The recent Eleventh Circuit decision in Galarza v. One Call Claims, LLC marks a significant shift in how employers in Alabama, Florida and Georgia should assess whether workers are properly classified as independent contractors under the Fair Labor Standards Act (FLSA). In that case, a group of insurance adjusters who had been deemed independent contractors challenged the classification and sought overtime pay. The court reversed summary judgment for the employer and remanded the case for trial, holding that a reasonable jury could find the workers were employees.
At the heart of the case is the reaffirmation of the so-called “economic reality” test. The court still uses a six-factor framework (control over work, opportunity for profit or loss, investment in equipment, skill required, permanence of the relationship, and integral part of the business) derived from an earlier case. None of the factors are dispositive. Instead, the key question is whether the worker is economically dependent on the company or instead in business for him or herself.
In the new Galarza case, the court found that five of the six factors favored finding employment, not independent contracting – so the employees should get their day in court, in front of a jury.
For employers—especially those in industries such as construction, staffing, field services or where gig-type labor is used—this ruling has immediate significance. Labels and titles matter far less than actual practice. Even if a contract calls someone a “contractor,” if scheduling, supervision, equipment provision, exclusivity and permanence mirror an employment relationship, the contractor label won’t hold up in court.
Employers should review arrangements where individuals work full-time or exclusively, perform work integral to the business, use company-provided equipment, have little opportunity for independent profit or loss, and are subject to company oversight and schedule control. That kind of relationship now triggers a high risk of employee status under the FLSA in the Eleventh Circuit.
In summary, the Galarza decision underlines that the key issue is economic dependence, is not just contractual language. For HR professionals in Florida, the new ruling underscores the need for proactive review of all contractor arrangements. This means creating clear documentation of independent contracting relationships and ensuring that written contracts and operational practices match. Misclassification can lead to significant liability for unpaid wages, overtime and statutory penalties (workers’ compensation and unemployment). The Florida Department of Revenue notes that an intentional misclassification of a worker as an independent contractor when they are in fact an employee may be a felony under Chapter 443 of the Florida Statutes (unemployment).
