11th Circuit Clarifies Independent Contractor Test For Employers in Georgia, Florida, And Alabama

The U.S. Court of Appeals for the Eleventh Circuit recently issued an important decision clarifying how employers should determine whether workers qualify as employees or independent contractors under the Fair Labor Standards Act (FLSA). The ruling — Galarza v. One Call Claims, LLC (October 16, 2024) — provides valuable guidance for businesses operating in Georgia, Florida, and Alabama.

This distinction matters: employees are protected by federal and state wage and hour laws, while independent contractors are not. Misclassifying workers can result in significant liability, including unpaid wages, tax penalties, and exposure under workers’ compensation and unemployment insurance laws.

The Case: Galarza v. One Call Claims, LLC

The Eleventh Circuit’s decision addressed whether insurance adjusters were properly classified as independent contractors. Applying the FLSA’s six-factor “economic reality” test, the Court concluded that a jury could reasonably find the adjusters to be employees, and remanded the case to the lower court for further consideration.

In doing so, the Court emphasized that the economic realities of the working relationship — not contract labels or job titles — should determine whether a worker is an employee or an independent contractor. The Court focused on practical aspects of the work, such as who controls the schedule, who provides equipment, and whether the worker depends economically on the company.

Takeaways from the Eleventh Circuit’s Economic Reality Test

When deciding how to classify a worker, no single factor is determinative. Courts (and employers) must consider the totality of the circumstances. The six traditional factors include:

Control Over the Work
Does the company control the worker’s schedule, assignments, and methods? Greater control suggests employee status.

Opportunity for Profit or Loss
Can the worker increase earnings through initiative or business skill? If compensation is fixed and tied only to the company’s payment structure, this points toward employee status.

Investment in Equipment or Materials
Who provides the tools, materials, and resources needed for the job? Minimal personal investment supports a finding of employee status.

Skill Required and Opportunity for Profit or Loss
A highly skilled worker who can influence profits or losses based on performance is more likely to be a contractor.

Permanency of the Relationship
Long-term, ongoing relationships tend to indicate employment, particularly if the worker does not perform similar work for other clients.

Integral Part of the Business
Workers performing tasks central to the company’s operations are more likely to be employees.

Importantly, the Court noted that these factors are not exhaustive and may be adjusted if the overall economic reality suggests a different outcome.

Compliance Implications for Employers

If One Call Claims, LLC misclassified its adjusters, it could face back pay for overtime, liquidated damages, and other penalties. The case serves as a strong reminder that worker misclassification can lead to costly litigation and reputational harm.

Employers operating in Georgia, Florida, and Alabama should take proactive steps to reduce risk, including:

Conduct an Independent Contractor Audit
Review all contractor relationships to ensure they reflect true independence. Confirm that written agreements align with actual practices.

Assess the Degree of Control
Evaluate whether the company dictates schedules, supervises daily work, or limits outside employment.

Review Compensation Structures
Ensure pay arrangements allow workers genuine opportunities for profit or loss based on their efforts.

Identify Core Business Functions
Determine whether contractors perform work central to your business operations. If so, reclassification may be warranted.

Conclusion

The Eleventh Circuit’s Galarza decision reinforces that the economic reality of the relationship — not contract wording — governs worker classification under the FLSA. Employers should take this opportunity to review their independent contractor agreements, policies, and practices to ensure compliance with this clarified legal standard and avoid exposure to misclassification claims.

If you have any questions, feel free to contact Jay Rollins or Debra Schwartz by calling  404.844.4130.