Recent developments in New Jersey and Washington reflect the ongoing debate over independent contractor (IC) classification in the U.S. In New Jersey, the state has moved to tighten its definition. At the same time, the federal government has taken steps to loosen the standards. These changes highlight the growing divide between state and federal labor laws.
In New Jersey, the Department of Labor and Workforce Development filed a notice with the Office of Administrative Law. The notice proposed new rules to codify the ABC test for determining independent contractor status. This test, widely known from California’s 2019 AB5 law, sets a strict bar for defining an independent contractor. The ABC test requires businesses to meet three criteria to classify a worker as an independent contractor rather than an employee.
Under the ABC test, a worker is considered independent if: (A) they are free from control, (B) they perform work outside the usual business scope, and (C) they operate in an independent trade or occupation. This approach makes it harder for workers to qualify as independent contractors. It pushes more individuals into employee status. New Jersey plans to integrate the ABC test into various state regulations, including Unemployment Compensation, Wage and Hour, and Wage Payment laws.
On the other hand, the federal government has taken a different approach. The Trump administration’s independent contractor rule was replaced under the Biden administration. This shift has sparked tension between the federal government and state lawmakers. Some federal policies aim to ease restrictions on independent contractor classification. These moves contrast with New Jersey’s stricter stance.
Overall, the contrast between New Jersey’s tightening rules and the federal government’s more flexible approach underscores a larger debate. Businesses now have to navigate this ever-changing regulatory landscape. Will these changes help or hurt the industry? This ongoing debate over independent contractor classification is not likely to end soon.
For more updates on this story, visit DC Brief.
