AB 5 Update: Joint Employment, Retroactivity, and Implementation Challenges


From Lexology, James A. Paretti, Jr.Bruce J. SarchetMichael J. Lotito and Patrick Colin Stokes discuss recent California cases that address joint employment and retroactivity of the ABC test under Dynamex. The write:

Joint Employer Status. On October 8, 2019, the California Appeals Court for the First Appellate District held that Dynamex is limited in its application to whether a worker is misclassified as an independent contractor, and is not intended as a broad test of “joint employment” for purposes of wage law liability. In Henderson v. Equilon Enterprises LLC, the court examined whether the multi-national owner of gasoline stations worldwide was the “joint employer” of a station manager employed by the gas station’s operator. The court rejected the application of Dynamex, concluding that the case “does not fit analytically and was not intended to apply to claims of joint employer liability.” As the court explained in its decision, at bottom, Dynamex was intended to address misclassification of workers as independent contractors, and the policy concern that misclassified workers are unprotected under state wage and hour laws, while “good actors” that properly classify their workers as employees are put at a competitive disadvantage. Where, as here, there was no dispute that the station manager was a statutory employee of the gas station operator (and thus already protected under state law), those policy concerns were not at issue, and the application of Dynamex would be inappropriate. Given these facts, the court found the appropriate analysis to be the traditional, and more time-tested, approaches for determining joint employer status.

Retroactivity. On the same day, the Court of Appeals for California’s Second Appellate District became the second court to analyze whether the Dynamex decision is retroactive and conclude that it is.1 In Gonzales v. San Gabriel Transit, Inc., the appeals court determined that Dynamex applied retroactively to claims by drivers for a transportation company that they were misclassified as independent contractors and thus entitled to damages under state wage and hour laws. The court remanded the case to the lower court to determine which of the numerous wage and hour claims brought by plaintiffs were cognizable under Dynamex and subject retroactively to the ABC test. Earlier this year, the U.S. Court of Appeals for the Ninth Circuit became the first court to hold that Dynamex applied retroactively, causing confusion and much consternation for employers state-wide. The Ninth Circuit subsequently withdrew its opinion, and instead asked the Supreme Court of California to decide whether Dynamex applies retroactively, or is prospective in application only. The question is currently certified to the state supreme court, which is not required to provide an answer, but is widely expected to do so. AB 5 also purports to answer the question of retroactivity, indicating that new obligations are effective prospectively, but the exceptions to the ABC test apply retroactively.

Read the full story at AB 5 Update: Joint Employment, Retroactivity, and Implementation Challenges – Lexology

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