Dive Brief:

• A district court was wrong to conclude that technicians who install DirecTV satellite systems are DirecTV employees as a matter of law, the 9th U.S. Circuit Court of Appeals ruled (Lasater v. DirecTV, LLC, No. 17-56863 (9th Cir. July 2, 2019)).
• The technicians are paid by third parties who contract with DirecTV for the installations, and the technicians have "substantial control over the performance of work orders," the 9th Circuit said. Additionally, DirecTV does not control the technicians' compensation or determine whether they are hired or fired. 
• Because a reasonable jury could find that the technicians were independent contractors or employees of only the third parties, the 9th Circuit vacated and remanded the district court's ruling. Additionally, because the 9th Circuit had previously ruled that the new Dynamex test for determining independent contractor status under state law applies retroactively, the 9th Circuit vacated the ruling on the state law claims so the district court could evaluate them under the Dynamex standard.

Dive Insight:

The California Supreme Court decided Dynamex on April 30, 2018, and the ruling strongly favors a finding of employee status.

The new "ABC test" allows a worker to be classified as an independent contractor, if no state wage order applies, only if the entity hiring the worker is able to show all three of the following: (A) The worker is free from the control and direction of the hiring party in connection with the performance of the work, (B) the work is outside the usual course of the business of the hiring entity, and (C) the worker has an independently established business that regularly performs the same type of work he or she was hired to do.

In May, the 9th Circuit ruled that applying the Dynamex test retroactively was consistent with due process because judicial decisions tend to operate retrospectively, while statutes tend to operate prospectively. Additionally, said the 9th Circuit, the "California Supreme Court embraced the ABC test and found it to be 'faithful' to the history of California’s employment classification law 'and to the fundamental purpose of the wage orders.'"

From a practical standpoint, the retroactive application of Dynamex means that California employers should continue to review their practices to ensure that workers classified as independent contractors meet all three parts of the ABC test. Employers in other jurisdictions would also be well-advised to ensure their worker classifications are correct, as the applicable tests vary, and lawsuits and settlements in this area can be extremely expensive.