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Vazquez v. Jan-Pro Franchising Int’l (9th Cir. 17-16096 2/2/21) Dynamex/Wage and Hour 

Having received the California Supreme Court’s answer to a certified question, the panel amended and reissued its opinion, and vacated the district court’s summary judgment in favor of Jan-Pro Franchising International, Inc. (“JanPro”) in a putative class action involving back wages and overtime claims.

Jan-Pro, an international janitorial cleaning business, developed a “three-tier” franchising model to avoid paying its janitors minimum wages and overtime compensation by misclassifying them as independent contractors.

The panel held that the test in Dynamex Ops. W. Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018) (adopting the so-called “ABC test” for determining whether workers are independent contractors or employees under California wage order laws), which post-dated the district court’s decision, applied retroactively to this case.

In 2008, a putative class action was filed in the District of Massachusetts against Jan-Pro; and in 2017, the First Circuit affirmed the district court’s dismissal of the complaint, but not on the merits. Depianti v. Jan-Pro Franchising Int’l, Inc., 873 F.3d 21 (1st Cir. 2017).

The panel rejected Jan-Pro’s argument that the Depianti final judgment was entitled to preclusive effect in this litigation under either the principle of res judicata or the doctrine of law of the case. The panel held that plaintiffs were not in privity with Depianti for res judicata purposes under Massachusetts law; and that Jan-Pro’s law of the case argument was a repackaging of the res judicata argument. The panel also rejected Jan-Pro’s argument that Dynamex should not be applied retroactively. The panel held that California law called for the retroactive application of Dynamex. The panel further held that applying Dynamex retroactively was consistent with due process.

Because the district court had no opportunity to consider whether plaintiffs were employees of Jan-Pro under the Dynamex standard, and neither party had the opportunity to supplement the record with regard to the Dynamex criteria, the panel left it to the district court to consider the question in the first instance. The panel offered guidance to the district court as it considered all three prongs of the ABC test. First, there was no Patterson v. Domino’s Pizza, LLC, 333 P.3d 723 (Cal. 2014), gloss to the ABC test. Second, other courts have considered three-tier franchise structures in applying the ABC test. Third, prong B of the ABC test may be the one most susceptible to summary judgment. The panel remanded to the district court for further proceedings consistent with this opinion.