A more thorough explanation:

The economic-realities test is a method used by courts to determine the true nature of a business transaction or situation. This is done by examining all the commercial circumstances surrounding the transaction or situation.

One common use of this test is to determine whether a person is an employee or an independent contractor. The court will consider factors such as whether the alleged employer controls the details of the work and whether taxes are withheld from payments made to the worker.

For example, if a company hires a person to do a specific job and provides all the tools and equipment needed to complete the job, the court may consider this person an employee rather than an independent contractor. On the other hand, if a person is hired to complete a project and is given the freedom to complete the project in their own way, using their own tools and equipment, the court may consider this person an independent contractor.

Another example could be a company that hires a person to work full-time, provides them with a set schedule, and withholds taxes from their paycheck. This person would likely be considered an employee. However, if a company hires a person to complete a specific project and does not provide them with a set schedule or withhold taxes from their payment, this person may be considered an independent contractor.

These examples illustrate how the economic-realities test is used to determine the true nature of a business transaction or situation. By examining all the commercial circumstances, the court can determine whether a person is an employee or an independent contractor, which can have significant legal and financial implications for both parties involved.