California Supreme Court rules 'ABC' independent contractor test applies retroactively

In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court created a presumption that a worker who performs services for a company is an employee for purposes of wages and benefits arising under the wage orders issued by the Industrial Welfare Commission. The ruling requires an employer to satisfy a three-part test—commonly known as the "ABC" test—to establish that a worker is an independent contractor. At the request of the U.S. 9th Circuit Court of Appeals (whose rulings apply to all California employers), the California Supreme Court agreed to decide whether Dynamex applies retroactively.

Dynamex applies retroactively to all nonfinal cases

In Dynamex, the California Supreme Court faced this question: What standard applies in determining whether, for purposes of the obligations imposed by California's wage orders, a worker is an employee or an independent contractor? All wage orders define "employ" to mean "suffer or permit to work" and define "employee" to mean "any person employed by an employer." The wage orders don't contain a definition of the term "independent contractor" or any other provision that addresses the distinction between employees and independent contractors.

Ultimately, the high court concluded in Dynamex: