Workers have long been presumed to be employees. To rebut that presumption, an employer bears the burden of proving all three elements of what has been known as the ABC Test. On May 5, 2026, New Jersey Department of Labor adopted new rules for independent contractor standards.  Specifically, these new rules clarify the “ABC Test” for determining whether the worker is to be classified as an employee or an independent contractor, including:   

• Element #1 of the ABC Test sets forth that the individual be free from the employer’s control or direction over how services are to be performed.

• Changes to Element #1. The new rules adopted by the NJ Department of Labor enumerate nine (9) factors, including whether the worker must be on call, whether the employer limits the worker’s geographic area or clientele, and whether the employer provides training. Non-compete and non-solicitation clauses in a contractor agreement are Element #1 evidence weighing against independent contractor status.

• Element #2 of the ABC Test sets forth that the work performed is either outside the usual course of business for which the work is being performed, or the work is performed outside all of the places of business of the enterprise.

• Examples: a cleaning person at a dental office likely satisfies this element; a rideshare driver for a transportation network company does not satisfy this element.

• Element #3 of the ABC Test sets forth that the worker is customarily engaged in an independently established trade, occupation, profession or business. 

• Under Element 3, none of the following are sufficient alone: having multiple employers, licensure, business registration, or carrying insurance. The worker must have a genuine, independent business that existed apart from the hiring relationship and would survive its termination.

Moving forward, issuing a Form 1099, labeling someone a contractor in an agreement, or pointing to business registration and insurance alone will not suffice. Employers have until October 1, 2026 to comply with the new rule.

If you or your organization would like assistance navigating the new rules or determining the status of an employee/independent contractor, please contact PTGB Law at (201) 569-5959 so that our attorneys can help you navigate the evolving employment-law landscape.