New Dynamex retroactivity ruling could affect high court

The 2nd District of Court of Appeal's ruling that 2018's Dynamex decision should apply retroactively to wage and hour orders could have major implications with the state Supreme Court, experts said Thursday.

Most notably, it could lay the groundwork to answer the question of whether the decision in Dynamex Operations West v. Superior Court, 2018 DJDAR 3856 could be used retroactively in all labor disputes.

The state high court is mulling the question after the 9th U.S. Circuit Court of Appeals answered, then retracted, its opinion last month that it does apply in Vazquez v. Jan-Pro Franchising International, 2019 DJDAR 3707.

In its retraction, the federal appellate court said it would abide by any decision the California Supreme Court makes if "it agrees to decide this question," according its published order.

The 2nd District's decision Tuesday in Gonzales v. San Gabriel Transit could go toward making the high court's decision that much easier. The appellate court reversed and remanded the case back to Los Angeles County Superior Court after ruling the employee-presumptive, three-prong "ABC" test in Dynamex is "retroactively applicable to pending litigation on wage and hour claims."

The test also applies to California Labor Code claims seeking enforcement of "wage order provisions" protections and misclassification claims that don't directly fall under those protections, the published order reads. Gonzales v. San Gabriel Transit, B282377 (Cal. App. 2nd Dist., filed May 1, 2017).

According to court records, named plaintiff Francisco Gonzales alleged he and a class of drivers working for San Gabriel Transit were misclassified as independent contractors. Filed in 2014, the suit claimed the company failed to pay minimum wage, overtime, and meal and rest breaks, among other wage and hour violations, court documents show.

"It's a positive sign for workers that a California appellate court is retroactively applying Dynamex," said Louis Benowitz, a partner at Smith & Benowitz APC in Sherman Oaks not involved in the matter. "While nobody should bank on predicting what the California Supreme Court will do, another well-reasoned decision on the issue helps build the case that Dynamex retroactivity should be the consensus view."

Brian Kabateck of Kabateck LLP took it a step further, calling the ruling a "no-brainer" and saying the ruling could help "fast track" the state Supreme Court's decision to resolve and clarify the retroactivity question.

"They'll probably see both the 9th Circuit question and the 2nd DCA's opinion as an avenue to grab this and resolve it quickly," Kabateck said.

But the recent passing of Assembly Bill 5, which codifies the Dynamex "ABC" test, almost makes the 2nd District's decision moot, said Tao Leung, head of Hogan Lovells' California labor and employment practice. Becoming law Jan. 1, AB 5 amends the Labor Code, rendering Gonzales ineffective as a case citation for misclassification, he said.

The same goes for the retroactivity, Leung said. Right now under Gonzales, the Dynamex test only applies retroactively to pending lawsuits.

"If you hadn't filed a lawsuit, at least as of the date of this ruling, then arguably you won't be able to retroactively apply Dynamex," Leung said. "Once AB 5 becomes effective, you could because it's broader than this decision."

Where Gonzales leaves the door open for further review lies in how its ruling "stretches" the ABC test's application to equally cover the Labor Code as equally as wage order provisions, Leung said. That could become problematic considering the two don't always align, such as with itemized wage statements.

"Labor Code [Section] 226 has nine different requirements that need to be on a wage statement, but the wage order has five requirements," Leung said. "It doesn't mirror what's contained in the Labor Code in terms of what's required on a wage statement."