Last year, we questioned whether California’s new restrictions on independent contractors would apply retroactively. Yesterday, the Ninth Circuit decided that the landmark ruling in Dynamex Operations West, Inc. v. Superior Court should be applied retroactively.
The new test established in Dynamex upended the Borello test, a multi-factor test that had been in use since 1989. The “ABC test” established in Dynamex makes it much harder for a hirer to classify a worker as an independent contractor, requiring the hirer to prove that the worker is: a) free from the control and direction of the hirer; b) the worker performs work outside of the usual course of the hirer’s business; and c) the worker is customarily engaged in an independently established trade of the same nature as the work performed. With the Ninth Circuit holding that Dynamex should be applied retroactively, an employer must now face the possibility that its once valid and correct classification of a worker is now improper.
Generally, judicial decisions are given retroactive effect. It has been an open question as to whether the Supreme Court’s Dynamex test would apply retroactively after the Supreme Court denied a petition for rehearing to consider that very issue. Considering the magnitude of this decision, employers should not only make sure that new workers are classified correctly according to Dynamex, but should revisit existing independent contractor agreements to verify they conform to the standards established by Dynamex.