Labor & Employment Law Daily Wrap Up, STATE REGULATIONS—NEW JERSEY—State labor department adopts ABC test guidance rule, emphasizing existing standards, (May 7, 2026)

By Patricia K. Ruiz, J.D.

The Department of Labor and Workforce Development frames the new rule as interpretive guidance clarifying long-standing worker classification law.

The New Jersey Department of Labor and Workforce Development has adopted N.J.A.C. 12:11, a regulation that provides detailed guidance on applying the state’s ABC test for worker classification across multiple labor statutes. Effective October 1, 2026, the rule does not alter the statutory test but codifies the department’s interpretation drawn from existing law and precedent. The department explains the measure is intended to improve consistency, compliance, and understanding of the ABC test following extensive public comment.

Interpretive, rather than substantive, regulation. The adopted rule applies to statutes administered by the department, including the Unemployment Compensation Law, Wage and Hour Law, Wage Payment Law, Temporary Disability Benefits Law, Earned Sick Leave Law, and Call Center Jobs Act, and is designed to “delineate” how the ABC test is applied in enforcement. Throughout the adoption notice, the department characterizes the regulation as interpretive rather than substantive, repeatedly responding to commenters that it does not create a new or expanded test but instead memorializes long-standing statutory requirements and judicial interpretations. The agency emphasizes that the ABC test has been part of New Jersey law since 1936 and has already been extended by courts to wage and hour contexts.

Three prongs. N.J.A.C. 12:11 provides structured guidance on each of the three prongs of the ABC test, under which a worker is presumed to be an employee unless all elements are satisfied.

For prong A, addressing control or direction, the rule outlines a non-exhaustive set of factors such as supervision, training, and operational requirements, and clarifies that these must be evaluated within the totality of the relationship. It further states that compliance-driven controls—those imposed to meet legal or regulatory obligations—remain relevant to the analysis.

For prong B, the rule addresses whether services are performed outside the usual course of business or outside all places of business, incorporating language from existing case law and providing illustrative examples.

For prong C, the regulation identifies factors relevant to determining whether a worker is engaged in an independently established business, including customer base, revenue sources, and the scale and continuity of the enterprise, while noting that the mere ability to work for others is not dispositive.

Fact-sensitive nature of test. The department underscores that the regulation preserves the fact-sensitive nature of the ABC test, stating that no single factor or set number of factors determines the outcome of any prong and that determinations must be made on a case-by-case basis. It declines to address specific industries or business models within the rulemaking, explaining that such issues are more appropriately resolved in individual adjudications applying the test to particular facts.

In response to concerns about the potential impact on flexible work arrangements, the agency states that neither the rule nor the underlying statutes prohibit flexibility in employment relationships or eliminate independent contractor classifications.

Statutory exemptions, authority. The adoption notice also addresses statutory exemptions under the Unemployment Compensation Law, clarifying that such exemptions affect contribution and benefit obligations but do not independently establish worker classification status. In responding to comments challenging its authority, the department cites its rulemaking powers and longstanding principles of deference to agency expertise, maintaining that the regulation is consistent with statutory mandates and existing legal.

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