By: Thomas M. O’Connell
Date: September 24, 2019
Citation:
Vazquez v. Jan-Pro Franchising International, Inc., 939 F.3d 1045 (9th Cir. 2019).
Executive Summary:
On rehearing, the 9th Circuit Court of Appeals certified a question to the California Supreme Court of whether the Dynamex ABC Test regarding independent contractor status applies retroactively.
Relevant Background:
Defendant Jan-Pro International Franchising, Inc. (“Defendant”) licenses a system for marketing cleaning services to “regional master franchisees” in a designated region who in turn are franchisors to “unit franchisees” in that area. Defendant is not a party to any contract with unit franchisees and unit franchisees may hire their own employees and may act in individual or corporate capacities.
In 2008, three unit franchisees filed a class action in the District Court of Massachusetts. By the end of the year, there were a total of eleven plaintiffs, including Plaintiffs Gerardo Vazquez and Gloria Roman who are California residents. Plaintiffs alleged that Defendant had developed a three-tier franchising model to misclassify its janitors as independent contractors and avoid paying minimum wages and overtime compensation. Over Jan-Pro’s objection, the District Court of Massachusetts severed Plaintiffs’ cases and transferred them to the Northern District of California.
There, Jan-Pro moved for summary judgment. The District Court stated that “no binding decision ha[d] addressed the standard applicable to determining whether a franchisor is an employer of the franchisee” and “in the absence of controlling authority” it applied “the Martinez [v. Combs, 49 Cal.4th 35] standard with a gloss of Patterson” [v. Domino’s Pizza, LLC, 60 Cal.4th 474]. Based on that standard, the District Court found that Plaintiffs had not established Plaintiffs were employees of Defendant and the Court granted summary judgment.
Plaintiffs’ timely appealed. While the appeal was pending, The California Supreme Court issued its decision in Dynamex Operations West Inc. v. Superior Court, 416 P.3d 1. Therein, the Supreme Court modified the Martinez standard–specifically the definition of “suffer or permit” to work. On May 2, 2019, the 9th Circuit issued a published holding that Dynamex applies retroactively. On petition for panel rehearing, the 9th Circuit withdrew its prior opinion and certified the question to the California Supreme Court.
Decision:
While the 9th Circuit’s analysis primarily relates to procedural law, one passage is relevant here:
Finally, we hold that if Dynamex does apply, the district Court’s reliance on Patterson and the “special features of the franchise relationship” was misplaced. … We continue to adhere to those conclusions and incorporate them here by reference. … Accordingly, the question of whether Dynamex applies retroactively “could determine the outcome” of this appeal.
Looking Forward:
The 9th Circuit Court of Appeals decision to certify this question to the State of California’s Supreme Court comes less than a year after the decision in Juarez v. Jani-King of Cal., Inc. and less than a week after the State legislature codified the Dynamex ABC Test. If adopted by the California Supreme Court, it would create a risk that the franchise industry will be retroactively held to an inapt independent contractor test. While it is difficult to determine how the California Supreme Court will ultimately find, franchisors should immediately audit their employment practices to ensure that they don’t run afoul of the ABC Test with either their workers or franchisees.
This article was originally published on the California Franchise Network.