Eleventh Circuit Clarifies the “Economic Realities” Test for Independent Contractor Status

The U.S. Court of Appeals for the Eleventh Circuit has again reminded employers that independent contractor classifications will be evaluated based on the economic realities of the working relationship, rather than solely on the terms of the contract. In Galarza v. One Call Claims, LLC, No. 23-13205 (11th Cir. Oct. 16, 2025), the court reversed summary judgment for two insurance companies, finding that a jury could reasonably conclude three insurance adjusters were employees under the Fair Labor Standards Act (FLSA).

Background

Following Hurricane Harvey in 2017, three licensed insurance adjusters were assigned by One Call Claims, LLC to handle property claims for the Texas Windstorm Insurance Association (TWIA). Their contracts labeled them as independent contractors and provided a fixed daily rate. Despite this designation, the adjusters alleged they were treated as employees because their schedules, assignments, and pay were tightly controlled, and their ability to work for others was restricted.

The Southern District of Alabama had previously granted summary judgment in favor of the defendants, concluding that the adjusters were properly classified as contractors. The Eleventh Circuit disagreed.

The Eleventh Circuit’s Analysis

Applying the six-factor economic realities test from Scantland v. Jeffry Knight, Inc., 721 F.3d 1308 (11th Cir. 2013), the court found that five of the six factors favored employee status.

1. Control: The companies directed the adjusters’ work schedules, reviewed timesheets, and imposed performance tracking through software monitoring. This factor supported employee status.

2. Opportunity for Profit or Loss: While the companies argued that the adjusters could increase earnings by cutting expenses, the court held that saving money on personal costs such as meals and lodging did not demonstrate a genuine entrepreneurial opportunity.

3. Investment in Equipment: The adjusters bore minor personal expenses, but the companies supplied the necessary tools, software, and infrastructure.

4. Skill Required: Since the adjusters obtained their licenses before the assignment, this factor favored independent contractor status.

5. Permanency of the Relationship: The adjusters worked for extended, renewable periods and did not perform services for other companies during that time, which supported employee status.

6. Integral Part of the Business: The adjusters’ work was central to both companies’ operations, further suggesting employee status.

After considering all factors, the court concluded that “the workers acted more like employees depending on an employer than independent contractors with their own businesses.”

Key Takeaways for Employers

This ruling underscores that labels and contracts are not determinative of the outcome. Courts will evaluate the actual economic realities of the relationship. In this case, five of six factors weighed in favor of employee status despite contractual language to the contrary.

For employers operating in Florida, Georgia, and Alabama, Galarza reaffirms that even temporary or project-based workers may be deemed employees if the company exerts meaningful control or if the work performed is central to the business.

Companies using independent contractors should:

• Review current contracts and pay structures against the Scantland factors.

• Ensure that workers maintain genuine business independence, including the ability to set their own pay, control their workflow, and pursue outside clients.

• Document each factor supporting independent contractor status, not merely the written designation.