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Appeals Court Rescinds Its Dynamex Rling

SAN FRANCISCO, CA, July 23 2019 -- The Ninth U.S. Circuit Court of Appeals has taken the usual step of rescinding one of its own decisions—a determination in May that the California Supreme Court’s Dynamex decision should be applied retroactively—and asking the California Supreme Court itself decide the retroactivity issue.

The Dynamex decision, issued 4/30/18, dramatically changed state law on independent contractors.   The California Supreme Court effectively threw out traditional rules and adopted a new “ABC test,” in which employers are required to prove:

A)    That the worker is free from the control and direction of the hirer in the performance of the work; and

B)    That the worker performs work outside the usual course of the hiring entity’s business; and

C)    That the worker is customarily engaged in an independently-established trade, occupation or business of the same nature as the work being performed for the hiring entity.

In May 2019, Ninth U.S. Circuit Court of Appeals ruled, in Vazquez v Jan-Pro Franchising, that the Dynamex ruling should  be applied retroactively.  It justified its ruling by noting that court decisions interpreting the law are customarily given retroactive effect, and that the California Supreme Court had declined a request to modify its Dynamex to clarify that it applied only prospectively.

In an order released this week, the federal appellate court rescinded its retroactivity ruling.   Nothing in that order requires the California Supreme Court to decide the issue, however.

Meanwhile, the Legislature continues to deliberate on AB 5, a bill that would codify the Dynamex ruling, but also add numerous exemptions—including one for persons and organizations licensed to transact insurance in California.  That bill has been approved by the full Assembly, and will be heard in the Senate Appropriations Committee on Aug. 12, when the Legislature reconvenes from its Summer recess.