New Jersey tightens contractor classification rules

By AI, Created 3:11 PM UTC, May 26, 2026, /AGP/ – New Jersey has finalized regulations that fold the ABC test into state wage and unemployment enforcement, a move that could make it harder for businesses to treat workers as independent contractors. The rules take effect Oct. 1 and may affect industries that rely on freelance, gig and contract labor.

Why it matters: - New Jersey’s finalized rules raise the bar for businesses that want to classify workers as independent contractors under state law. - Worker status can affect overtime pay, minimum wage protections, unemployment benefits and other workplace rights. - Industries that rely on freelance, contract or gig-based labor could face more disputes over classification.

What happened: - The New Jersey Department of Labor enacted the regulations on May 5, 2026. - The rules formally incorporate the ABC test into enforcement of the New Jersey Unemployment Compensation Act, the New Jersey State Wage and Hour Law and the New Jersey Wage Payment Law. - The regulations are expected to take effect on Oct. 1, 2026. - Lipsky Lowe LLP says the new framework could make contractor classification significantly harder for businesses.

The details: - Under the ABC test, a business must satisfy all three prongs to classify a worker as an independent contractor. - The business must show that the worker is free from company control. - The business must show that the work falls outside the company’s usual business or locations. - The business must show that the worker operates an independently established business or trade. - Failure to satisfy any one prong results in employee classification. - The ABC test has existed in New Jersey for years, but the new regulations add guidance for courts and agencies handling classification disputes. - Douglas Lipsky, founding partner of Lipsky Lowe LLP, said: “This leaves no doubt that New Jersey has one of the toughest standards for employers to meet when trying to classify workers as independent contractors.”

Between the lines: - The updated rules do not create the ABC test from scratch, but they strengthen how New Jersey can enforce it. - That could make classification challenges more predictable for agencies and more difficult for employers that depend on flexible labor models. - The firm has also focused on alleged misclassification issues involving golf caddies.

What’s next: - Businesses operating in New Jersey will need to review contractor relationships before the Oct. 1 effective date. - Workers who think they may have been misclassified may want to speak with an employment attorney about possible rights and remedies under New Jersey law. - Legal disputes over contractor status are likely to remain active as the rules take effect and courts apply the updated guidance.

The bottom line: - New Jersey has sharpened one of the strictest contractor tests in the country, and employers that rely on nonemployee labor may face more classification risk.