NJBIA Demands Pause on Strict Independent Contractor Regulations Set for Oct. 1
the staff of the Ridgewood blog
Trenton NJ, The New Jersey Business & Industry Association (NJBIA) has launched a grassroots campaign calling on Governor Mikie Sherrill’s administration to freeze the implementation of controversial New Jersey Department of Labor and Workforce Development (NJDOL) regulations. The proposed rule expands the state’s “ABC test,” making it significantly harder for businesses to classify workers as independent contractors.
Although Governor Sherrill instituted a 120-day stay following the codification of the regulations on May 5 to evaluate potential statutory fixes with state lawmakers, no legislative remedies have been passed. With the stay expiring, the regulations are scheduled to take effect on October 1.
What Is the ABC Test and Why Are Businesses Concerned?
Under the newly codified ABC test, every worker in New Jersey is legally presumed to be an employee unless a business can definitively prove all three distinct requirements:
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Prong A: The individual is free from control or direction over the performance of their work.
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Prong B: The service provided is outside the usual course of the hiring business or performed entirely outside all places of business.
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Prong C: The worker is customarily engaged in an independently established trade, occupation, or business.
Unlike multi-factor balancing tests used elsewhere, failing even one prong automatically classifies the worker as an employee under state law, regardless of signed independent contractor agreements or 1099 tax filing status.
The ‘Prong B’ Problem: Outdated Framework for Modern Gig Work
NJBIA Policy Analyst Jack Kelly highlighted “Prong B” as the most disruptive provision for the modern economy. Under the state’s strict interpretation, if a freelancer provides services that generate revenue for a business, they are almost automatically considered part of that company’s “usual course of business”.
“They cement into regulation a legal framework that originated in 1936, when the ABC test was developed for workers’ compensation cases during a vastly different economic era,” Kelly stated. “Independent professionals today perform app-based work, consulting, project-based services. Yet these regulations now adopt a framework built for the labor market of 90 years ago and make it the default standard for modern employment relationships.”
Opponents warn that similar policies in California severely disrupted freelance opportunities, reduced scheduling flexibility, and raised operating expenses for local businesses without guaranteeing increased traditional employment.
The Campaign for a Delay: What NJBIA Is Asking For
While NJBIA ultimately opposes the expansion of the rule entirely, the group is urging freelancers, business owners, and consumers to participate in a public campaign petitioning the administration for a delay.
The grassroots campaign calls for pushing the effective start date back to July 1, 2027, giving stakeholders and the Legislature adequate time to address compliance ambiguities.
How to Take Action
Freelancers and business leaders interested in submitting a formal request to delay the rule can participate through the official petition portal at njbia.org/ABCDelay.
Key Takeaways
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October 1 Deadline: The NJDOL worker classification rule takes effect Oct. 1 following the expiration of an administrative stay.
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Strict Burden of Proof: Businesses must prove all three prongs of the ABC test to classify a worker as an independent contractor.
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Grassroots Action: NJBIA is urging state leadership to delay implementation until July 1, 2027, to resolve ongoing practical and economic concerns.
Tags: New Jersey Business, Gig Economy, Labor Laws, NJ Politics, Independent Contractors, NJBIA
