New Jersey businesses that use independent contractors have a new reason to review their worker relationships.
New regulations governing New Jersey’s ABC test for independent contractor status became operative October 1, 2026. The regulations do not replace the ABC test. Instead, they provide formal guidance on how the New Jersey Department of Labor applies the test when evaluating worker classification.
For businesses issuing 1099s, this is a good time to make sure worker classification and year-end reporting are being handled correctly.
What Changed?
New Jersey has long used the ABC test to determine whether a worker may be treated as an independent contractor.
Under the test, a worker performing services for compensation is generally presumed to be an employee unless the business can establish all three parts of the ABC test.
The ABC Test
A — Free From Control
The worker must be free from the company’s control or direction in performing the services — both under the agreement and in actual practice.
B — Outside the Business
The work must either be outside the usual course of the company’s business or be performed outside all of the company’s places of business.
C — Independently Established Business
The worker must be customarily engaged in an independently established trade, occupation, profession or business.
All three parts must be satisfied.
Why This Deserves a Fresh Look
A Form 1099 or an independent-contractor agreement does not, by itself, establish that someone is properly classified as an independent contractor.
Businesses may want to take another look when a contractor:
- Performs work closely related to what the company itself sells or provides
- Works primarily or exclusively for one business
- Has their schedule, assignments or methods directed by the company
- Has limited evidence of operating a genuinely independent business
The actual working relationship matters. Businesses uncertain about a worker’s classification should consult with their CPA, attorney or other qualified advisor.
How Counter Point Can Help
Correct classification doesn’t mean every independent contractor needs to become an employee.
If a review determines that a worker should be treated as an employee, Counter Point can help establish the employee in payroll, set up the appropriate tax withholding and reporting, and incorporate the worker into the company’s ongoing payroll process.
Businesses that properly use independent contractors still have year-end reporting responsibilities.
Counter Point can produce year-end 1099s for your business — even when those contractors aren’t on your regular payroll.
We can help simplify year-end 1099 processing and reporting.
This information is provided for general informational purposes only and should not be considered legal or tax advice. Worker classification depends on the facts and circumstances of the individual relationship. Businesses should consult their legal, tax or other qualified professional advisors regarding specific classification questions.
Source
- New Jersey Department of Labor and Workforce Development — N.J.A.C. 12:11, Application of the Statutory ABC Test for Independent Contractor Status
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