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The Economic Realities Test for Employee Status

If you are working as an independent contractor, chances are you are aware that you do not get the same benefits that an employee would get. Among other things, you do not qualify for sick pay, paid time off, vacation pay, health insurance, or any other of the number of benefits of being an employee.

Furthermore you may know that you do not qualify as eligible for workers’ compensation should you be injured on the job. For these reasons and more, it is often in a company’s best interest to claim its workers are independent contractors, even when for all intents and purposes those workers are employees. There are a number of ways worker’s comp boards determine employee status, and one is the “economic realities test.”

What is the Economic Realities Test?

The economic realities test measures the level of dependence that a worker has upon the income from the employer in question. If losing the income from the employer would constitute a major portion of their income being lost and result in the worker being unable to pay their bills, many courts and agencies will deem that worker an employee under the economic realities test.

This is as a provision of the Fair Labor Standards Act, which seeks to ensure that employees and workers are fairly treated by their employers, which includes proper classification of the work being done as either independently contracted or as an employee.

What Other Means are Used?

In addition to the economic realities test, other factors to be considered when determining employee status are the type of work being done, the skill level of the work and the worker, who owns the equipment being used to perform the work, and the degree of control the employer has over the worker. No one factor is a clear-cut contractor or employee marker, but taken together, all the factors help paint a clearer picture of the employment situation and help the auditor come to an informed decision.

What it Means for You

If you are currently working as an independent contractor and are hurt on the job, you may still be entitled to worker’s compensation if your employment lines up with some or all of these standards, or even if you meet the economic realities test guidelines. If you think you may qualify, contact The Workers’ Compensation Center right away to discuss the claims you may be eligible for under the law. Call now (800) 223-1866.

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Evan A. Hoffman

Evan A. Hoffman

Mr. Hoffman’s philosophy is "our knowledge and experience is your best defense." He has been a featured author on criminal law issues such as driving under the influence, domestic violence and illegal searches.

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