New Jersey Reinforces Independent Contractor “ABC Test”

The New Jersey Department of Labor and Workforce Development (NJDOL) has finalized regulations reinforcing the state’s strict “ABC test” for determining whether workers are properly classified as independent contractors or employees. The regulations are scheduled to take effect October 1, 2026.

Although New Jersey has applied the ABC test for years, the new regulations formally codify the state’s interpretation and signal continued aggressive enforcement of worker-classification rules across wage and hour, wage payment, unemployment, and related employment laws.

Why This Matters

Under New Jersey law, workers are presumed to be employees unless the hiring entity can satisfy all three parts of the ABC test. Failure to meet any one element may result in the worker being treated as an employee rather than an independent contractor.

Businesses utilizing 1099 contractors in New Jersey — especially in positions tied closely to core business operations — should consider reviewing both contractor agreements and day-to-day working relationships before the regulations become effective. Potential exposure from worker misclassification may include:

Unpaid minimum wage and overtime claims
Unemployment insurance liability
Payroll tax exposure
Workers’ compensation issues
Statutory penalties and interest
Class or representative litigation
State enforcement investigations

Overview of New Jersey’s ABC Test

To classify a worker as an independent contractor in New Jersey, the business must establish all three of the following:

Freedom From Control - The worker must be free from the company’s control or direction regarding how the work is performed, both contractually and in actual practice.

Work Outside the Usual Course or Place of Business - The services performed must either be outside the company’s normal business operations or occur outside all places of business of the company.

Independently Established Business - The worker must operate an independently established trade, occupation, profession, or business that exists separately from the relationship with the hiring entity. Importantly, simply issuing a Form-1099 NEC or requiring a contractor agreement does not by itself establish independent contractor status under New Jersey law. Businesses issue Form-1099 NEC to independent contractors and the IRS to track non-employment earnings of $600 or more per year.