New Jersey is considering a rule that could seriously limit how organizations — especially smaller ones — work with freelancers, part-time contributors, and even volunteers who receive an occasional stipend.

The rule, proposed by the Department of Labor, is based on what’s known as the “ABC test,” a legal standard used to decide whether someone should be treated as an employee or an independent contractor. The state already uses it in some cases, but this new version is less flexible and would apply across multiple areas, including wage laws, unemployment benefits, and paid sick leave.

Under the DOL proposal, anyone an organization pays would be presumed to be an employee unless the organization can prove all three of the following:

• The person works independently, without organizational direction or control.

• They’re doing work that’s outside the usual business or mission of the organization.

• They have their own established business or trade that operates independently of the organization.

All three parts must be met. If not, the person is classified as an employee — even if they only work once, are paid a small amount, or view the role as a short-term assignment.

Even offering a one-time stipend could trigger reclassification under the rule.

Here’s how things would change if the rule is adopted:

This proposal isn’t in effect yet. It was filed April and published  May 5 with a formal public comment period through August 6, 2025. After that, the Department of Labor will review all comments, consider revisions, and may choose to adopt the rule into the state’s administrative code.

The governor cannot veto or block it.  Administrative regulations are handled entirely within state agencies.. The best way to push back is to submit public comments and lean on lawmakers, organizations, and advocacy groups to pressure the DOL.

So what can small organizations do if the rule goes through?

Volunteers are unaffected, as long as no money is changing hands. Honoraria may still be allowed, as long as they are not tied to specific deliverables or expectations. Organizations can also run contests or award occasional prizes  as long as participation is voluntary and judged on merit. Paying regular stipends or assigning work for pay would most likely require reclassifying that person as an employee, with all the obligations that come with it.

Public comments are due by August 6. You can email your input to david.fish@dol.nj.gov and be sure to reference Proposed Rule N.J.A.C. 12:11

I sent an email to Mr. Fish on behalf of NJ21st on this issue – you can read it here.

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