End of the Side Hustle? NJ Adopts Controversial ABC Test Rules for Independent Contractors
the staff of the Ridgewood blog
Trenton NJ, New Jersey’s gig economy just hit a massive roadblock. In a move that has sent shockwaves through the state’s business community, the Sherrill administration has officially adopted a Murphy-era rule that drastically tightens the definition of an independent contractor.
The decision to move forward with the revised ABC Test parameters has drawn sharp criticism from the New Jersey Business & Industry Association (NJBIA), which warns that the new regulations could “grind significant portions of the gig economy to a halt.”
What is the New ABC Test Rule?
The “ABC Test” is the three-pronged criteria New Jersey uses to determine if a worker is a 1099 independent contractor or a W-2 employee. Under the new adoption:
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Stricter Standards: It becomes much harder for businesses to prove a worker is truly “independent.”
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Narrowed Flexibility: The rule reduces the ability for freelancers to set their own terms, impacting everything from rideshare drivers to freelance consultants.
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Immediate Impact: While the rule has been adopted, the New Jersey Department of Labor (NJDOL) has issued a 120-day stay to allow for potential legislative adjustments.
Why the NJBIA is Sounding the Alarm
NJBIA President and CEO Michele Siekerka released a blistering statement following the announcement, noting that while the administration held a 90-day review period, the final result is a “disappointment” for New Jersey’s affordability agenda.
“This proposal significantly reduced flexibility and opportunities for freelance workers who choose to be so, as well as the added costs facing businesses. It is significant to note that the rules would have a negative disproportionate impact on women, working mothers, and minorities.” — Michele Siekerka, NJBIA CEO
Key Concerns Raised by the Business Community:
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Lack of Predictability: Businesses now face uncertainty in how to classify workers without risking massive penalties.
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Economic Hit: Over 9,500 letters were sent in opposition to the rule, citing fears that it mirrors California’s controversial “AB5” law, which led to mass reclassifications and job losses.
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Affordability: In a state already struggling with high costs, the added payroll burdens on entrepreneurs could stifle new business growth.
What Happens During the 120-Day Stay?
The 120-day delay isn’t a cancellation—it’s a window. The Sherrill administration and the NJDOL intend to use this time to work with the Legislature on “required statutory changes.”
The NJBIA is calling for a new public comment period, arguing that the amendments made to the rule are significant enough to warrant a fresh round of transparency.
The Bottom Line for NJ Freelancers
If you are a gig worker, entrepreneur, or a business owner relying on independent contractors, the clock is ticking. By late summer, the rules of work in New Jersey could look very different. The fight now moves to the State House in Trenton, where legislators will decide if they will provide the “flexibility and clarity” the NJBIA claims is missing from the current text.
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