Being called an independent contractor does not necessarily make you one under New Jersey law. Receiving a 1099, signing an independent-contractor agreement, forming an LLC, or being paid by the project are not, by themselves, conclusive.
Instead, New Jersey generally uses the ABC test to determine whether a worker is properly classified as an employee or an independent contractor. The classification can affect important rights involving overtime, unemployment, workers’ compensation, earned sick leave, family leave, and other workplace protections.
This article provides general information and is not legal advice. Worker-classification questions are highly fact-specific.
The difference between an employee and an independent contractor can have significant consequences.
Employees may be entitled to protections and benefits that generally are not available to independent contractors, including minimum wage and overtime protections, workers’ compensation, unemployment benefits, temporary disability benefits, earned sick leave, and family-leave benefits.
Misclassification can also result in unpaid wages, improper deductions, lost benefits, and other potential remedies depending on the circumstances and the laws that apply.
New Jersey's ABC test generally starts with the presumption that a worker is an employee. Once it is established that an individual performed services for pay, the hiring entity generally has the burden of proving all three parts of the test. If it cannot establish all three, the worker is generally treated as an employee under the laws that use the ABC test.
The three parts are commonly referred to as Part A, Part B, and Part C.
Part A examines whether the worker has been and will continue to be free from control or direction over the performance of the work, both under the contract and in the actual working relationship.
For example, potential signs of employer control may include:
The important point is that the written contract is not necessarily the end of the analysis. The actual relationship between the parties matters as well.
Part B asks whether the work is either outside the usual course of the company's business or performed outside all of the company's places of business.
Consider a few examples:
A bakery hiring an electrician to repair its wiring may present a different classification question than a bakery treating its regular bakers as independent contractors.
Likewise, a marketing agency hiring a plumber for an office repair is different from a marketing agency hiring a freelance copywriter to perform its core marketing services.
Remote work does not automatically satisfy Part B. The specific facts and the nature of the company's business still matter.
Part C examines whether the worker is customarily engaged in an independently established trade, occupation, profession, or business.
Potential indicators of an independent business can include:
Simply forming an LLC, however, does not automatically satisfy Part C or establish independent-contractor status. New Jersey specifically warns that requiring a worker to form an LLC or franchise does not, by itself, make the worker an independent contractor.
In May 2026, the New Jersey Department of Labor and Workforce Development adopted regulations intended to clarify how the statutory ABC test applies to worker classification. The regulations synthesize decades of New Jersey court decisions and address classification under laws including the state's unemployment, wage-and-hour, and wage-payment laws.
The regulations are scheduled to become operative October 1, 2026. They clarify the existing ABC framework rather than replacing it with an entirely new worker-classification test.
No.
A 1099 is evidence of how the company treated the worker for tax and payment purposes, but it does not determine legal classification under New Jersey's ABC test. The same is true of an independent-contractor agreement, LLC, franchise arrangement, project-based payment, or the absence of payroll deductions.
New Jersey's Department of Labor expressly states that receiving a 1099 does not, by itself, establish that a worker is properly classified as an independent contractor.
Some circumstances that may raise questions about classification include:
These factors do not automatically establish misclassification. The legal analysis ultimately depends on the applicable law and the facts of the working relationship.
Depending on the circumstances, a worker who was improperly classified may potentially be entitled to unpaid minimum wages or overtime, reimbursement for improper deductions, certain employee benefits, and other statutory remedies.
New Jersey also provides specific remedies and penalties for certain misclassification violations.
Importantly, workers generally cannot simply waive statutory protections by agreeing to be called independent contractors when the actual relationship does not satisfy the applicable legal requirements. NJDOL states that a worker's agreement to contractor status does not eliminate the employer's obligation to properly classify the worker.
If you believe you may be misclassified, consider preserving documents that show how the relationship actually works, such as:
Keeping these records can help establish the actual working relationship if a classification dispute arises.
Workers may have protections against retaliation for asserting certain workplace rights or reporting suspected violations. New Jersey's Department of Labor specifically states that individuals are protected from retaliation for making a complaint alleging misclassification.
The specific protection available can depend on the circumstances and the law involved.
Whether you are an employee or an independent contractor in New Jersey generally depends on the actual working relationship not simply the paperwork.
A 1099, LLC, or contractor agreement does not automatically settle the question. New Jersey's ABC test requires consideration of all three parts of the test, and failing to satisfy one part can have significant consequences for worker classification.
If you believe you have been misclassified, consider reviewing your circumstances with a qualified New Jersey employment law attorney who can evaluate the facts and explain what rights or remedies may apply.