CYPHR Register · Employment
What is the primary challenge for professional services firms under New Jersey's ABC test?
Prong B, the second of the three ABC criteria. A consultant who performs a professional services firm's core service is working within that firm's usual course of business, so the firm can satisfy the second criterion only by the alternative route, showing the service is performed outside all of its places of business. New Jersey puts the burden on the business, and failure on any one criterion classifies the worker as an employee.
The short version
New Jersey’s test has three criteria and the business has to satisfy all of them. The first and third are about how the worker operates. The second is about what the firm sells — and that is the one a professional services firm runs into.
The criteria are cumulative. The three criteria are cumulative rather than a balancing test, so failing a single one is enough to make the worker an employee. There is no weighing of factors and no making up a weak criterion with a strong one.
The second criterion is where firms land. For a professional services firm it is the first branch of the second criterion that fails, because a consultant delivering the firm’s core service sits inside its usual course of business. That is the whole problem in one sentence.
But it is written in the alternative. The statute does not stop at the usual course of business. It says the service must be either outside the usual course of the business, or performed outside all of the places of business of the enterprise. The second branch is the one that stays open to a firm whose people work off its premises — and it is a question about places, not about work.
The three criteria
| Criterion | What it asks | Where firms usually stand | Who must prove it |
|---|---|---|---|
| A — control | Free from control or direction over the performance of the service, both under the contract and in fact | Often satisfiable, and often the one firms concentrate on | The business |
| B — usual course or places | Either outside the usual course of the business, or performed outside all of the enterprise’s places of business | First branch fails for core-service consultants; second branch is the live one | The business |
| C — independent trade | Customarily engaged in an independently established trade, occupation, profession or business | Turns on the worker’s own practice, not on the engagement | The business |
The criteria are quoted in full, from the instrument itself, in the table below.
The details that catch people out
Prong B is two routes, not one
The most common mistake is reading the second criterion as a single test about the nature of the work. It is not. It is a disjunction, and the second half asks a different kind of question — about where the service is performed rather than what the service is. A firm that assumes prong B is closed to it because its consultants do consulting work has stopped reading at the word “or”.
One failed criterion is the whole answer
Because the criteria are cumulative, an engagement that is strong on control and strong on independent trade still produces an employee if the second criterion is not met. Effort spent documenting the first and third criteria does not offset the second.
The test travels further than unemployment law
The three criteria quoted here are from New Jersey’s unemployment compensation law. It is Hargrove that carries them across to wage-payment and wage-and-hour claims — the statute itself does not say so, and we have not asserted it on the statute’s authority. The practical effect is that one classification answer governs more than one exposure.
The practical default
The practical default for a New Jersey based worker performing the firm’s core functions is employee classification. That is a starting position to argue away from with facts, not a conclusion — but it is the right starting position.
Where this comes from
| Instrument | Section | Operative text, quoted | Source | Checked | Status |
|---|---|---|---|---|---|
| New Jersey Unemployment Compensation Law, R.S.43:21-1 et seq. | R.S.43:21-19(i)(6)(A)-(C), codified N.J.S.A. 43:21-19(i)(6) | (6) Services performed by an individual for remuneration shall be deemed to be employment subject to this chapter (R.S.43:21-1 et seq.) unless and until it is shown to the satisfaction of the division that: (A) Such individual has been and will continue to be free from control or direction over the performance of such service, both under his contract of service and in fact; (B) Such service is either outside the usual course of the business for which such service is performed, or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and (C) Such individual is customarily engaged in an independently established trade, occupation, profession or business. | nj.gov | 2026-08-28 | Checked at source |
| Hargrove v. Sleepy’s, LLC, 220 N.J. 289 (2015) | holding | Therefore, we hold that any employment-status dispute arising under the WPL and WHL should be resolved by utilizing the “ABC” test set forth in N.J.S.A. 43:21-19(i)(6)(A)-(C). | njcourts.gov | 2026-08-28 | Checked at source |
What we have not verified
- We did not tether New Jersey’s misclassification penalty provisions. Our source material carries penalty figures, but we hold no quoted statutory text for them, so we have left the numbers out rather than print figures we cannot show you the source for.
- We did not verify whether bills to codify the ABC test across all New Jersey employment contexts have advanced. Our source records that status as unconfirmed.
- We read the instruments themselves. We did not read the regulations, agency guidance or enforcement practice underneath them, and beyond Hargrove we did not read the case law applying this test to particular facts.
- Whether a given engagement satisfies the second criterion’s places-of-business branch is a question about your facts. We describe what the criterion asks; we have not applied it to anyone.
- We did not check the federal tests. Federal law applies its own classification standards on top of the state ones, and meeting a state test does not settle the federal question.
- We checked these sources on August 28, 2026. We have not checked whether they changed after that date.
- This is a description of what these instruments say. It is not legal advice, and it is not a substitute for your own counsel on your own facts.
Related
The companion entry on the same test across three states is whether New York, New Jersey and Pennsylvania use the ABC test for worker classification. This entry is part of the CYPHR Register — questions answered from the law itself, each one dated and sourced. Why we publish the sources at all is set out on the evidence page. The corpus behind these answers is CYPHR Intelligence.