On May 5, 2026, the New Jersey Department of Labor and Workforce Development (NJDOL) announced the adoption of its final rule clarifying the application of the state’s ABC test for determining whether a worker is an independent contractor or employee under several state laws, including the NJ Wage & Hour Law and NJ Wage Payment Law. The final rule comes approximately one year after the NJDOL’s initial proposal (see HERE) and is anticipated to become operative on October 1, 2026.
Underlying ABC Test Remains the Same
While the NJDOL removed several provisions and examples from the proposed rules that “created uncertainty,” the final rule does not alter the underlying ABC test. The NJDOL reiterates that the putative employer bears the burden of establishing all three prongs of the ABC test, as follows:
- Prong A: Worker was and is free from control or direction over the performance of services, contractually and factually;
- Prong B: Work performed is either (1) outside the usual course of business, or (2) outside the enterprise’s places of business; and
- Prong C: Worker is customarily engaged in an independently established trade, occupation, profession, or business.
Highlights of the Final ABC Rule
The final rule takes a decidedly less aggressive approach to classification determinations by modifying several provisions included in the proposed rule, including the following:
Prong A: Freedom from Control or Direction
- Removes the control sub-factor concerning required use of the company’s app or software.
- Adds a sub-factor addressing whether workers must report services at set times or intervals.
- Clarifies that compliance with federal, state, or local law does not alone establish control or direction.
Prong B: “Usual Course of Business” and “Usual Places of Business”
- Removes several examples of services performed within the “usual course of business,” including rideshare drivers using a company app or software.
- Removes the distinction between “essential” and “ancillary” off-site work for determining the “usual places of business.”
- Clarifies that a remote worker’s home is not a putative employer’s “place of business.”
Prong C: Independently Established Business
- Removes language stating that the relevant question is not whether the worker has the right to work for others, but whether the worker actually performs paid work for others.
- Recodifies a provision stating that factors such as multiple clients, professional licensure, business registration, entity formation, or insurance alone do not establish independent contractor status.
Employer Takeaways
While the final rule relaxes certain aspects of the proposed rule, it reinforces the NJDOL’s continued focus on worker misclassification and confirms that the ABC test remains a stringent standard. Employers should expect continued scrutiny, particularly where business practices do not align with contractual designations. In advance of the anticipated October 1, 2026 operative date, employers should consider the following steps:
- Conduct proactive audits of existing independent contractor relationships;
- Review independent contractor agreements, policies, and practices to ensure compliance with the ABC test and final rule;
- Ensure actual practices align with contractual terms; and
- Train managers and supervisors on risks and requirements under the final ABC rule.
If you have any questions related to the final ABC rule, or need assistance reviewing independent contractor agreements, policies, and/or practices, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100.