New Jersey primarily uses the strict ABC test to classify gig workers as employees or independent contractors. This determines access to benefits like minimum wage, overtime, and unemployment insurance. Misclassification remains a key issue in the gig economy.
ABC Test Criteria
To qualify as an independent contractor, all three prongs must be met:
- A: Free from the hiring entity’s control or direction over work performance.
- B: Work performed outside the entity’s usual business course.
- C: Worker engaged in an independently established trade, business, or occupation of the same nature.
Failure on any prong defaults the worker to employee status.
Employee vs. Contractor Rights
Employees gain wage protections, overtime, benefits eligibility, and NJLAD anti-discrimination coverage. Contractors handle their own taxes and benefits but retain some NJLAD protections and health/safety standards. Misclassification risks fines, back pay, and reclassification for employers.
Recent Developments
In 2025, NJDOL proposed ABC test revisions facing business pushback for harming gig flexibility and costs; no final 2026 changes confirmed. Federal DOL rules emphasize economic dependence but defer to state tests like NJ’s. Consult NJDOL or legal counsel for case-specific classification.
