Economic Reality Test

The Economic Reality Test is a legal standard used to determine the true nature of a work relationship, particularly to differentiate between independent contractors and employees. It assesses factors such as how much control a business has over a worker, the worker’s ability to profit or risk loss, and the level of independence in how work is performed. Essentially, this test seeks to understand the economic realities of a working relationship rather than just its formal classification, ensuring that workers receive appropriate rights and protections based on their actual work circumstances.