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Calif. decision on contractors steers federal appeals ruling


A 2018 California Supreme Court ruling that gave companies that hire independent contractors a test to gauge whether an individual is an employee or contractor must be applied retroactively, according to a federal appeals court ruling issued Thursday.

Shedding light on California’s ruling in Dynamex Operations West Inc. v. Superior Court of Los Angeles County, a panel of federal judges with the 9th U.S. Circuit Court of Appeals ruled that an employer’s due process for deciding whether a contractor is an employee, and thus subject to laws protecting employees, must be fulfilled, according to Gerardo Vazquez, Gloria Roman, and Juan Aquilar v. Jan-Pro Franchising International Inc., filed in San Francisco.

The latest suit was filed in Massachusetts District Court in 2008 by three janitors — one from Massachusetts, two from Pennsylvania — claiming that Jan-Pro, a major international janitorial cleaning business, had developed a “sophisticated” “three-tier” franchising model to avoid paying its janitors minimum wages and overtime compensation by misclassifying them as independent contractors, according to court documents.

The Dynamex case, meanwhile, stems from two individual delivery drivers who sued package-and-document delivery company Dynamex Operations West Inc., alleging that the company had misclassified its delivery drivers as independent contractors rather than employees, thus violating California wage and worker laws, according to documents in the California Supreme Court ruling.

The unanimous decision in California defined an independent contractor as a “worker (that) 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.” The ruling puts other requirements in place for a company to classify a worker as an independent contractor: “That the worker performs work that is outside the usual course of the hiring entity’s business” and “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.”

The federal appeals court ruling, vacating an earlier dismissal of the complaint and also unanimous, remanded the issue back to the lower district court, with instructions to follow the test issued in the Dynamex ruling: “We hold that the test does apply, vacate the lower court’s grant of summary judgment dismissing the complaint, and remand for further proceedings consistent with this opinion.”

Plaintiff’s attorney Shannon Liss-Riordan, of Lichten & Liss-Riordan PC in Boston, said the decision “should help thousands of cleaning workers throughout California, many of whom are immigrants, who have been exploited by a host of national cleaning companies.” 

“These companies claim they are offering workers a chance to start their own business, but what they are really doing is selling them low-paid cleaning work,” she wrote in an email to Business Insurance. “The workers pay thousands of dollars for a ‘franchise’ when what they are really buying is the right to clean office buildings for these companies.”

Defense attorney Jeffrey M. Rosin, of O’Hagan Meyer PLLC in Boston, called the ruling an “unfair situation.”

“Jan-Pro Franchising International intends to Petition for Rehearing on an issue of fact and law it does not believe was decided and that is of critical importance to the case and its unique procedural history, as well as other cases,” he wrote in an email to Business Insurance. “JPI is disappointed the 9th Circuit did not affirm on appeal, but will return to District Court to present its arguments, and evaluate whether it will ask the District Court to certify any questions to the California Supreme Court.”

Officials with Jan-Pro could not immediately be reached for comment.





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