In May, the New Jersey Department of Labor issued proposed regulations that would require employers to apply a strict “ABC test” when determining whether workers are employees or independent contractors.
As a former California legislator, news of the New Jersey proposal caught my attention. California was the first state in the nation to require employers to use a strict ABC test across all our employment laws.
I voted for the legislation enacting the California test after listening to hours of public testimony, but I also played a role in fine-tuning its use. From the outside looking in, I believe New Jersey could benefit from similar refinements.
On its own, the ABC test is a blunt instrument. The test is not able to distinguish between a contractor at risk of being misclassified and an insurance agent who has chosen to build a small business as an independent contractor. To the ABC test, both the contractor and the insurance agent look like workers being exploited and are, therefore, deemed to be employees. For the worker, the extra protection may be good news. For the insurance agent, being an employee means losing a small business.
As a member of the Insurance Committee in the California Assembly, I made sure there were guardrails around the California test for licensed professionals in the insurance and financial services industries. Surveys show these professionals are highly satisfied with their employment status and are opposed to change. But my motivation in championing guardrails was about more than protecting these heavily-regulated professionals. It wanted to protect consumers who depend on their services.
I have worked in insurance my entire career, in both the private sector and as a public servant. My first boss was an independent insurance agent. Because of this experience, I know that forcing an insurance agent or financial advisor to become an employee changes more than just a person’s job status. It disrupts access to financial services in harmful ways.
Consumers benefit tremendously from the presence of independent contracting in insurance and financial services. The structure creates an energized, economically motivated population of professionals standing ready to deliver outstanding options and choices that fit their customers’ needs. This is not just my view. It is backed by research. NERA economists have found that consumers would experience “substantial” harm if independent contracting is prohibited in these industries.
Today, access to agents and advisors is more critical than ever. Over the past 20 years, our country has shifted responsibility for financial security and retirement planning onto individuals. Gone are the days of pensions and a guaranteed retirement. Families now need, and want, professional help. In 2025, this is especially true, with economic uncertainties like market volatility and trade disruptions coming from Washington, D.C. In this volatile environment, public policies should ensure greater access to appropriate products and services, not less.
In 2022, I served as President of the National Council of Insurance Legislators (NCOIL). Recognizing that other states might try to copy California’s approach to worker classification, NCOIL adopted a resolution urging states to also copy California’s exemptions in order to preserve distribution models in insurance and financial services.
At present, New Jersey’s proposal contains no such carve outs. As written, the regulation would eliminate independent contracting in insurance and financial services and throw the future of thousands of agents and advisors, as well as the consumers they serve, into doubt.
If New Jersey leaders will accept some friendly advice from someone who wrestled with this issue in California, I suggest pausing this rule to further study its impact. If the rule does move forward—now or in the future—exemptions from the ABC test for licensed professionals should be included. Now more than ever it is important that leaders avoid policies that restrict access to financial products and service-oriented, knowledgeable advice.
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Ken Cooley served as California Assemblymember from 2012 to 2022 and as President of National Council of Insurance Legislators (NCOIL) in 2022.
