Retroactive Self-Employed Proof, California Supreme Court Rules

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The California Supreme Court ruled Thursday that the test the state adopted to determine the classification of workers is retroactive, which could have big implications for gig companies like Uber Technologies Inc. and Lyft Inc. The “ABC test” was determined in the state Supreme Court decision in 2018, called Dynamex, and was later codified in Assembly Bill 5, which became law in 2020. Based on the test, workers can be considered independent contractors only if they control their work; if their functions are outside the scope of the normal business of a company; and if they have an independent business doing that work.

AB 5 led to Proposition 22 as Uber UBER, -4.19%, Lyft LYFT, -2.08% and others sought to exempt themselves from having to treat their drivers and delivery workers as employees. Prop. 22 was approved by 58% of California voters in November, but not before a state appeals court upheld a decision ordering Uber and Lyft to comply with AB 5. See: Uber and were asked Lyft to classify drivers as employees. facing other worker classification lawsuits in the state and elsewhere, and according to Thursday’s ruling, which applies to cases that had not been resolved before the Dynamex ruling in April 2018, could face liability if they lose those cases. Thursday’s ruling was in response to a case brought by the workers against Jan-Pro Franchising International, Inc. Chief Justice Tani Cantil-Sakauye wrote that “in light of the general rule of retroactivity for court decisions and the fundamental importance of the protections granted by the [state’s] wage orders, we found no compelling justification for denying workers included in such lawsuits the benefit of the standard set at Dynamex. “Instacart did not comment Thursday, while Uber, Lyft and DoorDash Inc. DASH, + 4.67% have not responded. requests for comments.