The California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court continues to change the legal landscape. On May 2, 2019, the 9th Circuit Court of Appeal revived a decade old lawsuit, Vazquez v. Jan-Pro Franchising Int’l., applying Dynamex’s ABC test retroactively and dismissing substantial due process concerns. While dismissing the defendant’s arguments against retroactive application, the 9th Circuit went on to render an extremely employee-friendly decision, solidifying two key points: first, the ABC test is broadly applicable to cases involving California’s wage orders; and second, the court laid out – over ten pages of its decision – a roadmap to holding employers liable under the ABC test.
California employers should take notice of the breadth and scope of this decision. The 9th Circuit did not ultimately apply the ABC test to the merits in Vazquez, choosing to leave that task to the Northern District of California. But where it fell short of ruling on the merits, the 9th Circuit made clear that the ABC test is treacherous, invasive, and “extremely broad.”
The breadth of the decision is unmistakable when you consider the distance between the plaintiffs and their alleged employer under the three-tier franchise system at issue. Under this system, a company (the top tier) may contract with franchisees, who in turn contract with subsequent, or “unit” franchises. The 9th Circuit believes the ABC test is broad enough to find independent contractors of the unit franchise are actually employees of the top tier company. (Is it just me, or does this sound like the employment law version of 6 degrees of separation?)
As if this wasn’t enough, the Court went on to offer “observations and guidance” – to the tune of ten pages – discussing how “Prong B of the ABC Test May Be the One Most Susceptible to Summary Judgment,” and laying out three theories upon which a plaintiff may successfully satisfy this prong: (1) is the contractor’s business necessary or incidental to the company’s core business; (2) is the contractor’s work continuously performed for the hiring entity; and (3) what business the hiring entity claims to be in. This is essentially a roadmap to fundamentally altering the relationship of millions of California’s independent contractors, and significantly expanding the definition of “employment.”
Vazquez is overtly employee-friendly, but it is not without a silver lining. Where plaintiffs may use Vazquez as a roadmap to manufacturing litigation, employers can use it as a roadmap to escape. Employers should carefully check agreements with their contractors against the ABC test, including the three Prong B tests discussed in Vazquez, to ensure they are properly classifying employees. Just keep your eyes on the road.