NJ Department of Labor Adopts Stricter ABC Test Regulations for Worker Classification

What Happened?

On May 5, 2026, the New Jersey Department of Labor and Workforce Development (“NJDOL”) adopted new regulations that affect the statutory “ABC test” used for determining whether a worker is an independent contractor or employee.

Currently, the “ABC test” provides that an employee is an independent contractor if A) a worker has been and will continue to be free from control or direction over the performance of services, both under the worker’s contract of service and in fact; B) work performed is either outside the usual course of the business for which the work is being performed or the work is performed outside of all the places of business of the enterprise; and C) the worker is customarily engaged in an independently established trade, occupation, profession, or business.

Under the new regulations, the ABC test is further refined. For example, factors to consider when evaluating whether an individual is “free from control” under part (A) now include whether the individual is required to work set hours or jobs; whether the employer has the right to control the details and means by which the services are performed; whether the services must be rendered by the individual personally; whether the individual’s rate of pay is fixed by the putative employer; and whether the individual bears any risk of loss for services performed. Moreover, a place of business under part (B) can now include vehicles, homes, or remote work. Lastly, under part (C), receiving a 1099 tax form, holding a professional license, or having multiple clients no longer necessarily satisfies this part of the test.

What Do You Need to Know?

The new ABC test adopted by NJDOL creates a stricter framework for determining worker classifications. Employees will be afforded stronger protections against misclassification, and employers will be held to a more stringent standard regarding their classification of employees.

Next Steps…

The new rule is anticipated to be published and effective June 1, 2026, and operative on October 1, 2026. Therefore, employers should audit their existing independent contractor relationships against the new ABC test factors to ensure that all workers are properly classified and reclassify any workers who no longer meet the new ABC factors prior to October 1, 2026, to avoid any potential penalties. If misclassified, employees may have grounds to file a complaint with the NJDOL.