As we previously reported, the California Supreme Court’s landmark decision in Dynamex Operations West, Inc. v. Superior Court adopted a new worker-friendly standard, known as the “ABC test,” for determining whether workers are properly classified as employees or independent contractors under the California Industrial Welfare Commission’s (“IWC”) Wage Orders. On May 2, 2019, the Ninth Circuit expanded the effect of the decision in Vazquez v. Jan-Pro Franchising International, Inc., holding that Dynamex must be applied retroactively and providing guidance on how to apply Prong B of the ABC test. The next day, California’s wage and hour enforcement agency, the Division of Labor Standards Enforcement (“DLSE”), issued an opinion letter further expanding Dynamex’s reach by opining that the ABC test applies to claims for “waiting time penalties” under Labor Code section 203 and for reimbursement under Labor Code section 2802. On May 30, 2019, the California State Assembly passed A.B. 5, which seeks to codify Dynamex and, with the exception of certain specified professions, requires that the ABC test be used in determining the status of workers with respect to all provisions of the Labor Code and Unemployment Insurance Code, rather than solely for the IWC Wage Order requirements, unless another definition or specification of “employee” is provided. The bill will need to be passed by the California Senate.
By contrast, the US Department of Labor (“DOL”) and the National Labor Relations Board (“NLRB” or “Board”), applying a less stringent standard, recently found workers in the gig economy to have been properly classified as independent contractors, not employees, under the Fair Labor Standards Act (“FLSA”) and the National Labor Relations Act (“NLRA”).
The Ninth Circuit’s Decision in Vazquez
In 2008, a putative class action was filed by janitor-franchisees of Jan-Pro Franchising International, Inc. (“Jan-Pro”), an international janitorial cleaning business. The plaintiffs alleged that Jan-Pro had developed a “threetier” franchising model to avoid paying janitors minimum wages and overtime compensation by misclassifying them as independent contractors. In May 2017, a California district court granted summary judgment for Jan-Pro, concluding that the individuals performing the cleaning services were independent contractors. The plaintiffs appealed. While the appeal was pending, the California Supreme Court issued Dynamex, in which it adopted the narrower ABC test for determining worker classification.