United States: Let's Try On The Patterson Gloss Again: The Ninth Circuit Retracts Vazquez

In its May 2019 opinion in Vazquez v. Jan-Pro Franchising Int'l, Inc.,[1] the Ninth Circuit held that the recent California Supreme Court decision, Dynamex Ops. W. Inc. v. Superior Court,[2] should apply retroactively.  On Monday, the Ninth Circuit withdrew its Vazquez opinion and will certify the retroactivity question to the California Supreme Court.  The Ninth Circuit's withdrawal of Vazquez is a welcomed development for franchisors doing business in California because the Ninth Circuit's decision in Vazquez not only held Dynamex applied retroactivity, but offered "guidance" on how Dynamex should apply to California franchise relationships.  In doing so, the Ninth Circuit not only ignored its general rule that "courts and agencies are not required to decide issues unnecessary to the results they reach," but also inexplicably gave no weight to California precedent that, under Miller v. Gammie,[3] it was required to apply.

The Dynamex decision and its impact on the Martinez test

In California, an "employer" under a wage order is typically defined by Martinez v. Combs as someone who exercised control over the wages, hours, or working conditions of another; suffered or permitted another to work; or engaged, and thereby a common law employment relationship is created.[4]  In Dynamex, the California Supreme Court addressed what it meant for an employer to "suffer" or "permit [another] to work"[5] holding that lower courts should apply the "ABC test" to determine if an employment relationship, as opposed to an independent contract relationship, exists.[6]  Under the ABC test, a claimant is presumed to be an employee, and a purported employer may rebut the presumption only if it can establish: (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of work, both under the contract and in fact; (B) that the worker performs work that is outside the usual course of the entity's business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.[7]  If an employer fails to prove any prong, it is deemed an employer for purposes of the wage order. 

The Dynamex ABC test, if applied literally and without regard to the special features of a franchise relationship, could jeopardize many, if not all, California franchise relationships.  For example, franchisors often assert they are in the business of selling franchises, and it is the independently owned franchisees that are in the business of actually operating the franchised business.  But some courts question that distinction, especially when a franchisor not only sells, but also operates outlets that are similar to those operated by its franchisees.  Because the distinction between the franchisor as the developer and seller of a business concept and the network of franchisees as the actual operators is clouded, courts need to use common law tests to determine whether notwithstanding the franchise relationship defined by a franchise agreement, there is still an employment relationship.  That is where Jan-Pro found itself in Vazquez. 

Vazquez and the Patterson gloss

In Vazquez, a Jan-Pro commercial cleaning franchisee brought an action under a California wage order claiming it was actually Jan-Pro's employee, not a franchisee.  In its motion for summary judgment, Jan-Pro argued that its franchisee was an independent contractor under applicable California law, and cited to Patterson v. Domino's Pizza, LLC, while Vazquez claimed that he was Jan-Pro's employee under a strict application of the Martinez test.[8]  In Patterson, the California Supreme Court recognized that a strict application of California's vicarious liability test would do harm to franchise relationships, and instead applied a modified form of the common law test to account for the fact that a franchise relationship necessarily contemplates some level of control by the franchisor over the franchisee and its operation.[9]  The district court in Vazquez took the same approach that Patterson did, applying a "Patterson gloss" to the Martinez definition of employer.[10]  It did so because the district court recognized that, if it did not apply a Patterson gloss to the Martinez test, it "would yield 'a distorted view of operative law,' inasmuch as Patterson 'denigrate[d] reliance on [the California Supreme Court's] older decisions' and applied its new standard where the 'traditional common law principles of agency' would otherwise apply."[11]  Having modified the Martinez test to account for the special features of the franchise relationship, the district court in Vazquez granted Jan-Pro's motion for summary judgment. 

Then came Dynamex.  In considering the franchisee's appeal, the Ninth Circuit asked the parties to address the effect of Dynamex on the district court's decision.[12]  Initially, the Ninth Circuit concluded that Dynamex applied retroactively, and that "the case must be remanded to the district court to consider the merits in light of Dynamex."[13]  However, instead of leaving that application to the district court in the first instance, the Ninth Circuit offered "guidance" as to how the district court should apply Dynamex.  Significantly, its guidance conflicted with the California Supreme Court's decision in Patterson because it dismissed the relevance of the franchise relationship.

Miller and the role of precedent

In Miller v. Gammie, the Ninth Circuit issued an en banc decision instructing appellate panels that they remain bound to apply the "mode of analysis" from decisions with precedential value.[14]  The Miller rule binds panels regardless of whether or not the precedential framework is derived from state or federal decisions, so long as the framework is embodied by "a decision of a court of last resort."[15]  An analytical framework will remain good law until such a court issues a decision "clearly irreconcilable" with the prior precedent.[16]

In Patterson, the California Supreme Court comprehensively considered the many "special features" that exist in a franchise relationship in determining how best to apply the common law test for respondeat superior liability to a franchise relationship.  Since it did not involve a franchise relationship, the Dynamex decision did not undercut the Patterson "mode of analysis," and most certainly is not "clearly irreconcilable" with Patterson.  Consequently, Patterson, and the special attention the California Supreme Court gave to the franchise relationship, should remain the proper means for analyzing the application of common law tests in the franchise context. 

While the Ninth Circuit order reflects the certified question is on the issue of retroactivity hopefully, the California Supreme Court's resolution of the certified question will also address the fundamental question of whether Dynamex was intended to overrule Patterson or whether the franchise-conscious framework used in Patterson must be taken into account when applying the Martinez test in the context of a franchise relationship.

[1] 923 F.3d 575 (9th Cir. 2019).
[2] 4 Cal.5th 903 (2018).
[3] 335 F.3d 889 (9th Cir. 2003) (en banc)
[4] 49 Cal.4th 35, 64 (2010).
[5] 4 Cal.5th at 956-57.
[6] Id.
[7] Id. at 957.
[8] 60 Cal.4th 474, 497-98 (2014).
[9] Id. at 499.
[10] 923 F.3d at 594.
[11] No. 16-05961, 2017 WL 2265447, at *3 (N.D. Cal. 2017) (quoting Salazar v. McDonald's Corp., No. 14-02096, 2016 WL 4394165 (N.D. Cal. 2016).
[12] 923 F.3d at 580.
[13] Id.
[14] 335 F.3d 889, 900 (9th Cir. 2003).
[15] Id.
[16] Id.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions