New Jersey
New Jersey: Final Rule Published Implementing ABC Test for Worker Classification
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APPLIES TO All Employers with Workers in NJ |
EFFECTIVE OCT 1, 2026 |
QUESTIONS? Contact HR On-Call |
Quick Look
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Discussion
On May 5, 2026, the New Jersey Department of Labor (NJDOL) published a final rule implementing the state’s “ABC” test, which is used to determine whether a worker is an employee or an independent contractor under New Jersey’s Unemployment Compensation Law, Wage and Hour Law, and Wage Payment Law. The final rule is set to go into effect on October 1, 2026.
The ABC Rule
While the ABC test itself is not new to New Jersey, the final rule aims to clarify and codify existing case law. Under the ABC test, a worker is presumed to be an employee unless the employer can demonstrate that all three of the following criteria are met:
- Prong A: The worker is free from the employer’s control or direction in performing the work, both under the contract and in fact;
- Prong B: The work is performed outside the employer’s usual course of business or outside all of the employer’s places of business; and
- Prong C: The worker is customarily engaged in an independently established trade, occupation, profession, or business.
If a worker fails to satisfy even one of these criteria, the worker is classified as an employee. The burden of proof rests entirely on the employer to demonstrate that all three prongs are met. This makes New Jersey’s test among the strictest worker classification standards in the country.
Final Rule Clarifications
The final rule eliminated several of the more “controversial” provisions from the April 2025 proposed rule:
- Industry-specific examples:The proposed rule included examples identifying rideshare drivers, drywall installers, caddies, and delivery drivers as workers performing services within a company’s usual course of business. All such examples have been removed from the final rule.
- Software and applications as control:The proposed rule would have treated a business’s requirement that workers use its software or applications as evidence of control over the worker. This provision has been deleted.
- Actual work vs. right to work:The proposed rule would have focused on whether a worker actually works for other clients rather than whether the worker merely has the right to do so. This provision has been removed, restoring the relevance of a worker’s contractual right to perform services for others.
- Essential vs. ancillary off-site work:The proposed rule would have treated “essential” off-site work as performed at the employer’s usual places of business. This distinction has been eliminated.
- Legal compliance as control:The proposed rule would have treated a business’s exercise of control necessary to comply with other laws as evidence of an employment relationship. The final rule takes the opposite approach, expressly stating that steps taken to comply with federal, state, or local law do not constitute control under the ABC test.
In addition to the above, the final rule introduces several new clarifying provisions:
- Statutory exclusions: The final rule confirms that existing statutory exclusions from minimum wage and overtime requirements (e.g., those for certain “white collar” professionals) remain unaffected by the rule.
- Remote work:The final rule clarifies that when a worker performs services from home, the worker’s home is not automatically considered part of the employer’s usual places of business, meaning that performing remote work alone does not automatically render a remote worker an employee.
The final rule preserves the NJDOL’s general analytical approach, maintains the employer’s burden of proof on all three prongs, and identifies specific facts relevant under each criterion, such as whether workers control their own schedules or set their own pay rates. Importantly, the final rule also retains the provision that certain facts are insufficient on their own to establish independent contractor status, including the existence of an independent contractor agreement, the worker’s use of a business entity, a low salary, or the worker holding multiple jobs.
Action Items
- Audit and review independent contractor classifications with legal counsel for compliance.
- Have appropriate personnel trained on the requirements.
Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2026 ManagEase