New Jersey uses what is commonly called the “ABC test” to determine whether a worker is an independent contractor or employee. Under the test, a worker is presumed to be an employee unless all of the following circumstances apply:

A. The individual has been and will continue to be free from control or direction over the performance of work performed, both under contract of service and in fact; and
B. The work is either outside the usual course of the business for which such service is performed, or the work is performed outside of all the places of business of the enterprise for which such service is performed; and
C. The individual is customarily engaged in an independently established trade, occupation, profession, or business.

Part A: Does the entity direct or control how the person performs assigned work? Direction and control can include the following:

  • Giving instructions
  • Providing training
  • Setting work hours
  • Telling the person what tools or supplies to use while performing work
  • Hiring assistants
  • Specifying responsibilities
  • Determining the sequence of work (telling the person to do things in a particular order)
  • Having the right to fire the person.

If an entity exercises direction and control, then part A of the ABC test is not be met.

Part B: Is the work the person does for the entity (i) substantially different from the entity’s usual course of business, or (ii) performed outside of their usual place(s) of business? If the work a person does for the entity is similar to or the same as the business the entity usually conducts, or the work is performed in a location where the entity typically does business, part B of the ABC test is not met.

Part C: Is the worker engaged in an independently established trade, occupation, profession, or business that could operate separately and apart from the entity? Many factors influence whether work can exist separately and apart from the relationship with the entity, including:

  • The amount of work and length of time worked for the current entity
  • The number of workers employed by such individual
  • Whether the individual pays its own expenses
  • Whether the individual works for more than one person or firm
  • Whether the individual uses its own tools, equipment, vehicles, or other materials
  • The number of other customers and volume of business from other customers
  • The amount of work received from the current entity compared to the amount of work received from others for the same services.

Under New Jersey law, if an employee is misclassified, they may be entitled to remedies that include, but are not limited to,

  • Backpay for unpaid minimum wage, overtime, failure to pay prevailing wage, and other payments due under the New Jersey Wage & Hour Laws, including reimbursement for any illegal deductions;
  • Entitlement to fringe benefits; and/or
  • Reinstatement or correction of discriminatory actions taken in retaliation against an employee making an inquiry or complaint about possible misclassification.