The New Jersey Department of Labor and Workforce Development has adopted new regulations clarifying how workers are classified as either employees or independent contractors, an effort they say will protect workers’ rights while giving businesses clearer guidance on compliance.

The rules formalize the state’s longstanding “ABC test,” which determines whether a worker can legally be treated as an independent contractor. The regulations apply across several statutes, including the state’s unemployment compensation, wage and hour, and wage payment laws.

State labor officials said the changes are designed to reduce confusion for employers while preventing worker misclassification, a practice that can deny employees access to benefits and protections.

The regulations draw on decades of legal precedent, including rulings by the New Jersey Supreme Court, such as East Bay Drywall, LLC v. Department of Labor (2022) and Carpet Remnant Warehouse, Inc. v. NJ Department of Labor (1991), both of which reinforced strict standards for independent contractor status.

Acting Labor Commissioner Kevin Jarvis said the department revised earlier proposals after extensive feedback from stakeholders.

“We heard from New Jersey’s business community and workers — and we acted on it,” Jarvis said in a statement. “At its core, this action has always been about protecting workers through fairness and clarity.”

During the rulemaking process, the department extended the public comment period from 60 to 90 days and held a public hearing, receiving thousands of comments. Officials said the final rules reflect significant input from the business community, including the removal of certain examples that had raised concerns about ambiguity.

Under the ABC test, employers must prove three criteria to classify a worker as an independent contractor: that the worker is free from control, performs work outside the usual course or location of the business, and is engaged in an independently established trade or business.

Labor officials say the updated rules will help ensure a level playing field by preventing companies from gaining a competitive advantage through misclassification, while also preserving protections for legitimate independent contractors.

The regulations are scheduled to take effect October 1, 2026, following an anticipated publication date of June 1.