Workers Comp

Independent contractor test applies retroactively

Angela Childers

January 20, 2021 Reprints

Workers Comp Coverage More + Less -

The California Supreme Court held in a decision Thursday that the test to determine whether workers are employees or independent contractors applies retroactively.

In Vazquez v. Jan-Pro Franchising International Inc., the court answered a question left unanswered by the April 2018 Dynamex Ops. W. Inc. v. Superior Court case, which established a new test for determining whether workers were independent contractors or employees under state law.

In May 2019, the 9th U.S. Circuit Court of Appeals held in Vazquez v. Jan-Pro Franchising Intl. that Dynamex was retroactive, making employers who misclassify workers responsible for California Labor Code obligations such as overtime, minimum wage, reporting time pay, record-keeping, business expense reimbursement, meal and rest periods.

The California Supreme Court agreed to hear the case, stating that it would not depart “from the general rule that judicial decision are given retroactive effect.”

Under Dynamex, an employer must establish each of the following to show a worker is an independent contractor: (A) The worker is free from the control and direction of the hiring entity in connection with performance and in fact; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is engaged in an independently established trade, occupation or business of the same nature as the work performed.

Jan-Pro argued that the court should make an exception to the general rule of retroactivity because it “could not have anticipated that the distinction between employees and independent contractors for purposes of the obligations imposed by a wage order would be governed by the ABC test,” but the court dismissed the argument, concluding that Dynamex applied retroactively to all cases not yet final as of the date of the Dynamex decision.