The Labor Department says the regulations explain an existing legal test, while business groups and freelancers are pressing for changes or a delay.
MORRISTOWN, NJ – New Jersey’s regulations governing whether a worker is an employee or an independent contractor are scheduled to become operative Oct. 1, as the state and critics disagree over what they will mean for businesses and freelancers.
In a Sept. 21 New Jersey Monitor report, Acting Labor Commissioner Kevin Jarvis said the regulations do not change the state’s classification test or enforcement approach. Critics argue that the underlying standard does not fit modern freelance, remote and gig work.
The distinction affects access to wage protections and benefits. It also determines responsibilities for employers that pay workers to perform services.
The regulations address New Jersey’s ABC test, under which the business must establish all three conditions to classify a covered worker as an independent contractor. The Department of Labor’s adoption announcement describes the requirements:
- A: The worker is free from the business’s control or direction, both under the contract and in practice.
- B: The service is outside the business’s usual activities, or it is performed outside all of the business’s places of business.
- C: The worker customarily operates an independently established trade, occupation, profession or business.
The department says the rules collect principles developed through court decisions, including New Jersey Supreme Court cases dating to 1991 and 2022. Its May announcement said certain examples were removed from the proposed regulations in response to public comments.
Jack Kelly, a government affairs associate at the New Jersey Business and Industry Association, told the Monitor that the decades-old statutory test needs revision. The outlet also reported that legislators, including Senate President Nicholas Scutari, have called for a delay.
An Assembly committee advanced legislation on Sept. 17 addressing an exemption for certain insurance brokers, according to the Monitor. Committee advancement does not itself create an exemption. Jarvis told the outlet he was uncertain whether the department could delay the scheduled start on its own.
For workers, the label on a tax form does not settle the issue. The department’s worker guidance says receiving a 1099 instead of a W-2 does not establish that someone has been correctly classified. Requiring a worker to create an LLC likewise does not, by itself, resolve the employment relationship.
The state examines the working arrangement, including control over how tasks are performed and whether the worker operates a business that can exist independently of the company paying for the work. Classification can affect unemployment coverage, workers’ compensation, earned sick leave and wage claims, subject to the requirements of the relevant laws.
Workers who believe they are misclassified can contact the department at 609-292-2321 or misclass@dol.nj.gov. Businesses and workers can also consult the filed adoption document, which identifies Oct. 1 as the operative date, for the regulations and the department’s responses to public comments.