Independent Contractor Factors + Other NJDOL Proposals Paused as Part of Governor’s EO

Takeaways

• New Jersey’s new governor’s 01.23.26 executive order pauses all new or pending administrative rules for 90 days, including significant NJDOL proposals such as the ABC Test codification, pay transparency rules, and domestic worker regulations.
• The proposed ABC Test regulation goes beyond existing case law, adding new factors and examples that could make it harder for businesses to classify workers as independent contractors.
• Businesses should monitor developments closely while the new administration reviews paused proposals and agencies identify any rules whose delay could harm public health, safety, welfare, or security.

Related link

• Providing that no state agency shall propose or adopt any administrative rule for 90 days, subject to exceptions (EO-7)

Article

On Jan. 23, 2026, New Jersey Gov. Mikie Sherrill issued an executive order (EO) impacting numerous proposed regulations and rules that either have been proposed within the past 12 months or remained pending for the last 18 months, i.e., any rules issued in or around June 2024 but not yet formally adopted.

Gov. Sherrill explained that her new administration “should be afforded sufficient opportunity to examine the proposed rules and regulations … to ensure they are not inconsistent with the policies and priorities” of her administration.

Although the governor has yet to nominate a commissioner of the New Jersey Department of Labor and Workforce Development (NJDOL), the list of pending regulations impacted by the EO include proposed rules crucial to business operations, including the proposed regulation “codifying” the “ABC Test” into the Administrative Code (N.J.A.C. § 12:11-1, et seq.).

(Additional proposed rules affected include, inter alia, N.J.A.C. § 12:74-1, et seq., regarding pay transparency, and N.J.A.C. § 12:73-1, et seq., regarding domestic workers. Both of these were proposed in 2025 but have not been adopted.)

Proposed Regulation

On May 5, 2025, the NJDOL proposed a rule that the agency claims “codifies” existing case law on independent contractor classification. The proposal was opposed by multiple industries at the June 23, 2025, hearing.

Although the burden remains upon the putative employer to demonstrate the elements of the conjunctive ABC Test (described below), the proposed rule goes further by identifying factors to analyze and providing examples of what generally qualifies as an independent contractor and what generally does not qualify as an independent contractor that appear to go beyond the terms in the statute as well as existing case law guidance. If adopted, the proposed rule may prove to be challenging for businesses.

A. Prong “A”

In Prong A, the putative employer must demonstrate the business does not exercise control or direction over the independent contractor’s work. The proposed rule expressly notes “[t]he putative employer need not control every facet of a person’s work for that person to be an employee” and proceeds to list factors to apply when determining compliance with this element including, inter alia, determination of hours of work, right of control over the details and means by which the services are performed, whether the services must be performed by the independent contractor personally, the role the independent contractor plays in determining the rate of pay, whether the independent contractor may perform the services for others, and so on.

The NJDOL notes the proposed rule is not a checklist and expressly reserves discretion with a broad disclaimer: “The factors listed … are not exhaustive and additional factors may be considered.” Thus, NJDOL provides employers little guidance as to what factors may be considered and the weight given to any particular factor.

B. Prong “B”

To meet Prong B, the putative employer must demonstrate that the work performed by the independent contractor is either outside the putative employer’s usual course of business or those services are performed outside of all of the putative employer’s places of business.

After providing plainly obvious examples of services that fall outside a putative employer’s course of business (such as janitors for a dental office and musicians at a restaurant), the proposed rule sets forth examples of arrangements that generally do not meet Prong B because it is either purportedly within the usual course of business or within the putative employer’s places of business. For example, the NJDOL’s proposed rule identifies trucks, airplanes, vehicles, and personal residences of customers as places where an integral part of the putative employer’s business may be conducted. Such an expansive reading may compromise a business’s ability to meet Prong B of the test.

C. Prong “C”

Lastly, the proposed rule appears to greatly emphasize a portion of the Prong C test while all but ignores the remaining statutory language. Prong C requires the putative employer to establish that the contractor is “customarily engaged in an independently established trade, occupation, profession or business.” The proposed rule, however, focuses heavily on the independent contractor running a business only. It provides no guidance on how an independent contractor can have an independently established trade, occupation, or profession, implying the only way to establish Prong C is through an independently established business, which appears contrary to the statute.

Among other factors, the proposed rule sets forth considerations including the length of engagement, number of customers serviced by the independent contractor, the amount of remuneration received by the independent contractor from the putative employer as compared to remuneration from others, advertisements, and the like. The NJDOL also notes licensure in an occupation or profession (such as attorney and nurse) alone is not sufficient to meet Prong C. Moreover, the existence of a formal business entity such as sole proprietorship or limited liability company or corporation is alone not sufficient to meet Prong C.

Impact of the EO

Gov. Sherrill’s EO means only that the current administration will further review the proposed rule. The EO prohibits the issuance or adoption of any new proposed rules for a 90-day period and requires agencies to submit a memorandum identifying any proposed rules whose non-adoption would “adversely impact public health, safety, welfare, or security” by Feb. 2, 2026.

To be certain, the EO appears only to pause the regulatory process. Businesses must closely monitor the status of these proposed rules as the administration’s policies crystalize in the early days of Gov. Sherrill’s term.

Please contact a Jackson Lewis attorney with any questions about independent contractor classification and other workplace issues.