In New Jersey, many people work under titles such as freelancer, contractor, or “project-based partner.” Some are paid by the hour, some sign “outsourcing agreements,” and others receive 1099 tax forms instead of W-2s. This raises a common but important question: Am I legally considered an employee or an independent contractor? This distinction is more than just terminology. It directly affects your right to minimum wage, overtime pay, workers’ compensation, unemployment benefits, tax obligations, and legal protections under laws like the whistleblower statute.
So how does New Jersey determine whether someone is an employee or an independent contractor? The key legal tool is known as the ABC Test.
What Is the ABC Test?
New Jersey uses the ABC Test as a strict legal standard for classifying workers. Unless an employer can satisfy all three parts of the test, the worker is presumed to be an employee. The three parts are:
- A: The worker operates free from the control or direction of the employer in performing the work;
- B: The services provided are not part of the usual course of the employer’s business;
- C: The worker has an independently established business and is customarily engaged in that business with other clients.
If any one of these conditions is not met, the law considers you an employee.
Why Does This Classification Matter?
Being legally classified as an employee entitles you to many protections. Employees are guaranteed minimum wage, overtime pay, wage security, workers’ compensation, unemployment insurance, and protection under laws like CEPA (the Conscientious Employee Protection Act). Employers are also required to pay Social Security and tax contributions on behalf of employees.
In contrast, independent contractors do not receive these benefits. If something goes wrong, the employer may claim you are “on your own,” making it much harder for you to recover lost wages or seek other remedies.
Don’t Be Misled by Labels or Contracts
In practice, some employers misclassify workers as independent contractors to cut costs. They might ask you to sign an “independent contractor agreement” or give you a 1099 form instead of a W-2. But under the law, what matters is not the contract you signed, but how you actually work. If you follow daily instructions, have set working hours, use the company’s tools, and work only for one business, chances are you are legally an employee—even if your paperwork says otherwise.
In the case of East Bay Drywall, LLC v. Department of Labor & Workforce Development, the New Jersey Supreme Court emphasized that surface-level indicators like having an LLC or business insurance are not enough to prove someone is truly independent. The court highlighted that what matters is whether the worker can continue operating independently after the work ends, or would instead “join the ranks of the unemployed.”
What Can You Do?
If you believe you’ve been misclassified as an independent contractor, but your actual working conditions reflect those of an employee, you have the right to challenge that classification. You can request a worker status review from the New Jersey Department of Labor, or consult an employment attorney to explore your legal options. You may be entitled to unpaid wages, back taxes, benefits, or even compensation.
In short, in New Jersey, your legal status is determined not by the title on your contract but by how you work day to day. Employers can’t simply label you an independent contractor to avoid legal obligations. Understanding your status is the first step to protecting your rights in the workplace.
This column is for reference only and does not constitute legal advice. For guidance on your specific situation, please contact 201-461-0031, WeChat: songlawfirm, or arrange a consultation via email at mail@songlawfirm.com.
