On Thursday the California Supreme Court ruled that the “ABC” test for finding independent contractors and workers under the AB 5 law is now to be considered retroactive.
Under AB 5, the ABC test, first clarified in the 2018 Dynamex ruling, workers must answer yes to being “free from the control and direction of the hiring entity in connection with the work’s performance,” must do work that is not usual in the business, and must have an independently established job that is being done under the work being done for the business. If a worker doesn’t fall under all three, they are to be considered an employee and not an independent contractor, opening them to full benefits and pay as an employee of the company.
The ABC test was brought under fire in 2020, with AB 5 itself being considerably weakened by having many initial businesses being covered under the new law being exempt. The biggest blow to AB 5 came in November when Proposition 22 was passed by voters of California and subsequently made all rideshare companies exempt from the law.
Since then, many groups have been trying to overturn Prop 22 in court. However, despite the worker classification itself being the major issue, the controversy over the ABC test continued on in the state Supreme Court.
Thursday’s case brought to the state Supreme Court by workers of Jan-Pro Franchising International against the company, was ultimately decided to be in the workers favor. Despite the weakening of AB 5 and the passage of Prop 22, workers can now continue to sue companies from being wronged by the ABC all the way back to cases in 2018, with companies remaining liable for any violations made since then.
“In light of the general rule of retroactivity of judicial decisions and the fundamental importance of the protections afforded by the state’s wage orders, we find no compelling justification for denying workers included in such lawsuits the benefit of the standard set forth in
Dynamex,” explained Chief Justice Tani Cantil-Sakauye.
Law experts noted the importance of the passage on Thursday.
“This is pretty big, and it is probably making companies like Lyft and DoorDash nervous tonight,” former business attorney Mel Greenburg told the Globe. “What happened was that the test is now retroactive, meaning that any cases where prior rulings or exemptions were given, like Prop 22, it is all clear for them. So if a company unfairly put down an employee as a contractor instead of an employee, say, in April 2019, against what the ABC test said to do, they are liable. So, say for rideshare companies, nothing now protects them for lawsuits if such a thing happened between the time the ABC test was made legal to when Prop 22 came into effect. It’s a big window.”
It is unknown as of Thursday if the case will be appealed to a higher court.