- within Litigation, Mediation & Arbitration, Privacy and Real Estate and Construction topic(s)
New Jersey has adopted regulations codifying the ABC test for determining whether a worker is an employee or an independent contractor, with the new framework expected to take effect Oct. 1, 2026.
Under the ABC test, workers are presumed to be employees unless the hiring entity can demonstrate that the individual is free from control, performs work outside the usual course of the business or outside all places of business of the enterprise, and is engaged in an independently established trade or occupation.
The rule is expected to impact multiple statutes enforced by the New Jersey Department of Labor and Workforce Development, including wage, hour, wage payment, and unemployment laws. While the ABC test is not new in New Jersey, the regulations reinforce the state’s already strict approach and increase the likelihood of continued scrutiny of contractor relationships.
For employers, the practical lesson is familiar: states continue to move toward more aggressive worker-classification enforcement, and California remains the clearest example of that trend. California has led the nation in challenging independent contractor classifications through the ABC framework and related litigation and enforcement activity.
New Jersey’s recent legislation reflects that same direction, and New York has also continued moving toward a more worker-protective approach. Other states have likewise adopted ABC-style tests in at least some contexts, making it increasingly risky for businesses to rely on a uniform, multistate independent contractor model without jurisdiction-specific review.
The exposure from a misclassification finding can be significant. Depending on the state and the claims at issue, employers may face unpaid wages, overtime, taxes, unemployment and workers’ compensation issues, statutory penalties, and class or representative litigation. Businesses that use independent contractors, especially in roles close to their core operations, should consider reviewing those relationships now, including both contract language and day-to-day practice, to determine whether the arrangement can withstand ABC-test scrutiny.
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.
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