Eleventh Circuit Ruling Clarifies ‘Economic Realities’ Test for Determining Independent Contractor Status

Quick Hits

• In Galarza v. One Call Claims, LLC, No. 23-13205 (October 16, 2025), a three-judge panel of the Eleventh Circuit Court of Appeals unanimously reversed a federal district court’s 2023 ruling that insurance adjusters were independent contractors for One Call Claims and the Texas Windstorm Insurance Association.
• The court concluded that the employers managed the adjusters’ work schedules, controlled their pay rates, directed work tasks, and limited their ability to work for other businesses. Accordingly, a jury could reasonably find that the workers were employees.

Under the Fair Labor Standards Act (FLSA), these factors may be relevant in determining whether an individual is an employee or independent contractor:

• the degree of the employer’s control over the work;
• the individual’s opportunity for profit or loss based on managerial skill;
• the individual’s investment in materials or hiring additional workers to complete the work;
• the degree to which the work requires a special skill;
• the degree of permanency and duration of the working relationship; and
• the extent to which the work is an integral part of the employer’s business.

Background

Texas Windstorm Insurance Association provides wind and hail insurance for properties on the Texas coast. One Call Claims is an outsourcing company that matches insurance companies’ needs with a roster of licensed adjusters and examiners. Three insurance adjusters sued the two organizations for allegedly misclassifying them as independent contractors and failing to pay them overtime compensation for hours worked above forty hours in a week.

In 2017, One Call Claims assigned the plaintiffs to adjust insurance claims for Texas Windstorm Insurance Association following Hurricane Harvey. The contracts between One Call Claims and the plaintiffs classified the plaintiffs as independent contractors and specified that their employment was temporary. The contracts also indicated that the plaintiffs would work up to ten hours per day, with hours determined by Texas Windstorm Insurance Association.

One Call Claims invoiced Texas Windstorm Insurance Association for each day of work provided by the plaintiffs and paid them a nonnegotiable daily rate. Texas Windstorm Insurance Association did not record or track the exact hours worked by the plaintiffs. The plaintiffs could choose when to start and end their workdays and when to take lunch breaks. The adjusters were provided with email accounts, a computer network, applications, and software. For teleworking, the plaintiffs were responsible for providing their own workspaces, internet service, cellphones, and computers.

The insurance adjusters argued that they should have been classified as employees because One Call Claims set their pay rate, and Texas Windstorm Insurance Association restricted opportunities to earn more through outside employment. The plaintiffs also claimed that Texas Windstorm Insurance Association set their work schedules, directed their daily tasks, reviewed their timesheets, and could dock their pay for unreported absences or tardies. The plaintiffs were prohibited from working on Sundays. The plaintiffs claimed Texas Windstorm Insurance Association used software to track performance metrics, including when they worked, how fast they typed, and how many words they typed.

In contrast, One Call Claims and Texas Windstorm Insurance Association argued that the plaintiffs were properly considered independent contractors because the plaintiffs maintained sufficient control over how they handled claims adjustments. The defendants also claimed the plaintiffs were free to market their services to other companies, as long as any outside employment didn’t interfere with or conflict with their job duties and obligations to the defendants.

On August 29, 2023, the U.S. District Court for the Southern District of Alabama granted summary judgment to the defendants, finding that the plaintiffs were independent contractors and, therefore, not eligible for overtime pay. The plaintiffs appealed.

The Eleventh Circuit’s Decision

Using a set of six factors from a 2013 case, Scantland v. Jeffrey Knight, Inc., the Eleventh Circuit reversed the district court’s grant of summary judgment and found that a jury could reasonably determine that the workers were employees. The defendants argued that the workers had an opportunity for profit because they exerted control over certain expenses, such as transportation, meals, lodging, internet service, and phone service, but the court found that “many of them are little more than personal expenses” and that “cutting costs where possible on mostly personal expenses to save money has nothing to do with a worker’s ability to ‘earn additional income,’ let alone the ability to do so through initiative and managerial skill.” (Emphasis added by the court.)

Although the plaintiffs paid for their license fees, membership dues, travel expenses, and insurance premiums, the court concluded that the defendants supplied the bulk of the equipment and materials necessary for the work. Thus, that factor weighed in favor of employee status.

The court did note that the insurance adjusters had acquired their training and licenses before starting the assignment, so the skill factor weighed in favor of their classification as independent contractors. Additionally, the court stated, “a jury could reasonably conclude that the companies exerted sufficient control over the manner in which the workers performed their tasks so as to suggest that the workers were not a ‘separate economic entity’ distinct from the companies.”

Considering the permanency and duration of the working relationship, the court reasoned that the employers had “retained the workers for an indefinite and extendable period of time during which the workers did not service any other companies, supporting employee status.” It also noted that the plaintiffs were an integral part of the employers’ business models.

Finally, the court noted that when viewing the facts in a light most favorable to the plaintiffs on summary judgment, “the workers acted more like employees depending on an employer than independent contractors with their own businesses.”

Next Steps

This decision sheds light on the circumstances under which courts may determine that workers classified as independent contractors can be classified as employees, and it may serve as a reminder of the value of thoroughly analyzing the economic realities of a worker’s relationship with the company. In this case, the court concluded that five of the six factors in the economic realities test weighed in favor of the insurance adjusters’ being employees, while only one factor suggested that they were independent contractors. Further, although these plaintiffs were permitted to work for other companies, the court found that they did not actually do so during their employment—a controlling economic reality that weighed in favor of their employee status.

Going forward, companies may want to take all six factors into account when classifying workers as employees or independent contractors. More importantly, they may wish to consider the economic reality of the situation, which can affect how courts will view the workers’ classification.

Ogletree Deakins will continue to monitor developments and will provide updates on the State Developments and Wage and Hour blogs as new information becomes available.

Margaret Santen is a shareholder in Ogletree Deakins’ Charlotte and Atlanta offices.

Virginia M. Wooten is a shareholder in Ogletree Deakins’ Charlotte office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

Follow and Subscribe

LinkedIn | Instagram | Webinars | Podcasts