New Jersey Finalizes ABC Test Rules: What You Need to Know Before October 1, 2026

On May 5, 2026, the New Jersey Department of Labor and Workforce Development (NJDOL) adopted final regulations clarifying how the state’s ABC test applies when determining whether a worker is properly classified as an W-2 worker or an independent contractor. The new rules are scheduled to become operative on October 1, 2026.

New Jersey continues to apply the ABC test under N.J.S.A. 43:21-19(i)(6)(A-C). Under this framework, all three prongs of the test must be met.

To satisfy the ABC test:

Prong A: The independent contractor must be free from the company’s control or direction in performing the services, both under the contract and in practice.

Prong B: The services must either be outside the company’s usual course of business or be performed outside all of the company’s places of business.

Prong C: The independent contractor must be customarily engaged in an independently established trade, occupation, profession, or business.

Unless all three prongs can be met, the individual generally must be classified as a W-2 worker under applicable New Jersey law rather than engaged as an independent contractor.

The 2026 regulations do not create a new ABC test. Instead, they provide guidance clarifying how the NJDOL will interpret and enforce the existing statutory test across laws such as the New Jersey Unemployment Compensation Law, the New Jersey Wage and Hour Law, and the New Jersey Wage Payment Law. NJDOL stated here that the rules synthesize decades of court decisions, including East Bay Drywall, LLC v. Department of Labor and Carpet Remnant Warehouse, Inc. v. NJ Department of Labor.

One key area of clarification is in regard to Prong B. The final rule explains that a company’s “usual course of business” may include activities the company regularly performs to generate revenue or to develop, produce, sell, market, or provide goods or services. The rule also notes that a company may have more than one usual course of business.

The regulations also clarify the meaning of “places of business” as work performed at customer locations, remote job sites, home offices, or digitally connected environments may still be considered part of the company’s business premises for purposes of the ABC test.

NJDOL also reinforced that labels alone do not determine worker classification status. Issuing a Form 1099, entering into an independent contractor agreement, or referring to an individual as an independent contractor will not override the ABC test if the facts of the relationship show otherwise.

While the ABC test applies broadly, certain statutory exemptions remain, including exceptions for domestic servants working in private homes and certain agricultural workers.

For businesses that engage independent contractors in New Jersey, the message is clear: classification should be based on the substance of the working relationship, not the paperwork alone. Companies should review their contractor arrangements before October 1, 2026, with particular attention to whether the services performed are connected to the company’s usual business and whether the worker operates a truly independent business.

At TCWGlobal, we can help your organization stay compliant by handling the complexity of proper classifications based on the jurisdiction where the work is being performed. For more information about independent contractor compliance across the United States, explore our IC Compliance Guide for a state-by-state breakdown of independent contractor laws or connect with us at tcwglobal.com or email us at hello@tcwglobal.com to learn how we can assist your business in navigating this evolving area of the law.