Your business uses independent contractors because the arrangement makes sense for the work being performed.
Maybe you hire a consultant for specialized projects, use subcontractors when demand increases, or regularly work with people who invoice your company and receive a 1099 instead of a W-2.
With new worker-classification regulations for New Jersey becoming operative on October 1, 2026, you might be wondering whether those arrangements need another look.
The regulations do not create an entirely new test for deciding whether someone is an employee or an independent contractor. New Jersey already uses the ABC test for worker classification under several state labor laws. The new rules provide more detailed standards for how that test is applied.
For businesses in Voorhees and throughout South Jersey, now is a useful time to understand what the state actually looks at and whether the way your contractors work matches the way they are classified.
What Is Changing for New Jersey Businesses on October 1?
New Jersey labor officials adopted new regulations clarifying how the ABC test is applied, with the rules becoming operative on October 1, 2026.
The ABC test itself has been part of New Jersey law for years. The new regulations provide more detailed standards and incorporate principles developed through court decisions.
That distinction matters.
October 1 does not automatically turn independent contractors into employees, and it does not mean every business using contractors must change those relationships. It does mean businesses have clearer regulatory standards against which their existing arrangements can be evaluated.
If your company regularly pays people as independent contractors, the important question is whether those working relationships satisfy the legal test, not simply what the company has called them.
What Is New Jersey's ABC Test?
Under the ABC test, a worker is generally presumed to be an employee unless the business can establish all three parts of the test. Certain statutory exemptions or exclusions can apply depending on the law and type of work involved, but where the ABC test applies, the business bears the burden of satisfying each requirement.
In general, the business must show that:
- The worker carries out the services without being subject to the company's control over how the work is done, as reflected in the parties' agreement and in the way the arrangement actually operates.
- The services fall outside the company's usual course of business or take place entirely away from locations treated as the company's places of business.
- The worker maintains a separate, ongoing trade, profession, occupation, or business that exists independently of the relationship with the company.
All three parts matter.
A business that cannot establish all three does not satisfy the ABC test. That is why classification cannot be determined by one fact, such as where someone works, how they are paid, or what their contract calls the relationship.
Does Giving Someone a 1099 Make Them an Independent Contractor?
No.
Issuing a Form 1099 instead of a W-2 does not determine whether someone is an independent contractor under New Jersey's ABC test. Instead, the ABC test turns on the underlying facts and whether all three parts of the test are satisfied.
Other facts, such as whether the worker sends invoices, sets aspects of their own schedule, or pays certain business expenses, can be relevant to the relationship. None of those facts, standing alone, establishes independent-contractor status.
For a business owner, that distinction matters because an arrangement can look like an independent-contractor relationship from an accounting standpoint without satisfying the worker-classification test.
The focus should be on how the relationship actually operates.
What if You Have a Written Independent Contractor Agreement?
A written agreement can be relevant, but calling someone an “independent contractor” in the agreement does not determine the worker's legal classification.
The way the parties actually work together still must satisfy the ABC test.
For example, the first requirement looks at the degree of control the company has over the worker, taking into account both the written agreement and how the work is actually handled. A carefully drafted contract cannot resolve the classification question if the company's day-to-day practices show a different relationship.
Businesses should review the written agreement alongside how the relationship functions in practice.
Consider who controls how the work is performed, the services the person provides, whether that work is part of the company's usual business, where it takes place, and the extent to which the person maintains a business apart from your company.
Which Contractor Relationships Deserve a Closer Look?
Not every contractor arrangement presents the same classification questions.
For example, a business that brings in an outside professional to perform a service unrelated to what the company ordinarily provides can present different facts from a relationship in which a contractor performs work that is part of the company's usual business and is closely directed by company managers.
That does not mean either fact alone determines the worker's classification. The relationship still has to be evaluated under all three parts of the ABC test.
Location can require a closer look as well. For purposes of Prong B, a business's “places of business” are not necessarily limited to its office, store, factory, or similar premises. They can also include other locations that play a significant role in the company's business operations.
The new rules also address remote work. A worker's own home, when it is used for remote work and is not operated by the company, is not treated as a company place of business for this purpose.
Questions worth examining include:
- What work does the contractor actually perform?
- Who decides how that work will be done?
- Does your company set the worker's schedule or provide detailed instructions?
- Is the work part of the service your company ordinarily provides to customers?
- Where is the work performed?
- Does the worker offer the same services to other customers or operate an independent business?
- Does the written agreement accurately reflect what happens in practice?
Those answers can help identify which parts of the relationship deserve closer examination under the ABC test.
Why Does Worker Classification Matter to Your Business?
Worker classification affects more than the terminology used in a contract.
New Jersey applies the ABC test in connection with several state labor laws, including the Unemployment Compensation Law, the Wage and Hour Law, and the Wage Payment Law. If someone who should have been treated as an employee is instead classified as an independent contractor, the business can face questions involving wages, required contributions, and other obligations tied to employee status.
What follows from a classification problem depends on the law involved and the specific circumstances surrounding the working arrangement.
For that reason, businesses should not approach an October 1 review as a search for a technical workaround or a new document that will automatically protect every contractor arrangement. The more useful goal is to determine whether the company's agreements and actual practices support the classification it is using.
What Should Your Business Review Before October 1?
Start with the contractor relationships your business currently relies on.
Gather the independent-contractor agreements, descriptions of the services being performed, invoices, payment records, and any policies or communications that show how the work is assigned and supervised.
Then compare the paperwork with what actually happens.
If an agreement says the contractor controls how the work is performed, for example, but company managers closely direct the person's daily work, that difference deserves attention. The nature of the services, their connection to the company's usual business, and the worker's business activities apart from the company also deserve a close look under the three-part test.
At the Law Offices of Howard N. Sobel, we work with businesses on contracts, day-to-day legal matters, and issues affecting their operations. Reviewing contractor relationships before a dispute or government inquiry develops can help your business identify where classification questions exist and determine what changes, if any, deserve consideration.
Review Your Contractor Relationships Under New Jersey’s ABC Test
The new regulations do not mean that every independent-contractor relationship in New Jersey must end on October 1. They do give businesses a timely reason to look beyond 1099s and contract labels and examine how their contractor relationships actually function.
For businesses in Voorhees and throughout Camden, Burlington, Gloucester, and surrounding South Jersey counties, that review can begin with a few practical questions: What work do your contractors perform? What do their agreements say? How are they supervised? Do they operate businesses independent of yours?
The answers can help identify whether an existing classification deserves closer attention under New Jersey's ABC test.
If your business uses independent contractors and you have questions about your agreements or working relationships, Howard N. Sobel, Esq. and his team can review the circumstances, explain the New Jersey worker-classification framework, and help you evaluate appropriate next steps.
To discuss your business's situation before the October 1, 2026, regulations become operative, contact the Law Offices of Howard N. Sobel to schedule a confidential consultation.
Disclaimer: The articles on this blog are for informational purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact the law firm directly.