By Ty Hyderally, Esq., Eli Linden

August 7, 2025

Misclassification of employees as independent contractors is sometimes intentionally used by unscrupulous employers to deprive certain under-empowered employees of overtime, unemployment benefits, and protections from certain statutory violations. Hopefully, New Jersey workers will soon have the protection of legislation aimed at preventing employer misclassification of employees as independent contractors.

In April 2025, the New Jersey Department of Labor and Workforce Development (NJDOL) filed proposed rules at N.J.A.C. 12:11, intended to codify the definition of an employee under several New Jersey statutes, including those concerning unemployment benefits and payment of minimum wages and overtime. The proposed rules appeared in the New Jersey Register on May 5, 2025.^[1] The public comment period, originally ending on July 4, 2025, was extended to August 6, 2025, in light of widespread interest and feedback.

Under the proposed regulations, employers must satisfy all three prongs of the “ABC Test” to justify treating a worker as an independent contractor rather than an employee. The three prongs of the ABC Test are:

(A) Whether the worker is free from the company’s control or direction;

(B) Whether the worker is performing work outside the employer’s usual course of business or location; and

(C) Whether the worker is engaged in an independently established trade, occupation, or business.

While New Jersey courts have enforced the ABC Test for years, the proposed regulations would be the first binding rules spelling out the NJDOL’s interpretation and enforcement approach.^[2] These rules draw heavily on precedent, particularly Carpet Remnant Warehouse, Inc. v. New Jersey Department of Labor, 125 N.J. 567 (1991) and East Bay Drywall, LLC v. Dep’t of Labor and Workforce Development, 251 N.J. 477 (2022), where the New Jersey Supreme Court urged the NJDOL to clarify its regulatory authority and promote consistency.

Under Prong A, even reserving the right to control work, such as setting schedules, providing training, or requiring the use of company-provided tools, could disqualify independent contractor status.[3] Prong B would be clarified to be construed that work performed at a client’s location that is integral to the employer’s usual operations would, in all likelihood, be considered within the employer’s business.[4] Prong C would be clarified to emphasize that merely holding a business license, using a 1099 form, or servicing a few clients is insufficient, in and of itself, to impart independent contractor status. Rather, employees must show a durable trade independent of the hiring entity.[5]

NJDOL Commissioner Robert Asaro-Angelo has emphasized that the ABC Test aims to protect employees while providing clarity for employers. As he put it, “[N]ot only would these new rules protect workers’ rights, but they would also ensure that bona fide independent contractors understand what makes them independent contractors, rather than employees, so that they can continue to operate with autonomy.”^[6] The proposed rules will provide protections for employees who do not control their schedule, perform integral work for a single payer, or lack true independent business structures.

The proposed codification of the ABC Test is welcome news for New Jersey employees, as, if enacted, the regulation will provide clear rules defining when a worker should be classified as an employee.

If you have any questions regarding your rights as an employee, you should seek out an experienced attorney who concentrates in employment law. Our firm has concentrated in employment law for over twenty-two (22) years!

En nuestra firma hablamos español. This blog is for informational purposes only. It does not constitute legal advice and may not reasonably be relied upon as such. If you face a legal issue, you should consult a qualified attorney for independent legal advice regarding your particular set of facts. This blog may constitute attorney advertising. This blog is not intended to communicate with anyone in a state or other jurisdiction where such a blog may fail to comply with all laws and ethical rules of that state or jurisdiction.

^[1] N.J. Dep’t of Lab. & Workforce Dev., Proposal No. PRN 2025-__, Proposed New Rules: N.J.A.C. 12:11, at 5-6 (Apr. 3, 2025) (to be codified at N.J. Admin. Code Tit. 12, Ch. 11).

^[2] N.J. Dep’t of Lab. & Workforce Dev., NJ Labor Dep’t Proposes New Rules to Address Statutory “ABC Test” for Independent Contractor Status (Apr. 28, 2025), https://www.nj.gov/labor/lwdhome/press/2025/20250428_ABC.shtml.

[3] N.J. Dep’t of Lab. & Workforce Dev., Proposal No. PRN 2025-__, Proposed New Rules: N.J.A.C. 12:11, at 5-6 (Apr. 3, 2025) (to be codified at N.J. Admin. Code Tit. 12, Ch. 11).

[4] Id. at 9.

[5] Id. at 10-14.

^[6] N.J. Dep’t of Lab. & Workforce Dev., NJ Labor Dep’t Proposes New Rules, supra note 3.