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May 12, 2010
Economics Reality Test to Determine Independent Contractor Classification

In a BLR webinar entitled ‘Employee versus Independent Contractor: Where’s the Line? How to Make the Proper Call and Stay Out of Court’, Maria Anastas discusses the economics reality test, which can be used to determine independent contractor classifications.

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She states that courts look to the economic reality of the parties' business relationship as a whole. The focus here is whether the worker is economically dependent on the business he or she is working for, or (as a matter of economic reality) is he or she in business for himself or herself. There are several factors that are looked at to determine whether individuals are employees and these factors include:

  • The degree to which the person is independent or is controlled by the employer with respect to the way the work is done
  • The individual's opportunities for profit or loss
  • The individual's investment in the facilities and equipment of the business
  • The permanency and length of the relationship between the business and the individual
  • The degree of skill needed to do the person's work
  • If, and how much, the work performed by the individual is a major part of the employer's business

Maria Anastas is a partner in the San Francisco office of law firm Ogletree, Deakins, Nash, Smoak & Stewart, PC (www.ogletreedeakins.com ). She represents employers in labor and employment law matters exclusively, with a primary emphasis on traditional labor matters. She can be reached at maria.anastas@ogletreedeakins.com.

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