The New Jersey independent contractor regulation officially took effect Thursday, putting an end to speculation in recent weeks that the October 1 implementation might be delayed.
The regulation formally codifies the ABC test as the standard for determining whether a worker should be classified as an independent contractor.
Business organizations across New Jersey have broadly opposed the regulation, including groups representing the trucking industry. But Richard Reibstein, an attorney specializing in independent contractor law at Littler Mendelson, offered one of the clearest summaries of the concerns raised by opponents.
Changes moderate the original proposal
Reibstein noted that the initial proposal issued last year was subsequently modified, making the final version less punitive than the original draft.
In recent comments, he said the final regulation “takes a more moderate regulatory approach than the proposed regulation issued in April 2025.” However, he added that it still establishes “one of the most business-unfriendly tests for IC status in the country” and interprets that test in a particularly restrictive way.
New Jersey’s approach inevitably draws comparisons with California’s AB5 law, which also codified the ABC test. But the two processes are different.
In California, the legislature passed the law and it was subsequently signed by the governor. New Jersey, by contrast, adopted its standard through a rulemaking process. The regulation establishes a framework that regulators or courts can use when determining independent contractor status.
The ABC test has long been viewed as a standard more likely to classify a worker as an employee rather than an independent contractor. That distinction can have significant consequences for the relationship between a company and a worker who previously considered themselves independent, including issues involving control, minimum wage, workers’ compensation and other employment protections.
Although the precise wording can vary slightly, the ABC test requires three conditions to be met for a worker to legally qualify as an independent contractor:
A: The worker must be free from control and direction.
B: The work must be “outside the usual course of the hiring company’s business.” This requirement is particularly significant for trucking companies, where an operator may have as much as 100% of its freight needs handled by independent contractors.
C: The worker must be “customarily engaged in an independent trade, occupation, profession, or business that has lasting enterprise and independent viability.”
No breaks for anybody
Unlike California’s AB5, the New Jersey regulation contains no carve-outs for specific industries that could be particularly affected by the new standard.
California’s exemptions cover a wide range of professions, from surgeons to translators. New Jersey, by comparison, adopted a “clean” regulation that applies across the board, regardless of industry.
Opponents of the New Jersey rule were not necessarily calling for a similar system of exemptions.
In a prepared statement criticizing the regulation, New Jersey Chamber of Commerce President and CEO Tom Bracken said the state “should not follow California’s path of responding to problems with its independent contractor law by creating numerous exemptions and carve-outs for specific professions and industries.”
According to Bracken, that approach creates “an increasingly complicated patchwork of rules and even more uncertainty.”
Instead, he argued that “New Jersey needs a clear, consistent and workable standard that applies fairly across our economy.”
His organization therefore called for the implementation to be delayed.
The ABC test was already part of New Jersey’s legal framework governing independent contractor status before the new rulemaking process. Supporters of the regulation had sought to emphasize that the new rule essentially codified principles that were already present.
Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, strongly disputed that characterization.
“The state’s Department of Labor has dismissed this adoption as merely the codification of already existing regulatory actions and behavior, when, in fact, it is now leaving open an overly broad interpretation of an ABC framework from nearly a century ago,” she said in a prepared statement.
“In New Jersey, this is now the legal default, and a virtually impossible standard to meet, without any acknowledgement of the realities of the modern gig economy,” Siekerka added.
Nationwide impact
The implications of the New Jersey regulation may extend beyond businesses physically based in the state, according to Reibstein.
In his latest commentary, he warned that companies operating on a nationwide basis could also be affected if they use New Jersey workers.
“While some companies may mistakenly regard this New Jersey regulation as only governing businesses located or operating a facility in New Jersey, it also impacts companies operating on a nationwide basis that engage any New Jersey workers who perform services from their home offices or other business locations in New Jersey,” he wrote.
