New Jersey adopts strict “ABC test” for independent contractors

Classifying a worker as an independent contractor will likely be more difficult for New Jersey businesses soon.

The New Jersey Department of Labor and Workforce Development (NJDOL) today adopted new regulations that strengthen its interpretation of the “ABC Test” used to guide independent contractor classification under several state employment laws.

These new regulations, which will take effect October 1, extend beyond the current statutes and case law in several important ways. Perhaps most significantly, they require that a business refrain not only from exercising control or direction over an individual’s work in fact but also from reserving the right to control or direct the individual’s work.

In response to concerns raised by the public, the NJDOL made several changes from the draft version it proposed last year, including:

• Expressly stating that the new regulations do not affect statutory exemptions under other laws, such as the overtime exemptions for white-collar employees or the paid sick leave exemption for construction employees;
• Removing from consideration any requirements that a worker use the hiring party’s digital application or software;
• Specifying that actions taken by the hiring party to comply with federal, state or local laws will not be considered evidence of control on their own; and
• Removing several specific examples.

“We heard from New Jersey’s business community and workers – and we acted on it,” Acting NJDOL Commissioner Kevin D. Jarvis said. “We removed provisions in the draft rules that created uncertainty and built a framework shaped by their input, one that protects legitimate independent contractors, supports employees, and respects businesses that follow the rules.”

Nevertheless, industry leaders were not satisfied. “While some of our suggested changes were included, it is definitely a disappointment [that the NJDOL adopted its new ABC rule],” New Jersey Business & Industry Association President and CEO Michele Siekerka said.