California Workers Could Sue Over Past Misclassification After Federal Court Says ‘Dynamex’ Applies Retroactively

A new federal court decision could make businesses around the state vulnerable to increased legal risk for misclassifying workers in the past.

On Thursday, the U.S. Court of Appeals for the Ninth Circuit ruled that workers who believe they should have been classified as employees, as opposed to independent contractors, can file legal claims against companies retroactively under the “Dynamex” standard.

Last year, the California Supreme Court issued a decision that narrowed the definition of who is an independent contractor, commonly referred to as the “Dynamex” case.

Claims for misclassification can be filed for things like unpaid overtime and out-of-pocket expenses for benefits over the past four years. Workers can file claims going back four years.

Lukas Clary, a shareholder at the Sacramento law firm Weintraub Tobin, said the recent federal court decision may prove costly for businesses.

“When you multiply those numbers over a three-to-four-year period across the segment of the workforce that were classified as contractors, it can be huge exposure to a business,” he said.

Caitlin Vega, legislative director at the California Labor Federation, says the decision is a win for workers. The Labor Federation came out in strong support of the Dynamex decision and has supported Assembly Bill 5, which would codify it in state law.

But Vega says the federal court ruling doesn’t necessarily mean legal trouble for businesses.

“Our hope is that we will see not more litigation but more compliance with the law,” Vega said.

Another bill, Assembly Bill 71, would revert to the old standard for determining who is an independent contractor.