Published
August 11, 2025
As some have said, “As California goes, so go other blue states.” Following California’s lead, New Jersey recently proposed a regulation that would implement legislation creating an 'ABC test' to determine whether someone is an independent contractor or an employee.
In contrast to California’s AB5 law enshrining its ABC test, New Jersey’s law does not include the array of exempt industries that California’s does. Consequently, if finalized, New Jersey’s regulation would pose an even greater threat to the continued use of independent contractors as well as the digital platforms that rely on them. The New Jersey statute’s ABC test is to be applied to a wide array of laws covering minimum wage, overtime, unemployment compensation insurance, sick leave, and workers’ compensation law.
To refresh, under an ABC test, for a worker to be classified as an independent contractor, all three conditions must be met:
- The worker must not be controlled by the hiring company;
- The work must be outside the usual course of the hiring business; and
- The worker must be customarily engaged in an independently established trade, occupation, profession or business.
New Jersey’s proposed regulation makes each of these prongs extremely difficult to satisfy while also allowing factors not included to be considered, and making clear that the enumerated factors are not to be seen as a checklist. The net effect is that putative employers will often be left wondering which factors matter and whether their classifications will be questioned due to some factor or factors they could not have foreseen. Furthermore, the New Jersey proposed regulation puts the burden of proof on employers to show that all prongs of the ABC test have been met.
On August 6, the Chamber filed comments opposing New Jersey’s proposed regulation and citing several flaws, such as inconsistency with New Jersey case law and heavy bias towards finding an employment relationship. As the Chamber stated in its comments:
The independent contractor model is particularly important to small businesses, which rely on independent contractors’ skill and expertise to provide services outside of the companies’ core business. By reducing the need for economies of scale, independent contracting enables small businesses to compete with larger domestic and international companies, boosting competition and lowering prices for all consumers. Access to independent contractors is also critical in industries where talent is scarce, and workers prefer short-term, flexible work arrangements over traditional employment.
Furthermore, many small businesses operate as independent contractors, voluntarily choosing the independent contractor model to preserve flexibility and control over their operations rather than become employees with more rigid restrictions on their services. To the extent this rule will reduce opportunities for independent contracting, these small businesses will suffer.
In sum, while the Department’s proposal assumes that workers would benefit from being employees, this is incorrect. Policies that support independent contracting facilitate productivity and growth, thereby making the economy more competitive. They also help workers with entrepreneurial inclinations to pursue higher income, and an autonomy that leads to greater work satisfaction for nine in ten independent contractors. Policies that inhibit the formation of independent contracting relationships have the opposite effect: muzzled competition, stunted incomes, decreased flexibility and opportunity, and significant job loss.
Against this backdrop, the Department has proposed a rule that would trigger widespread reclassification and significantly increase litigation. The Proposed Rule consistently favors employee status. This preference has potentially far-reaching negative consequences for entire industries, yet the Department appears not to have considered the economic and operational harm that widespread reclassification would cause to businesses and workers.
The Chamber comments called for New Jersey to withdraw the proposed rule, or modify it significantly to reflect the concerns highlighted in our comments.
About the author
Marc Freedman
Marc Freedman is vice president of workplace policy at the U.S. Chamber of Commerce. He develops and advocates the Chamber’s response to OSHA matters; FLSA issues such as overtime, minimum wage, and independent contractors; paid leave issues; EEOC, and other labor and workplace issues.
