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Department of Labor Adopts New Rules on Independent Contractors; Are You in Compliance?

The New Jersey Department of Labor and Workforce Development has adopted new regulations for determining whether a worker is an independent contractor or an employee.

The statutory test, which is commonly referred to as the “ABC Test,” sets out three provisions that a presumed employer must satisfy to rightfully classify someone as an independent contractor. While the department has already been utilizing the ABC Test to classify independent contractors, the new rules, effective October 1, 2026, formalize the DOL’s interpretation of the test and demonstrate the state’s growing interest in addressing issues of worker misclassification.

Under the three-pronged ABC Test, workers performing services for compensation are recognized to be employees unless the presumed employer can demonstrate that:

Prong A: The individual has been and will continue to be free from control or direction over the performance of services, both under their contract and in fact,

Prong B: The service is either outside the usual course of the business or outside all the places of business of the enterprise, and

Prong C: The individual is customarily engaged in an independently established trade, occupation, profession or business.

The burden of proof for the classification determination rests on the employer. If the presumed employer is unable to satisfy any one of the three prongs, the person in question is deemed an employee.