New Jersey regulations clarifying how the Department of Labor and Workforce Development (NJDOL) applies the ABC test to worker classification went into effect on October 1, 2026. While the regulations do not create a new test, they formalize the department’s interpretation of existing laws and court decisions, reinforcing the importance of properly classifying workers.
Under New Jersey’s ABC test, workers who provide services for compensation are generally presumed to be employees unless the employer demonstrates that all three requirements are met:
- A: Freedom from control. The worker must be free from control or direction over the work, both under the contract and in practice.
- B: Work outside the business. The services must be outside the company’s usual course of business or performed outside all its places of business.
- C: Independent business. The worker must operate an independently established trade, occupation, profession or business that can continue apart from the relationship.
Failing any one of these requirements generally results in employee classification under the applicable law.
Why Classification Matters
A signed contractor agreement, LLC registration, insurance certificate or Form 1099 does not, by itself, establish independent contractor status. Classification depends on the actual working relationship and whether the legal requirements are satisfied.
Businesses in construction, trucking, landscaping, hospitality and professional services may want to pay particular attention to their contractor arrangements. However, the ABC test can affect businesses across industries.
Misclassification can expose employers to liability for unpaid wages, overtime, unemployment contributions and other employment-related obligations, depending on the circumstances. Worker classification is a compliance decision, not simply a payment or paperwork choice. Businesses must look beyond contracts and tax forms to ensure their working arrangements meet New Jersey’s legal requirements.
How We Can Help
Counter Point can help you review your payroll practices, identify potential classification concerns and ensure your payroll processes support compliance. If you have questions about how your contractor arrangements may affect your business, contact our team to discuss your needs.
