New Jersey employers:
On May 5, 2026, the New Jersey Department of Labor and Workforce Development adopted new regulations clarifying the state’s statutory “ABC test” for determining whether a worker is an independent contractor or an employee. These regulations apply the ABC test—which the state has applied in some contexts for nearly a century—to the New Jersey Unemployment Compensation Law, the New Jersey Wage Payment Law, and the New Jersey Wage and Hour Law, among others. Under the ABC test, as contemplated by these rules, the working relationship must satisfy each of the following three criteria for the worker to be properly classified as an independent contractor:
- The worker is free from the hiring entity’s control or direction over the services they perform, both in fact and under the terms of the worker’s contract;
- The work performed is either (1) outside the scope of the hiring entity’s usual course of business, or (2) is performed outside of all the hiring entity’s places of business; and
- The worker is regularly engaged in an independently established trade, occupation, profession, or business.
The putative employer bears the burden of establishing that the worker is properly classified as an independent contractor by meeting each of the above. If not, the worker is deemed to be an employee.
These regulations are set to take effect October 1, 2026, 120 days after their anticipated effective date of June 1, 2026. However, opposition and a push for legislative change is expected, as many believe these rules exceed what existing law requires.
Misclassification of employees as independent contractors can have significant financial repercussions, and we recommend consulting with counsel to ensure that you are properly classifying your workforce. We will continue to monitor these developments.