On Tuesday May 5, 2026, New Jersey adopted regulations—effective October 1, 2026—that are intended to provide guidance for determining when workers are employees versus independent contractors. The New Jersey statutory test, which is commonly referred to as the “ABC Test,” has been in effect in its current form for several years now (see our prior alerts here and here). The new regulations assert that the New Jersey Department of Labor and Workforce Development (the Department) will apply the ABC Test uniformly to any legislative program under its jurisdiction, including the State’s Unemployment Compensation Law, Wage and Hour Law, and Wage Payment Law. Before the new regulations, there had been some possibility that different statutes would draw the line differently between employee and independent contractor.
Under the three-pronged ABC Test, workers performing services for remuneration are presumed to be employees unless the putative employer can show that
(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,
(B) the service is either outside the usual course of the business or outside all the places of business of the enterprise, and
(C) the individual is customarily engaged in an independently established trade, occupation, profession or business.
Under this additive test, if the putative employer fails to satisfy even one prong, then the person in question will be deemed an employee, not an independent contractor, under the laws enforced by the Department.
In its draft regulations released for comment in May 2025, the Department had proposed several examples that drew a great deal of objection from certain industries, particularly the gig economy, media, and performing arts. The final regulations eliminate those controversial examples, which leaves specific decisions on close cases to future litigation and enforcement actions. Notably, however, other provisions of the draft regulations were retained in the final regulations over the objections of the business community, including that the existence of a written contract labeling the worker as an independent contractor will not be dispositive, particularly where the putative employer is the “unilateral drafter” of the agreement and material terms are not negotiable.
As adopted, the regulations essentially explain rather than expand current New Jersey law. Their adoption and implementation is, however, an excellent reminder to employers in New Jersey to pay close attention to any workers they classify as independent contractors. New Jersey law creates a very strong presumption that workers are employees and provides for potentially significant monetary damages in the event of misclassification. Every employer with workers in New Jersey should review their 1099 classifications at least once a year to evaluate whether there is exposure and, if so, how best to address the situation.