New Jersey Proposes Rules Aimed at Clarifying Worker Classification, by Christopher Nucifora, Esq., 6-11-2025

The New Jersey Department of Labor and Workforce Development (NJDOL) has proposed new rules aimed at codifying its interpretation of the statutory “ABC test” for determining independent contractor status.

These proposed rules, which were published  in the New Jersey Register on May 5, 2025, seek to provide clearer guidance to employers on how the ABC test applies under various NJ statutes, including but not limited to the New Jersey Unemployment Compensation Law, Temporary Disability Benefits Law, Wage Payment Law, and the Earned Sick Leave Law.

Background

The proposed new rules stem from the NJDOL’s interpretation of the statutory ABC test, and are informed by binding decisions of the Appellate Division of the New Jersey Superior Court and the New Jersey Supreme Court, including the New Jersey Supreme Court’s 2022 unanimous ruling in East Bay Drywall, LLC v. Department of Labor and Workforce Development, in which the Court expressly suggested ‘that the Department exercise its statutory authority and expertise… to promulgate regulations…’, according to Governor Phil Murphy’s office.

The NJDOL has consistently worked to address the issue of misclassification. By codifying the NJDOL’s interpretation of the ABC test, the proposed new rules would provide clarity, reducing the risk of misclassification and enhancing compliance across industries, according to the Governor’s office. 

Overview of the ABC Test

Under New Jersey law, a worker should be considered an employee unless all the following circumstances apply, according to the NJDOL:

• Freedom from Control: The individual has been and will continue to be free from control or direction over the performance of the service, both under a contract of service and in fact.
• Outside the Usual Course of Business: The work is either outside the usual course of the business for which such service is performed, or the service is performed outside of all the places of business of the enterprise for which such service is performed.
• Engaged in an Independently Established Trade: The individual is customarily engaged in an independently established trade, occupation, profession, or business.

These criteria are designed to ensure that workers who are economically dependent on a business are classified as employees, thereby affording them the protections and benefits associated with employment.

Proposed Changes

The proposed rules outline detailed criteria for assessing each part of the test, along with examples of situations that would meet or fail to meet the test requirements.

Prong A of the ABC Test

For example, under Prong A in the proposed rules regarding freedom from control, some factors that may be considered when evaluating whether a worker has been and will continue to be free from control or direction over the performance of services include:

1. Whether the individual is required to work any set hours or jobs;
2. Whether the putative employer has the right to control the details and means by which the services are performed by the individual;
3. Whether the services must be rendered by the individual personally; and
4. Whether the putative employer negotiates for and acquires the work performed by the individual.

Prong B of the ABC Test

Under Prong B, in the category of whether the work is outside the usual course of business, the proposed rules note that the phrase “places of business” refers to those locations where the enterprise has a physical plant or conducts an integral part of its business. This is explained further within the rules.

Prong C of the ABC Test

Under Prong C, among factors that may be considered when evaluating whether a worker is customarily engaged in an independently established trade, occupation, profession or business, include:

1. The duration, strength, and viability of the individual’s business (independent of the putative employer);
2. The number of customers of the individual’s business and the volume of business from each respective customer; and,
3. The amount of remuneration the individual receives from the putative employer compared to the amount of remuneration the individual receives from others in the same industry.

Further details on each prong can be found within the proposed rules, which are open to public comment until August 6, 2025. A public hearing is scheduled for June 23, 2025. Further details can be found within the public notice.

Key Considerations for Employers

Given potential changes on the horizon, employers should consider:

• Conducting a thorough review of their current worker classifications to ensure compliance with the ABC test.
• Maintaining clear and comprehensive records that demonstrate how workers meet the criteria of the ABC test.
• Reviewing internal policies, operational procedures, and employment contracts to assess where changes may be needed if the proposed rules are adopted.

Conclusion

The NJDOL’s proposed rules represent a significant development in the enforcement of worker classification standards in New Jersey. Employers should stay informed about these changes and take proactive steps to ensure that their worker classifications align with the ABC test as interpreted by the NJDOL. Failure to properly classify workers can result in legal and financial consequences.

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