Dynamic Dynamex: 9th Circuit Applies Dynamex’ New Test Retroactively

In April 2018, the fallout from the Ninth Circuit’s Decision in Dynamex v. Superior Court quickly proliferated, as the decision upended decades worth of legal precedent that had provided the grounds to determine whether a worker was an independent contractor or an employee. The April 2018 decision not only eliminated what most would consider a flexible legal test, but also placed the onus on businesses to prove that a worker is not an employee under its new three-option test. Those prongs are:

  1. The worker is free from the control and direction of the hirer in connection with the performance of the work;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The work is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

On May 2, 2019, the Federal Appeals Court injected further grounds for legal issues that businesses must now deal with – despite the fact that the new test did not apply to businesses until its articulation in April 2018, the Court ruled that the test shall be retroactively applied. The Court deemed that the April 2018 ruling constituted a “clarification rather than a departure from established law” and was “remedial” in nature.

The opinion arrived after Dynamex filed a petition for review, challenging the Court of Appeal’s conclusion that the wage order definitions of “employ” and “employer” that the Court of Appeal applied are applicable to the question of whether a worker is properly considered an employee or an independent contractor for purposes of the obligations imposed by an applicable wage order.

The holding emphasized the utility of the broad standard, noting that “the suffer or permit to work standard is relevant and significant in assessing the scope of the category of workers that the wage order was intended to protect.” The Federal Appeals Court detailed that “adoption of the exceptionally broad suffer or permit to work standard in California wage orders finds its justification in the fundamental purposes and necessity of the minimum wage and maximum hour legislation in which the standard has traditionally been embodied.”

This ruling creates the need for immediate attention from businesses that utilize independent contractors, as many validly created independent contractor relationships now face heightened scrutiny under the new test, especially given the new test’s imposition of the burden of proof on businesses.

This ruling will impact litigation that is still pending regarding classification issues and may even apply to cases that have already been decided.

Phillip Stephan is an experienced litigator, and also has transactional experience with entrepreneurs and established companies. He is an Associate Attorney at Neil, Dymott, Frank, McCabe & Hudson, APLC.

**This article is for information purposes only and does not contain or convey legal advice. The information herein should not be relied upon in regard to any particular facts or circumstances without first consulting an attorney. Any views expressed are those of the author only and not of the SDCBA or its Business & Corporate Law Section.**