New Jersey may tighten rules for gig workers as deadline looms, raising concerns from business owners and freelancers

Proposed rule could reclassify many independent contractors as employees. The governor has until Tuesday to act.

A controversial New Jersey rule that could significantly reshape gig work across the state is nearing a deadline, with thousands of freelancers, businesses, and lawmakers urging Gov. Mikie Sherrill to let it die.

If adopted, the proposal could make it much harder for workers — from rideshare drivers to freelance writers — to be classified as independent contractors, potentially forcing many into employee status and changing how they work, how they get paid, and how they are taxed.

The rule, proposed by the New Jersey Department of Labor and Workforce Development, is framed by state officials as a way to strengthen worker protections. But critics say it would reduce flexibility for workers who choose freelance jobs and raise costs for businesses, likely leading to higher prices and fewer services.

Sherrill has until Tuesday, May 5, to decide whether to adopt, revise, or abandon the proposal. Asked whether she has made a decision yet, her spokesman declined to comment.

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At the center of the proposal is New Jersey’s “ABC test,” the legal standard used to determine whether a worker is an independent contractor or an employee.

Under current law, workers must meet three conditions: they must operate independently from company control, perform work outside the company’s usual business, and be engaged in their own established trade or profession.

The proposed rule would tighten how those standards are interpreted, especially the requirement that work be outside a company’s “core business.” If the work is part of a company’s core business, the worker would be required to be treated as an employee.

In practice, that could mean a rideshare driver working for a company like Uber or Lyft would likely be classified as an employee, because driving is central to those companies’ business models. Similar reasoning could apply in other industries, from construction to hospitality to freelance writing for news outlets.

The proposal also states that having multiple clients or being paid via a 1099 tax form would not, on its own, qualify someone as an independent contractor.

The New Jersey Business & Industry Association is among the groups pushing hardest against the rule.

“This proposal would make it extremely difficult to be considered an independent contractor in New Jersey,” said Elissa Frank. “It will reduce autonomy for freelance workers and significantly increase labor costs for businesses.”

NJBIA President Michele Siekerka urged the administration to let the proposal lapse rather than adopt what she described as a flawed policy from the previous administration.

Business advocates warn the changes could ripple across the economy, affecting app-based services like ridesharing and food delivery, as well as independent professionals and small businesses.

Opposition to the rule has been widespread.

According to advocates, more than 9,500 public comments were submitted, with more than 99% opposing the proposal. Those weighing in included freelancers, truck drivers, small business owners, trade groups, and lawmakers from both political parties.

A group of 24 legislators previously urged the state to reconsider the rule, and Republican lawmakers introduced legislation last year seeking to block it.

Freelance advocate Kim Kavin, who analyzed the public comments, has described the proposal as a major threat to independent work.

State labor officials, however, say the effort is part of a broader push to address worker misclassification, which can deny workers benefits and protections.

Labor Commissioner Robert Asaro-Angelo has said the state’s actions reflect “a commitment to justice and fairness in the workplace.”

Top supporters of the proposed rule are labor unions in fields like construction. Critics have pointed out that rules could be made for those particular fields rather than a blanket rule for everyone.

New Jersey has already taken action when it comes to misclassifying workers, including a $100 million settlement with Uber in 2022. A lawsuit against Lyft over similar issues is ongoing.

But critics argue the proposal could have unintended consequences, particularly for workers who rely on flexible schedules.

Freelance advocates say the impact could fall heavily on women balancing caregiving responsibilities, as well as immigrants and part-time workers who depend on independent work arrangements.

Many small business owners who depend on contractors in certain areas say the choice won’t be between hiring someone as an employee or a contractor. It could mean not hiring the person at all if they have to be classified as an employee.

Opponents also point to California’s 2019 gig worker law as a cautionary example, saying sweeping restrictions disrupted multiple industries and led to hundreds of exemptions.

In response to the new law, California voters approved Proposition 22 in November 2020, allowing rideshare and delivery drivers to remain independent contractors. The California Supreme Court unanimously upheld the measure in July 2024, confirming its constitutionality. The California law has also sparked numerous lawsuits.

Former Gov. Phil Murphy established a task force in 2018 to examine worker misclassification. In 2020, lawmakers considered legislation, S863, that would have significantly restricted the use of independent contractors, but the bill stalled.

Instead, Murphy signed a package of six related bills into law on Jan. 21, 2020, aimed at cracking down on misclassification.

Some legislators argue the proposed rule circumvents the legislative process and say any major changes should be decided by the New Jersey Legislature, not the Department of Labor.