California Appeals Court Rules Dynamex is Retroactive
As is already well known, The trucking world was turned upside down April 30, 2018 when the California Supreme Court handed down Dynamex Operations West, Inc. v. Superior Court. 4 Cal.5th 903 (2018) and gave California the gift of the “ABC Test”.
Unless you can borrow Doc Brown’s Delorean or the Star Trek transporter, you’ve got problems.
OK, I’ll concede that time travel doesn’t exist, but that hasn’t stopped some courts from going back in time and stating the law that was the law then is no longer the case, and that even though you were acting legally at the time, we have now decided that you were acting illegally and are now in trouble. I’ll expand on this more in a minute, but that is the gist of retroactively applying the “ABC Test” to conduct that was governed by the Borello Multi-factor test at the time the conduct occurred.
A Quick Refresher on the ABC Test.
In an astonishing move that took most people in the industry and their legal counsel by surprise, in 2018 the CA Supreme Court shit canned a long-standing multi factor test which had been applied to determine if a worker was an employee or an independent contractor. As most of my readers know, the California Supreme Court threw out the Borello factor test and declared the “ABC Test” as the new determinant of who is independent and who is an employee. An unsettled question was whether the ABC test applies retroactively, and would conduct which took place prior to the Dynamex decision still be determined by the old Borello standard.
On October 8, 2019, the California court of appeals handed down a ruling in Gonzales v. San Gabriel Transit, Inc. and stated that the ABC test is to be applied retroactively to pending litigation. So, if you are being sued for alleged wage and hour claims for conduct that occurred before the ABC test became law, you will no longer be able to claim that you were simply following the law. You are right if you think this is incredibly unfair. For years, I would advise clients on whether they were compliant with the law in their use of independent contractors based on my analysis using the Borello multi factor test. Now, the court comes along and says that that doesn’t matter, that really was never the law anyways, and you are now guilty of misconduct for conduct that was legal at the time. Yeah, how’s that for a kick in the nuts?
Now, to be fair to the court, the court made it clear that the ABC test applies to labor code claims which are “rooted in one or more wage orders, or predicated on conduct alleged in one or more wage orders.” As far as other labor code claims are concerned, the court stated that the Borello multi-factor test still applies.
As most of you know, under the “ABC test,” independent contractors are considered employees unless an employer established the following three factors:
A. That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, and
B. That the worker performs work that is 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 performed.
And as most of you know, its the B prong that screws over trucking companies using Owner-Operators. Dynamex, however, did not address whether the ABC Test would apply retroactively to older claims or prospectively. That is why the Gonzales case could have far reaching impact.
The Implications Of the Gonzales Case.
Because of the Gonzales decision, trucking companies who relied on the Borello standard for classification of their independent contractors prior to the dynamics decision may have some liability exposure.
But hold your horses.
In another case at the United States Court of Appeals for the Ninth Circuit, Vasquez v. Jan-Pro Franchising International, Inc. initially ruled that the Dynamex ABC test applies retroactively. In Jan-Pro, the Ninth Circuit held that even though the California Supreme Court decided Dynamex after the trial court granted Jan-Pro’s motion for summary judgment, the Dynamex standard must be applied retroactively. However, the ninth circuit withdrew that decision and punted the matter of the retroactivity of Dynamex to the California supreme court for a formal opinion. As of the writing of this article, that issue is still pending, and if the California Supreme Court rules otherwise, the Gonzales decision may be short lived and overturned soon. But until it is, it is clear that California courts are leaning toward the retroactive application of Dynamex and the ABC Test.
However, The recently passed AB5 contains retroactive language, and states that the ABC test should be applied retroactively.
Are you still here?
When people come to my office wanting advice on how to start a trucking company in California, my first instinct is to Google “Psychiatrists” and politely, but firmly, tell them they are crazy. Despite this advice being adverse to my own interests, I regularly advise trucking companies to do what they do anywhere but California – and maybe Massachusetts as well which is a special cauldron of hell where Satan himself actually concocted the ABC Test. If you can do what you do outside of California, you can leave this bullshit behind.
While the politicians – and in California, what I really mean is the Democrat powerhouse – want you to think that AB5 was necessary to protect the poor, powerless and abused truck driver, the reality is that by eliminating independent contractors, the state can collect more taxes, and the unions can collect more dues, and the trial attorneys can squeeze you for huge legal fees. The ultimate irony is that the owner operators who went out, secured financing for their own rig, purchased a rig with the hope of using that investment to make money, are completely screwed and deprived of true entrepreneurial opportunity. Now, they are forced to be an employee in California and have to be asking themselves “Why in the hell did I buy this truck and trailer if I’m simply going to be another company driver?” Good question, and the answer is that the collection of taxes, union dues, and plaintiffs’ lawyer legal fees are simply much more important.
Most bonafide owner operators that I’ve come in contact with are happy with the status quo, and enjoy the freedom of being independent, being able to make more money than a company driver, and having more choices regarding their work. But the politicians would have you believe that all independent contractors are abused individuals who get stuck into some impossible lease purchase scheme, where the evil Trucking Co. takes advantage of them until they can’t any further and then throws their dying body to the side of the road, and then turns around to put another sucker in the truck. But this is nothing more than the tired script used by the politicians and their lackeys ,the unions and plaintiffs’ bar, to crush an entire business model that put food on the table and kept the lights on in houses across the state. AB5 has nothing to do with protecting the true, bonafide owner operator, but has everything to do with the Democrats protecting their interests and the interests of their biggest supporters, the unions and trial lawyers. Quite frankly, I hope Uber and Lyft are successful in their proposed 2020 referendum to overturn AB5. That should stop the pathological salivating and drooling of the welfare alchemists who fabricated the abomination known as AB5.
My Bitching Is Fun, But Not Really Helpful.
Venting provides relief, if only temporary, but AB5 is just over 2 months from becoming reality. Trust me, the State and Plaintiff’s lawyers are going rain down hell upon trucking companies that use ICs come January 1. And remember – because of how the Labor Code is written in California – Owners, Directors and Officers of trucking companies can be held personally liable for Labor Code violations – that’s right – and after they take everything you have, you will be left for dead on the side of the road. But take heart – then you’ll be eligible for MediCal benefits.