923 F.3d 575
9th Cir.2019Background
- Jan‑Pro International Franchising, Inc. operates a multi‑tier janitorial franchise system: Jan‑Pro (top franchisor) sells rights to regional "master" franchisors, who in turn sell unit franchises that perform cleaning work.
- Plaintiffs are California resident unit franchisees who claim Jan‑Pro misclassified janitors as independent contractors to avoid wage‑and‑hour obligations and sued under California law.
- Earlier related litigation (Depianti) proceeded in Massachusetts and Georgia; a Georgia appellate judgment found no employment relationship and became final, and the First Circuit gave that judgment preclusive effect for the Depianti plaintiff (not the California plaintiffs).
- The district court in Northern District of California granted summary judgment for Jan‑Pro applying Martinez with a Patterson ‘‘franchise’’ gloss and dismissed the California plaintiffs’ claims on the merits.
- After that decision, the California Supreme Court decided Dynamex, adopting the ABC test (three prongs) for wage‑order employee classification; this panel considered whether Dynamex applies retroactively and whether preclusion or law‑of‑the‑case bars relief.
- The Ninth Circuit vacated the district court’s grant of summary judgment, held Dynamex applies retroactively, rejected Jan‑Pro’s preclusion and law‑of‑the‑case defenses as to the California plaintiffs, and remanded for application of the ABC test.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Dynamex’s ABC test applies to these California plaintiffs | Dynamex supplies the controlling ABC test and requires remand to apply its three prongs | Dynamex should not control or be applied retroactively | Court: Dynamex governs; remand to apply all three ABC prongs |
| Retroactive application of Dynamex | Dynamex is a clarification of existing law and should apply retroactively | Retroactive application would be unfair; reliance interests and due process preclude it | Court: California law presumes retroactivity for judicial decisions; retroactive application here is consistent with due process |
| Preclusive effect of earlier Depianti rulings on California plaintiffs | Plaintiffs: not precluded because they were severed and not parties/privity; interests not adequately represented | Jan‑Pro: Res judicata / law of the case based on First Circuit’s Depianti decision and Massachusetts proceedings | Court: No preclusion; California plaintiffs were not in privity and had been severed; law‑of‑the‑case does not bind this litigation |
| Whether Patterson’s franchisor‑liability gloss limits application of ABC in franchise context | Plaintiffs: franchise context does not alter Dynamex ABC analysis | Jan‑Pro: Patterson limits franchisor liability—franchisors should not be treated as employers absent direct day‑to‑day control | Court: Patterson (a tort/vicarious‑liability case) does not modify Dynamex for wage‑order classification; franchise structure considered but ABC applies unchanged |
Key Cases Cited
- Dynamex Ops. W. Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018) (adopts ABC test for wage‑order employee classification and emphasizes remedial, liberal construction)
- Depianti v. Jan‑Pro Franchising Int’l, Inc., 873 F.3d 21 (1st Cir. 2017) (addressed prior procedural history and held Georgia judgment preclusive as to Depianti plaintiff)
- Depianti v. Jan‑Pro Franchising Int’l, Inc., 990 N.E.2d 1054 (Mass. 2013) (Mass. SJC answer: a defendant can be liable under the Massachusetts three‑prong test even without a direct contract with the worker)
- Martinez v. Combs, 231 P.3d 259 (Cal. 2010) (prior California precedent discussing alternative definitions of "employ" including "suffer or permit")
- Patterson v. Domino’s Pizza, LLC, 333 P.3d 723 (Cal. 2014) (franchisor vicarious‑liability discussion; court held franchisor liability requires entering the arena of operational control)
- Semtek Int’l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (2001) (federal common law applies for preclusion in diversity cases by reference to state law)
- Federated Dep’t Stores, Inc. v. Moitie, 452 U.S. 394 (1981) (final judgments on the merits have preclusive effect even if arguably wrong)