California Court of Appeal Provides Further Clarity on Scope of Dynamex

Ever since the California Supreme Court issued its groundbreaking decision in Dynamex Operations W., Inc. v. Superior Ct., 4 Cal. 5th 903 (2018), we have been monitoring its application by the lower courts. On October 8, 2019, the California Court of Appeal issued two decisions clarifying the scope of Dynamex. The outcome is a mixed bag for employers.

The first decision, Gonzales v. San Gabriel Transit, Inc., B282377, significantly expands the scope of Dynamex in two ways. First, the court held that Dynamex applies retroactively, meaning that its holding applies to pending litigation that arose before Dynamex was decided. As we previously reported on May 2, 2019 and July 24, 2019, the Ninth Circuit has struggled with whether Dynamex applies retroactively and has certified the question to the California Supreme Court. For the time being, Gonzales is binding law in the California state courts.

Second, Gonzales also broadened Dynamex‘s reach by holding that it applies not only to determine employee status under the IWC Wage Orders, but also to “Labor Code claims which are either rooted in one or more wage orders, or predicated on conduct alleged to have violated a wage order.” As we previously reported, AB 5 already applies Dynamex to Labor Code claims going forward. But because of its retroactivity holding, the Gonzales decision has important ramifications for pending wage-and-hour cases and those claims that accrue prior to January 1, 2020.

The second decision, Henderson v. Equilon Enterprises, LLC, A151626, is, by contrast, a positive development for employers. The Court of Appeal held, for the second time, that Dynamex does not apply to the question whether entities are joint employers. Rather, the applicable test remains the one set forth in Martinez v. Combs, 49 Cal. 4th 35 (2010). These two decisions from the California Court of Appeal, along with the Ninth Circuit’s recent decision in Salazar v. McDonald’s Corp., No. 17-15673 (9th Cir. Oct. 1, 2019), show a clear trend towards insulating joint-employer questions from Dynamex.

WHAT EMPLOYERS SHOULD KNOW

It is no secret that Dynamex and AB 5 mark a sea change for California employers. Classifying workers as independent contractors has become increasingly difficult and immensely complex. We will continue to monitor and report on relevant updates. 

Contact Payne & Fears LLP if you have any questions, would like to discuss how these decisions impact your business or want guidance on complying with AB 5 going forward.