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Fuhgettaboudit: The ABC Test is Officially Codified in New Jersey
You probably already know that California is our absolute favorite state to write about, at least when it comes to employment law. And when we say “absolute favorite,” we mean that in the sense that they are, most of the time, completely out of their minds, and we often times stare at the new laws and decisions like rubbernecking a car accident. We say this with affection. Mostly.
California had long used something called the ABC test to determine whether a worker is an independent contractor or an employee. The test places the burden on the employer to prove – across three separate prongs – that the worker is genuinely independent. As you can imagine, this test usually didn’t work out particularly well for employers trying to classify someone as a contractor. Then, in 2018, the California Supreme Court issued its decision in the Dynamex case, officially cementing the ABC test as the governing standard for contractor classification claims. What had previously been a difficult question effectively became a much harder one . . . which then became an essentially impossible one when the California legislature took Dynamex and codified it into Assembly Bill 5 about a year later, making the ABC test the official law of the California land. And California, presumably satisfied with its work, immediately moved on to finding new and creative ways to make employers question their life choices.
Why are we telling you about something that happened in 2019? Because the exact same thing just happened in New Jersey. And if you’re an employer in New Jersey, there is a long, long list of things you’d rather hear than, “Hey, great news – we just copied something California did on employment law.”
You see, New Jersey has also long used the ABC test, and anyone who has ever tried to win a contractor misclassification argument in front of the state knows that the default response has always been fuhgettaboudit. The state has used it to extract massive settlements for years – Lyft parted with $19.4 million to settle claims involving drivers, and the Attorney General’s lawsuit against Amazon’s delivery network is still fist pumping along. The one thing New Jersey hadn’t done was formally codify the ABC test into binding regulation . . . until now.
On May 5, 2026, the New Jersey Department of Labor officially adopted N.J.A.C. 12:11, enshrining the ABC test into the Administrative Code across six New Jersey labor statutes. It becomes operative on October 1, 2026.
The test itself, for the uninitiated, works like this – to classify a worker as an independent contractor, the employer bears the burden of proving all three of the following:
(A) The worker is free from the employer’s control or direction, both under the contract and in actual practice;
(B) The work is performed either outside the usual course of the employer’s business, or outside all of the employer’s places of business; and
(C) The worker is customarily engaged in an independently established trade, occupation, profession, or business.
The thing that makes the ABC test so brutal is that if you miss any one of those three criteria – just one – then the worker is an employee. Which means that LLC your contractor formed, the 1099 you’ve been sending them, and the agreement you both signed that says “independent contractor” seventeen times? Gorgeous paperwork. Good chance it’s deemed irrelevant. And as you can probably imagine, it’s that (B) prong that tends to trip people up the most. A dentist hiring a cleaning crew? Fine. A rideshare company hiring drivers? Less fine.
So what do you do with this? Ultimately, this law doesn’t really change anything in the sense that the ABC test is still the rule and it’s what should have been followed the whole time. That being said, this certainly feels like there will be greater enforcement action and so you’d likely be well served auditing your contractor relationships – all of them – well before the October 1 deadline (incredibly it’s going to be June next week – October 1st is a lot closer than it sounds). If the answers to the ABC test aren’t trending the right direction, the reclassification conversation needs to happen on your terms, not the state’s. Their version of that conversation tends to arrive with back contributions and penalties.
The Overtime Rule Saga Has a Finale (For Now)
And speaking of updates that no one saw coming . . .
US Labor Department Nixes Biden-Era Overtime Pay Rule Blocked By Courts
We’ve been tracking the Biden-era overtime rule for a while now, including most recently when the Trump DOL asked the Fifth Circuit to pause the appeals and the whole thing was clearly on life support. Well, the plug has officially been pulled.
By way of quick background: in 2024, the Biden DOL issued a rule that would have dramatically raised the salary threshold for the “white collar” overtime exemptions – the ones that let you classify certain executive, administrative, and professional employees as exempt from overtime pay. The threshold was set to jump from $684 per week (the 2019 level) all the way to $1,128 per week by January 2025. Two federal courts in Texas vacated the rule in late 2024. The Biden DOL appealed, the appeals went nowhere, and on May 15, the Trump DOL issued a “technical amendment” formally scrubbing the Biden rule from the books and restoring the 2019 threshold. And because the federal timeline has officially rewound back to 2020, the Highly Compensated Employee threshold drops back down to $107,432, too.
Before you start celebrating, let us do what we do best and throw cold water on your good mood. First, a reminder that the salary threshold is only one piece of a three-part test in order to determine whether an individual is exempt from overtime. Clearing the minimum salary criterion doesn’t automatically make someone exempt. You still need the salary basis and the duties test to hold up. If your “manager” spends 90% of their time answering the phones, the fact that you pay them $700 a week won’t save you in an audit.
Second, depending on where you operate, this news either feels like a significant rollback . . . or you’re operating in New York or California and you can go ahead and ignore this. State-level salary thresholds in certain jurisdictions remain way higher than the federal threshold and are completely unaffected by this reversal. Not sure which camp you’re in? That’s what we’re here for.
. . . and yes, this will change (again) with the political winds – it always does – but that’s the deal for now.
That’s all for this one. Have a great weekend everyone and enjoy these last few Spring weekends! As always, if you’ve got questions, you know we’ve got answers.
~ The W + K Team
ABOUT WEINSTEIN + KLEIN P.C.
Founded in 2019, Weinstein + Klein is a modern boutique law firm that serves as outside general counsel to businesses across industries. Weinstein + Klein provides strategic, day-to-day legal support with a focus on labor and employment law, corporate and transactional matters, and business litigation. Weinstein + Klein works closely with business owners, executives, and entrepreneurs to proactively manage risk, navigate complex employment issues, and handle key transactions – from formation to funding to exit.