More than a decade ago, a group of janitors filed a misclassification lawsuit, alleging that they were incorrectly classified as contractors under a three-tiered franchising model. In 2019, the U.S. Court of Appeals for the Ninth Circuit held that the ABC test applied retroactively in the Vazquez lawsuit.
The janitors purchase a franchise from Jan-Pro Franchising International and either hire workers or perform the work themselves. Because they aren’t classified as employees, they don’t receive benefits such as health insurance, minimum wage, and overtime pay.
The majority of janitorial workers in California are Latinx and immigrants working for low pay, in hazardous conditions, and in an industry where wage theft and other illegal conduct is endemic. “These types of misclassification schemes further degrade workplace standards in the janitorial industry and impose obstacles to employer accountability for labor violations,” Laura Padin, senior staff attorney with the National Employment Law Project told Bloomberg Law.
The janitors’ attorney, Shannon Liss-Riordan, told the justices that retroactive application was appropriate because the Dynamex ruling laid down a classification test that built on earlier rulings, rather than assembling a new standard out of whole cloth. According to Law360, Liss-Riordan said the Dynamex decision “was this court's decision in the evolution of the very important question about what standard should apply to determine when workers should be properly classified as employees and when they can be classified as independent contractors.”
Dynamex ABC Test
In 2018, stemming from the Dynamex Operations West, Inc. lawsuit, the California Supreme Court adopted the “ABC Test” for determining whether an individual is an employee or independent contractor under the state Industrial Welfare Commission Wage Orders. While this decision changed the standards in California for the classification of workers as independent contractors, it didn’t go so far as to address whether the decision would apply retroactively to independent contractor classification decisions made prior to the case being decided.
The ABC test requires a company to clear three hurdles to determine workers as independent contractors and disprove employment status:
- that the worker is free from the control of the hiring entity in connection with work performance – both under the performance contract and in fact;
- that the worker performs work outside the hiring entity’s usual business;
- that the worker is customarily engaged in an independent business of the same nature as the work performed.
While AB 5 specifically states that certain aspects of the law apply retroactively, the decision in Vasquez could affect the retroactive application of AB 5 as well, reported the National Law Review (October 26).
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The U.S. Chamber of Commerce and other business groups fear that interpreting the ABC test to reach back before the 2018 Dynamex decision would make employers liable for a host of costs associated with classification issues, such as years of back wages. That could mean a flood of lawsuits from workers dating back years before the ruling.
The case Vazquez v. Jan-Pro Franchising Int’l, Cal., No. S258191, oral argument 11/3/20.