Eleventh Circuit: Employer’s Labels Do Not Matter When Employees are Misclassified as Independent Contractors

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All Employers with Independent Contractors in AL, FL, and GA

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October 16, 2025

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  • On October 16, 2025, in Galarza v. One Call Claims, LLC, the Eleventh Circuit Court of Appeals ruled a business classifying workers as independent contractors does not matter where the economic reality clearly demonstrates an employment relationship.

Discussion

On October 16, 2025, in Galarza v. One Call Claims, LLC, the Eleventh Circuit Court of Appeals ruled a business classifying workers as independent contractors does not matter where the economic reality clearly demonstrates an employment relationship. Here, three insurance adjusters worked for the defendant company after Hurricane Harvey. While there was an independent contractor agreement with each of the adjusters, they worked full-time for nearly two years with tight schedules and oversight from the defendant. The adjusters sued the defendant alleging that they were really misclassified employees who were owed overtime wages. The court agreed.

 

In reaching its ruling, the court applied the Fair Labor Standards Act’s (FLSA) economic reality test. The court applied the factors to the adjusters’ arguments as shown below:

 

  1. The nature and degree of the alleged employer’s control over the manner in which work is performed. The defendant controlled the adjusters’ schedules and hours by setting work schedules and reviewing timesheets. They were threatened with discharge if they worked outside set hours. They were not free to perform other work.
  2. The worker’s opportunity for profit or loss depending on managerial skill. They were paid non-negotiable, fixed day wages. The adjusters paid their own expense, but this was a cost-cutting measure that benefitted the defendant.
  3. The worker’s investment in materials or hiring additional workers as necessary to complete their task. The adjusters had no authority to hire others. The defendant supplied computers, telephones, email accounts, and ID badges that they were required to use while working in-person.
  4. Whether the worker’s job requires a special skill. This factor weighed in favor of the defendant since the adjusters acquired their skills and licenses prior to their assignment with the defendant.
  5. The permanency and duration of the relationship between the worker and alleged employer. The defendant retained the adjusters for an indefinite and extendable period of time during which the workers did not service any other companies, similar to at-will employment, supporting employee status.
  6. The extent to which the worker’s services are an integral part of the alleged employer’s business. Without the adjusters’ services, the defendant had no service or product to sell.

 

Five of the six factors in the economic realities test favored the adjusters. The court reversed the grant of summary judgment favoring the defendant and found that a jury should decide whether the adjusters were employees. This case reiterated the interpretation under the FLSA that it is the relationship between the parties that controls the classification of employees and independent contractors and not a business’ label of that relationship.

 

Action Items

  1. Review independent contractor status with legal counsel.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase