On May 6, 2026 the New Jersey Department of Labor adopted new regulations to clarify the “ABC Test” for determining a worker’s status as an independent contractor or employee under New Jersey’s Unemployment Compensation Law, as well as under New Jersey’s wage payment and sick leave laws. These new regulations come after an extended comment period and a 90-day regulatory freeze imposed by Governor Mikie Sherrill since the regulations were proposed back in April 2025.
Generally, under the ABC Test, workers are presumed to be employees unless is it shown that: (A) the individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; (B) the service is either outside the usual course of the business for which such service is performed, or such service is performed outside of all the places of business of the enterprise for which such service is performed; and (C) the individual is customarily engaged in an independently established trade, occupation, profession or business.
Under these new regulations, the New Jersey DOL provides clarifications for the burden of proof, the standards for each of these prongs, and how certain evidence should be assessed in determining whether the ABC Test has been satisfied.
With regard to the burden of proof, it is ultimately placed upon the employer to satisfy every prong of the ABC Test. Otherwise, workers remain entitled to the presumption that they should be classified as employees and not independent contractors.
With regard to Prong A, the primary determination is whether an employer exercises control and directs an individual’s work, but employers do not have to control every aspect of the work for an individual to be classified as an employee. The regulations set forth nine non-exhaustive factors that may weigh for or against finding that an employer exercises sufficient control over a worker. The factors are not designed as a checklist but as a guide to assess the entirety of the relationship between an employer and a worker. Notably, the final rule incorporates a change requested by employers that acts taken solely to comply with federal, state, and local laws and regulations, on their own, are not evidence of control. Lastly, the final rule removes a subfactor that considered whether the employer provides unilaterally controlled software for the worker to use.
With regard to Prong B, the primary determination is whether the worker’s services are outside the employer’s usual course of business or the work is performed outside of the employer’s places of business. While the final regulations retain a broad definition for usual course of business which may include any activities that “generate revenue or develop, produce, sell, market, or provide goods or services,” they remove examples of services what typically would and would not be considered in the usual course of business and examples of the locations where work is regarded as outside or not outside of an employer’s places of business. Lastly, the final rule retains the notion that a remote worker’s place of residence is not included as a part of an employer’s places of business.
Lastly, with regard to Prong C, the primary determination is whether the individual is engaged in an independently established trade, occupation, profession, or business. The final regulations include seven non-exhaustive factors that may weigh for or against finding that the worker is engaged in an independently established trade or occupation. The final regulation also sets forth certain activities that are insufficient on their own to satisfy Prong C including having multiple employers, licensure for the profession, and individually obtained liability insurance.
The New Jersey DOL anticipates publishing the rules on June 1, 2026 and they are set to become operative 120 days later on October 1, 2026. In the interim, employers should evaluate their current agreements with individual contractors and their own practices and policies regarding independent contractors to ensure that they continue to satisfy each prong of the ABC Test under these new rules when they go into effect
