A worker’s title doesn’t always tell the full story.
Someone may be called an independent contractor in an agreement, paid by invoice, or issued a 1099. But if the working relationship functions more like employment, the classification may need a closer look.
For employers, that distinction can affect pay practices, unemployment obligations, wage and hour compliance, documentation, and how managers direct the work. It’s not just a paperwork issue. It’s an HR and compliance issue.
In May 2026, the New Jersey Department of Labor and Workforce Development adopted regulations clarifying how the state’s ABC test applies when determining whether a worker is an employee or an independent contractor.
The ABC test is already part of New Jersey law and the new regulations don’t create a different test, but they do provide clearer guidance on how NJDOL interprets and applies it under laws, including the NJ Unemployment Compensation Law, Wage and Hour Law, and Wage Payment Law.
The rules have been adopted, but they won’t become operative until October 1, 2026. That gives New Jersey employers time to review contractor relationships, written agreements, and day-to-day practices.
Why Independent Contractor Classification Matters
Businesses often rely on consultants, freelancers, specialists, and other outside support. While employers may use independent contractors, each relationship still has to meet New Jersey’s requirements.
A contractor may begin with a defined project and considerable independence. Over time, the role may expand. The business may set regular hours, add ongoing responsibilities, require frequent reporting, or begin managing the person more like a member of staff.
As the role changes, employers should reassess whether the classification still fits the relationship. A written agreement, 1099, or business name alone doesn’t settle the question; NJDOL looks at how the relationship works in practice.
How New Jersey’s ABC Test Works
Under New Jersey’s ABC test, a worker is treated as an employee unless the business can prove all three parts of the test.
A: Is the worker free from control or direction?
The business must show that the worker is free from control or direction over how services are performed, both under the agreement and in practice.
Relevant questions may include who determines the schedule, how much instruction the business provides, whether the worker can perform services for other clients, and how closely the work is supervised.
B: Is the work outside the usual course or place of business?
The work must either be outside the company’s usual course of business, meaning outside the kind of work the company normally provides, or be performed outside all of the company’s places of business.
For example, a marketing firm hiring a plumber is bringing in someone to perform work outside its usual business. Hiring a freelance marketer to handle client work may be closer to the firm’s core operations. In that case, the employer would also need to consider whether the work is performed outside all of the firm’s places of business.
C: Is the worker independently established in business?
The worker must be “customarily engaged” in an independently established trade, occupation, profession, or business.
In practice, that means considering whether the person’s business exists independently of this particular relationship and could continue if the relationship ended.
Having other work or clients, forming an LLC, holding a professional license, or carrying insurance may be relevant, but no one item proves independent contractor status on its own.
If the employer can’t establish all three parts of the ABC test, the worker is classified as an employee.
Where Contractor Relationships Can Become Unclear
Uncertainty tends to show up in the small, routine decisions managers make after the agreement is signed.
The document may stay the same while expectations, oversight, and working habits shift.
That doesn’t automatically mean the classification is wrong, but it is a good reason to take another look.
Employers assessing contractor relationships should consider:
- What services is the contractor performing?
- How closely does that work relate to the company’s usual business?
- Who controls the schedule, process, and priorities?
- How much supervision or direction does the business provide?
- Can the contractor accept work from other clients?
- Does the contractor operate an established business separate from this relationship?
- Does the current arrangement still match the written agreement?
- Are managers treating the contractor more like an employee in practice?
What Employers Can Review Before October 1
Employers don’t need to wait until the operative date to take stock of current practices. A practical review can start with three areas:
Contractor relationships
Identify who is currently classified as an independent contractor, what work each person performs, and how long the relationship has continued.
Agreements and role expectations
Compare written agreements with the actual scope of work. Look for roles that have expanded, changed, or become more integrated into your regular operations.
Day-to-day management
Examine how managers communicate with contractors, assign work, establish schedules, monitor performance, and involve them in internal processes.
This process gives employers a clearer view of which relationships are straightforward and which need additional attention.
Because classification can involve employment law, tax, payroll, and benefits, employers should bring in the appropriate legal or financial professionals when the review uncovers issues in those areas.
How Lindenberger Group Can Help
Lindenberger Group helps organizations examine the HR side of contractor relationships before unclear practices become larger concerns.
We help employers assess how contractors are engaged, documented, and managed, then strengthen the process where needed. We also help employers turn the review into clear next steps, including flagging questions for the appropriate advisor.
With October 1 approaching, now is the time for New Jersey employers to assess how contractor relationships are structured and managed.
Don’t let a contractor relationship become a compliance problem. Contact Lindenberger Group to make sure what’s written on paper matches what happens in practice.
LindenbergerGroup.com
609-730-1049