California Supreme Court Finds Dynamex Applies Retroactively
In a ruling issued earlier this month in Gerardo Vasquez v. Jan-Pro Franchising International, Inc., the California Supreme Court found that its decision in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903 applies retroactively. This means that it applies to all cases not yet final as of the date the decision in Dynamex became final – April 30, 2018.
So what does this mean as a practical matter? For most employers, this should have little to no effect moving forward as, unless they have been granted an exception under AB 5 (more on this below), they have already been required to operate consistent with Dynamex for almost three years now. As such, this recent ruling from the California Supreme Court should only affect the relatively small subset of employers who were being investigated, audited, or in litigation that commenced prior to April 30, 2018 and was still in progress as of April 30, 2018.
However, for this subset of employers, this means that all of their employment practices under investigation as of April 30, 2018 will be evaluated under the standards of Dynamex as opposed to Borello. In so ruling, the Court rejected the argument that it would be unfair to be evaluated under Dynamex as opposed to Borello despite the (reasonable) belief that Borello was the appropriate standard prior to April 30, 2018. This in turn means that it is highly likely that most borderline employee vs. independent contractor cases that were ongoing as of April 30, 2018 will result in a finding of employment status.
So what about current employers that are not currently the subject of an audit, investigation, or litigation? With the passage of AB-2257, which created numerous exceptions to AB-5 in which Borello is applied instead of Dynamex, and the more recent passage of Prop 22, which curtailed AB-5 with respect to its primary goal of regulating Uber, Lyft, and other gig economy companies, the ironic effect of AB-5 is that Dynamex no longer applies to many of the more borderline situations of employee vs. independent contractor. As a result of the revived importance of Borello, the impact of Dynamex has significantly waned since 2018 and thus the overall impact of Vasquez should be minimal.
From all of us at BKN, we hope that you remain safe and well during these challenging times. If we can be of assistance with respect to this or any other matter, please do not hesitate to contact us at any time.