The Franchise Memorandum

In the wake of the California legislature’s passage of AB-5 in September, thought leaders continue to examine how the new legislation may impact the franchising industry in California. A few recent cases are likely to have an impact. Each of these cases examines Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court decision that AB-5 is intended to codify, and the “ABC Test” for determining whether a worker is an “employee” or an “independent contractor” that is described therein. First, in Gonzales v. San Gabriel Transit, Inc., a California appeals court determined that Dynamex should be applied retroactively to wage and hour claims, and remanded the case to the trial court to apply the ABC Test. Second, the same day that Gonzales was decided, another California appellate court held in Henderson v. Equilon Enterprises LLC, that the “ABC Test” in Dynamex is not intended to apply to joint employer claims. This holding was consistent with an earlier holding by the Ninth Circuit in Salazar v. McDonald’s Corp., which also found that Dynamex was inapposite in that case because no party was alleging that a worker was an independent contractor. AB-5 will take effect on January 1, 2020.