Proposed NJ DOL Rules Would Refine the ABC Test for Contractors

The New Jersey Department of Labor and Workforce Development (NJDOL) plans to adopt rules that would codify and clarify the state’s “ABC test” for determining independent contractor versus employee status. These proposals, published in the New Jersey Register on May 5, 2025 and now past the public-comment stage, would have substantial impact on employment statutes, including those governing unemployment benefits and minimum wage and overtime laws.

The “ABC test” is used to determine whether a worker should be classified as an employee or an independent contractor. It’s purpose is to prevent worker misclassification, which is often linked to wage theft and denial of benefits. 

A worker is presumed to be an employee unless the employer can prove all three parts of the test:

• Part A — The individual is free from control or direction over the performance of work, both under their contract and in fact.
• Part B — The service is performed outside the usual course of the business for which the service is performed, or outside all the places of business of the enterprise.
• Part C — The individual is customarily engaged in an independently established trade, occupation, profession or business.

NJDOL’s proposed rules aim to codify case law concerning the ABC test, to clarify ambiguous language and to standardize the test’s application across various statutes, such as the Unemployment Compensation Law, Wage and Hour Law, Wage Payment Law and Wage Collection Law. This would prevent employers from arguing for different worker classifications depending on whether unemployment insurance or wage claims are involved.

The specific clarifications are as follows:

• For Part A, the rules specify what constitutes “direction and control,” distinguishing between standard contracting terms and day-to-day micromanagement.
• For Part B, the proposal contextualizes “usual course of business” by offering specific examples and emphasizing how integral the service is to the employer’s regular operations and not merely the physical location where the work occurs.
• For Part C, the rules detail what evidence is necessary to show a worker is “customarily engaged” in an independently established business, such as maintaining a separate business entity, advertising services, carrying business insurance and serving multiple clients.

The rules also outline what type of evidence is persuasive for each prong and clarify that the employer bears the burden to prove all three prongs. There are exceptions to the rules for professional services, for certain salespeople and for workers exempt under New Jersey and federal statutes.

The experienced New Jersey employment attorneys of Deutsch Atkins & Kleinfeldt, P.C. we pay close attention to all changes and proposed changes in state law and regulations affecting employees’ rights. 

If you believe you have been misclassified as an independent contractor and are being denied the benefits you deserve, call us at 551-245-8894 or contact us online to schedule a consultation. Based in Hackensack, we serve clients throughout North Jersey and the New York metropolitan area.