Why This Matters
The Ninth Circuit Court of Appeals recently remanded a case, Haitayan v. 7-Eleven, Inc., to the federal district court to reconsider its ruling in light of the California Supreme Court’s decision in Dynamex Operations West, Inc. v. Superior Court. The Dynamex Court adopted a new standard to determine whether workers are employees or independent contractors. This standard presumes that workers are employees unless they meet all three factors of what the Court called the ABC test. While Haitayan is an unpublished decision, meaning it is not precedential, it does demonstrate Dynamex’s continuing reach, this time all the way up to the Ninth Circuit. Given Dynamex’s broad impact on employers (see our previous discussions here and here), its trajectory is notable.
In Haitayan, the federal district court dismissed two lawsuits by 7-Eleven franchisees that were based on claims that they were employees, not independent contractors. In the first lawsuit, the franchisees claimed their classification as independent contractors violated the Fair Labor Standards Act. In the second, they sought to enjoin implementation of 7-Eleven’s franchise renewal agreement, which required them to release their claims in the first suit. The district court granted 7-Eleven judgment on the pleadings.
The Ninth Circuit, in a per curium opinion, held that the district court erred as to the first suit because it did not consider the plausibility of the franchisees’ claims. The Court also noted that, following the district court’s entry of judgment, the California Supreme Court decided Dynamex. The Ninth Circuit advised the district court that it was currently considering the application of Dynamex to franchisees in Vazquez v. Jan-Pro Franchising Int’l Inc., No. 17-16096, argued December 18, 2018. The Ninth Circuit also advised that, to the extent appropriate, proceedings in the district court may be stayed pending the decision in Vazquez. With respect to the second lawsuit, the Court held, in part, that the district court erred by failing to consider whether California’s prohibition against waivers of wage and hour claims by contract applied.
As demonstrated by the foregoing, businesses are still reeling from the impact of Dynamex, which unfortunately has cast a wide net to preclude arms-length service agreements at a time when workers and businesses alike want to pursue opportunities for more flexible working arrangements.
Employers who have questions regarding this client alert, or who generally want to consult with legal counsel regarding the employee status of persons hired as independent contractors can contact any one of our labor and employment lawyers at MSK.