Critics Say NJ Labor Department ABC Test Threatens Contractor Freedom
Independent contractors across New Jersey now work under an adopted ABC test that state labor officials have struggled to explain, exposing businesses to fines if workers fail the classification standard and leaving an estimated 1.7 million freelancers uncertain about how to remain legally self-employed.
The state Department of Labor and Workforce Development has adopted the ABC test rule that regulators will use to decide whether a worker is an independent contractor or a unionizable employee. Companies that misclassify workers under the test face fines and penalties.
The version adopted is scaled back from the one proposed last year, but lawmakers from both parties say it remains so onerous that compliance is nearly impossible. When the department first proposed the rule, roughly 9,500 written public comments were filed, and 99% of them opposed it. The only people who testified in support at the standing-room-only public hearing were on a union payroll or affiliated with organizations with strong union ties.
New Jersey AFL-CIO President Charlie Wowkanech defended the rule as “expanding and protecting the freedom of workers to join unions for a better life.”
The hearing that exposed the confusion
On October 15, the Senate Judiciary Committee grilled acting Labor Commissioner Kevin Jarvis for nearly two hours over how anyone could realistically satisfy the test. Members of both parties reported receiving a constant stream of calls from virtually every sector — insurance, performing arts, amateur sports — since no one seems able to determine what steps to take.
One senator said he convened a group of accountants to gain clarity, but they all gave him different answers. Laughter erupted in the chamber when Jarvis could not give a straight answer on how a business trying to comply could obtain the information required to do so. Another senator asked whether there would be a Division of ABC Test Clarification to help everyone make sense of the rule.
When the rule was first proposed, attorneys warned that the department’s interpretation would almost entirely eviscerate anyone’s ability to be an independent contractor at all, calling it an existential threat to independent work itself.
Who the test reaches
The stakes reach far beyond ride-share drivers. An estimated 1.7 million New Jersey residents work as independent contractors, and the rule threatens the incomes and chosen careers of that entire group, critics say. The test determines whether those workers keep the freedom to be their own bosses or are reclassified as employees.
For generations, working for oneself has been a standard path to earning a living in the state, from land surveyors to lawyers who opened their own shops. At a time when groceries, housing, healthcare and utilities remain expensive, the ability to take on side work or freelance arrangements matters to households across New Jersey.
Union backing behind the rule
The Sherrill administration pushed the regulations through despite the public’s 99% opposition, with strong support from Wowkanech and the New Jersey AFL-CIO. Jarvis’ former employer is the AFL-CIO, and Wowkanech testified at the judiciary hearing that Jarvis is his “dear friend.”
During the public-comment period, research cited by supporters also raised eyebrows. The Workplace Justice Lab at Rutgers University used footnotes citing research that compares independent contractors to human trafficking, child labor and workplace violence — comparisons critics call extreme. Yet it was those supporters the administration sided with when it adopted the rule.
What businesses face now
With the rule in effect, companies working with freelancers must try to satisfy a three-part test whose practical application even accountants cannot agree on. A business that fails the test faces fines and penalties, and there is still no clear channel for getting official guidance on compliance.
For contractors and the companies that hire them, the practical path forward runs through employment-law attorneys and business-compliance specialists who can review contracts and classification practices under the new standard. The rule is already shaping how New Jersey businesses structure work, and the confusion documented at the October 15 hearing suggests the uncertainty will persist until regulators issue clearer guidance.
The adopted rule leaves New Jersey with some of the most restrictive independent-contractor policymaking in the country, and the estimated 1.7 million contractors it covers are now waiting to see how the Department of Labor and Workforce Development will enforce it.