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New Jersey Department of Labor codifies ABC test for independent contractors

5/18/26

By: Andrew Sheppard

On May 5, 2026, the New Jersey Department of Labor enacted final regulations that codify the “ABC test” for determining whether a worker is an employee or an independent contractor under the New Jersey Unemployment Compensation Act, the New Jersey State Wage and Hour Law (“WHL”), and the New Jersey Wage Payment Law (“WPL”).

The ABC test is controversial but has been an integral part of New Jersey’s wage-and-hour laws for over a decade. In 2015, the Supreme Court of New Jersey ruled that the ABC test, which originates from the New Jersey Unemployment Compensation Act, would also be used for determining independent-contractor status under the WHL and the WPL. The new regulations codify that existing case law and add clarification to the factors to be considered under each prong of the test. The final regulations will go into effect on October 1, 2026.

Under the ABC test, a putative employer must show three things to avoid having a worker classified as an employee:

• Prong A: Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; and
• Prong B:   Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
• Prong C:  Such individual is customarily engaged in an independently established trade, occupation, profession or business.

The employer bears the burden of establishing each prong, and failure to establish any prong results in an “employee” classification.

These regulations’ primary effect is to outline factors that courts and administrative agencies may consider when evaluating each prong of the test. The regulations have garnered attention from businesses and trade groups because of the ABC test’s strong slant toward “employee” classification and its potential effects on New Jersey’s economy. The test itself raises questions as to how gig workers from rideshare drivers to golf caddies—who have traditionally been considered independent contractors—will be classified going forward and the effect of an “employee” classification on the desirability of some services to continue operating in New Jersey. While the ABC test has been New Jersey law for years, some of the factors outlined in the new regulations will likely impact how the test is applied to particular businesses.

FMG’s New Jersey labor and employment attorneys have extensive experience defending businesses against WHL and WPL claims under state and federal law, including class actions. For more information, contact Andrew Sheppard at andrew.sheppard@fmglaw.com or your local FMG attorney.

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