Search
The Employer Handbook Blog
New Jersey’s Independent Contractor Rules Are Now Official — And the Burden Is All Yours
New Jersey did not invent a tougher independent-contractor test this spring. It finally wrote down how it has been applying the old one.
TL;DR: On May 5, 2026, the New Jersey Department of Labor and Workforce Development filed adopted rules explaining how the state’s ABC test applies under statutes and Department rules that use the test. The rules list six covered statutes and become operative October 1. When the test applies, the putative employer must prove all three prongs. A Form 1099, a contractor agreement, business registration, insurance, multiple jobs, or professional licensure will not establish independent-contractor status by itself.
The ABC Test Is Old. The Regulations Are New.
New Jersey’s ABC test has governed independent-contractor status under the Unemployment Compensation Law since 1936. The Department has now adopted N.J.A.C. 12:11, explaining how it will apply that test whenever a statute or Department rule determines independent-contractor status through the ABC test. The regulation specifically lists the Unemployment Compensation Law, Temporary Disability Benefits Law, Wage Payment Law, Wage and Hour Law, Earned Sick Leave Law, and Call Center Jobs Act, but says its application is not limited to those six laws.
The New Jersey Supreme Court encouraged the Department in 2022 to provide regulatory guidance, particularly where an enterprise conducts an integral part of its business and what constitutes its usual course of business. The Department delivered. The rules were published June 1 and become operative October 1, 2026.
The rules do not create a new test. They largely memorialize existing case law and Department practice. They also preserve statutory exemptions under the laws to which they apply.
Three Prongs, and the Employer Must Prove All Three
When the ABC test applies, services performed for remuneration are presumed to constitute employment. The putative employer must satisfy all three prongs. Failure on any one means employee classification under the applicable statute.
Prong A asks whether the individual is free from control or direction in practice and whether the putative employer has reserved the right to control or direct the work. Nine nonexclusive factors include on-call requirements, restrictions on geographic area or potential clientele, the right to control how the work is performed, and training. The Department also identifies noncompete and nonsolicitation clauses as potential evidence under the factor addressing restrictions on work for others.
Actions taken solely to comply with federal, state, or local laws or regulations cannot, standing alone, be considered evidence of control under Prong A. The rule does not address actions taken for additional reasons or eliminate other evidence of control.
Prong B requires the services to fall outside the employer’s usual course of business or outside all its places of business. The final rules define those concepts but delete the proposal’s occupational examples. They do not declare that a dental-office cleaner passes Prong B or that a rideshare driver fails it.
The Department did retain one specific remote-work provision. A worker’s personal residence does not become the putative employer’s place of business merely because the worker performs services remotely there.
Prong C asks whether the worker operates an independently established trade, occupation, profession, or business. Seven nonexclusive factors examine the business’s viability, customers, revenue sources, workforce, investments, rate-setting, advertising, business location, and availability in the market.
Those factors are not a checklist, and no fixed number decides the outcome. The question is whether the enterprise exists independently of the hiring relationship and can survive its termination.
Before October 1, employers can compare their contractor relationships with this codified framework. That review should focus on how the relationship actually operates, not how the agreement labels it.
Three Contractor Files That Deserve Another Look
Contract restrictions can supply Prong A control
Noncompete and nonsolicitation clauses may restrict where or for whom a contractor can work. They are not automatically disqualifying, but employers should decide whether each restriction is necessary and whether it reserves control inconsistent with contractor status.
Prong C requires more than an LLC and insurance
Business registration, insurance, and professional licenses remain relevant, but none is sufficient alone. The stronger analysis examines the worker’s actual enterprise through whichever Prong C factors fit the relationship, without treating outside customers or revenue as mandatory elements.
Legally required control has a narrow lane
Actions taken solely to comply with the law cannot, standing alone, be considered evidence of control under Prong A. Employers relying on that provision should separate genuine legal requirements from operational preferences that control how the contractor performs the work.
October 1 Is Not a Classification Amnesty
The ABC test has been New Jersey law for almost 90 years. October 1 simply gives the Department a single enforceable chapter explaining how it applies that test.
Update: This post was revised on August 27, 2026, to correct earlier descriptions of the final regulations, including language deleted from the proposal, the identity of one listed statute, and the scope of the rules.