4 Cal.5th 903 (2018). The Dynamex case analyzed which test governed whether a worker was an employee for purposes of the “IWC” (i.e., Industrial Welfare Commission) Wage Orders. Dynamex held that, under one of the definitions of “employ” set forth in all California wage orders—namely, to “suffer or permit to work”—any worker who performs work for a business is presumed to be an employee who falls within the protections afforded by a wage order. On the contrary, a worker can be classified as a non-employee, independent contractor only if the employer establishes all three of the following: “(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.” (Id. at 916–917.) Many other jurisdictions use the same standard. (Id. at 916.)

One of the questions remaining after Dynamex was whether the “ABC” Test applied retroactively—meaning applied to relationships before the 2018 California Supreme Court case. Last week, the California Supreme Court answered that question and held that Dynamex’s effect is retroactive, noting that the Court saw “no reason to depart from the general rule that judicial decisions are given retroactive effect.” Vazquez et al. v. Jan-Pro Franchising International, Inc., No. S258191 (Opinion entered Jan. 14, 2021).

Procedurally, the California Supreme Court answered the retroactivity question at the request of the United States Court of Appeals for the Ninth Circuit.

At ILG Legal Office, PC, our employment lawyers have handled many misclassification lawsuits for both employees and employers. Any workers who think they may have been classified improperly as an independent contractor or any employer facing a lawsuit or threatened lawsuit about worker classification should call us at 415-580-2574 or email us at [email protected] for a free legal consultation. Knowing when each employment test applies and how to analyze the applicable tests can be difficult for non-lawyers so we recommend obtaining legal help from experienced employment attorneys like us.