New Jersey Adopts Final Rule on Independent Contractor Classification Under the ABC Test, by Christopher Nucifora, Esq., 5-11-2026

On May 5, 2026, the New Jersey Department of Labor and Workforce Development (NJDOL) adopted a final rule clarifying how the state’s statutory “ABC” test will be applied to determine whether a worker is an employee or an independent contractor under New Jersey law.​ The rule applies across several important statutes, including the Unemployment Compensation Law, Wage and Hour Law, and Wage Payment Law, and is scheduled to become operative on October 1, 2026.

What the Rule Does

According to NJDOL, the final rule is intended to synthesize decades of case law, including the New Jersey Supreme Court’s decisions in East Bay Drywall, LLC v. Department of Labor and Workforce Development (2022) and Carpet Remnant Warehouse, Inc. v. NJ Department of Labor (1991), into clearer regulatory guidance for employers.​ As under existing New Jersey law, the putative employer bears the burden of proving all three parts of the ABC test.

To establish that a worker is properly classified as an independent contractor, the employer must show:

• Prong A: The worker is free from control or direction over the performance of the services, both under the contract and in fact.​
• Prong B: The work is either outside the usual course of the employer’s business or performed outside all the employer’s places of business.​
• Prong C: The worker is customarily engaged in an independently established trade, occupation, profession, or business.​

If the employer cannot satisfy any one of the three prongs, the worker will be treated as an employee for purposes of the covered New Jersey statutes.

What Was Scaled Back

Although the Department largely preserved its overall approach to the ABC test, the final rule softened or removed several provisions from its initial proposed rule that had drawn substantial criticism from the business community during the comment period. NJDOL itself acknowledged that it received thousands of comments, extended the public comment period from 60 to 90 days, and made several revisions in response.​

The proposal also drew formal scrutiny from the New Jersey Legislature, which introduced concurrent resolutions (SCR-62/ACR-73) asserting that aspects of the proposed rule exceeded NJDOL’s statutory authority and were inconsistent with legislative intent. While those resolutions did not prevent the rule from moving forward, they formed part of the broader pushback that led to revisions in the final version.

Among the more notable revisions:

• Industry-specific examples were removed from the operative text. The proposed rule had included examples involving rideshare drivers, delivery-network drivers, drywall installers, and country club caddies that many commenters viewed as targeting particular business models; those examples do not appear in the operative regulatory text of the final rule, although they are still discussed in the adoption notices’ background and responses to comments.
• Software and app-use language was deleted. The proposal had suggested that requiring workers to use software or smartphone applications could itself indicate employer “control”; the final rule removes that language.​
• The rule retreated from an “actual work for others” emphasis. Proposed language minimizing a worker’s mere right to perform services for others and focusing instead on whether the worker actually did so for pay, was deleted.​
• The “essential” versus “ancillary” off-site work distinction was removed. The proposal would have treated some off-site work deemed “essential” to the business as occurring at the employer’s usual place of business; that distinction does not appear in the final rule.​
• The legal-compliance provision was substantially revised. Most significantly, the proposed rule would have treated some controls imposed to comply with other laws as evidence of employment; the final rule instead clarifies that steps taken to comply with federal, state, or local law generally should not, standing alone, constitute “control” under the ABC test.

The final rule also added clarifications viewed as less controversial, including language stating that statutory exclusions remain intact and that a worker’s home is not automatically considered one of the company’s places of business simply because the worker performs services remotely from home.

What Remains Intact

Even after these revisions, the final rule leaves much of the proposed framework in place.​ It continues to articulate NJDOL’s general interpretation of the ABC test, preserve the employer’s burden of satisfying all three prongs, and identify facts the Department may consider relevant under each element.

The final rule also underscores that some facts, standing alone, will not necessarily establish independent contractor status, including the existence of an independent contractor agreement, use of a business entity, low pay, or the fact that the worker has multiple jobs.​ In practical terms, that means form alone will not control; the Department will continue to focus on the practical realities of the working relationship under the statutory ABC framework.

Why Employers Should Pay Attention

For New Jersey employers, the final rule does not create the ABC test, but it does formalize the Department’s interpretive guidance in a way that may influence audits, investigations, and litigation under multiple state labor laws. Businesses that rely on independent contractors, particularly in sectors that use app-based platforms, field services, construction-related labor, or flexible staffing models, should review current classifications against each prong of the test rather than relying solely on contract labels or historical practice.

Because the rule becomes operative on October 1, 2026, employers have a limited window to assess contractor relationships, evaluate where control may be implied in practice, and determine whether work falls inside the company’s usual course or places of business.​ They should also revisit compliance protocols to take advantage of the final rule’s clarification that legally required safeguards do not automatically count as evidence of control.​

Key Takeaways

New Jersey’s final rule confirms that the state remains one of the more demanding jurisdictions for independent contractor classification.​ At the same time, the Department responded to criticism by deleting some of the proposal’s more expansive provisions, especially industry-specific examples, app-control language, and provisions that could have treated legal compliance as evidence of employment.

The result is a rule that is narrower than the proposal but still reinforces the central principle of New Jersey’s ABC test: unless the employer can prove all three statutory prongs, the worker will be treated as an employee under covered state law.

Author: Christopher Nucifora, Co-Managing Partner of Kaufman Dolowich’s New Jersey Office and Chair of the firm’s Commercial Litigation Practice Group