Earlier this year, the California Supreme Court introduced new restrictions with respect to classifying workers as independent contractors, but one thing remains uncertain: do these new restrictions apply retroactively?
This is the question our Los Angeles wage fraud attorney from JML Law has been hearing over and over again since May 1, when the Supreme Court historically and finally adopted a new test to establish which workers can be classified as independent contractors rather than employees.
What does the Supreme Court itself think about it?
In its landmark decision, the Supreme Court did not address the issue of whether this standard should apply retroactively or prospectively only, which left millions of employers, employees, and independent contractors in California scratching their heads.
And it sure seems as though the Supreme Court has no idea what to do in this situation either, as on June 20, the Court itself dismissed a petition for rehearing that asked the Court to clarify whether the new restrictions on independent contractors apply retroactively.
Lower courts say the new standard should apply both prospectively and retrospectively
While the Supreme Court is reluctant to shed light on its own decision, it will up to the lower courts in California to provide their own interpretation of the law in each individual case. Our experienced wage fraud attorney in Los Angeles warns that this means there could be a lot of conflicting decisions by the lower courts, and each of these legal actions could have an unpredictable outcome.
In August, one of the lower courts in California ruled that the new standard for classifying workers as independent contractors should be applied both prospectively and retrospectively [Johnson v. Imperial Showgirls, Orange County Superior Court].
In this particular case, several exotic dancers alleged that they had been misclassified as independent contractors and that their employer owed them wages and other employment benefits that they had lost due to the employer’s failure to properly classify them as employees.
Should the new test apply retroactively or prospectively?
The Superior Court was facing a very tough decision: should the new standard for classifying independent contractors be applied retroactively or prospectively? After all, since many employers misclassify their workers as independent contractors in order to reduce labor costs and engage in other forms of wage fraud, applying the new standard retroactively would mean that California employers owe financial compensation for all the years that their workers had been misclassified as independent contractors.
A rule of thumb is that judicial decisions by the Supreme Court apply retroactively in all or nearly all cases. This was one of the arguments provided by the Superior Court in the exotic dancers’ case. The Superior Court also pointed out that the Supreme Court could have clarified in its ruling that the standard applied only prospectively. But it did not do so, which means the standard should apply retrospectively.
That being said, the Supreme Court has also dismissed petitions for reheating and was reluctant to reconsider, change, or amend its original ruling. This was the second argument given by the Superior Court, which insisted that the standard for classifying workers as independent contractors should apply retroactively.
However, in no way does it mean that this opinion is shared by all the lower courts in California. Meaning: unless you are represented by a Los Angeles wage fraud attorney, the ruling in your case could go either way. If you are not sure whether your employer owes you compensation for misclassifying you as an independent contractor for the period between the date you were hired and the Supreme Court’s May 1 ruling, speak to our lawyers at JML Law about your particular case. Get a free consultation by calling at 818-610-8800.