Regulators Crack Down on Classifying Workers as Contractors [View all]

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by Jennifer Smith for Monday's Wall Street Journal

A crackdown on businesses that treat some workers as independent contractors is causing a stir in industries from trucking to exotic dancing.

At issue is whether the companies improperly classify employees to avoid paying overtime and payroll taxes.

In recent months, regulators have demanded millions of dollars from companies that hired independent contractors to hang drywall, install cable, staff call centers, give manicures and perform other jobs in which the government said workers were really functioning as company employees.

Some companies are pushing back. Last month a Texas oil-field-services company scored a rare legal victory against the Labor Department, which claimed that the company owed more than $6 million in back pay to its independent contractors.

"We felt we were right from the get-go," said Bert Steindorf, founder and chairman of Gate Guard Services LP, which based in Corpus Christi. The company hires contractors equipped with their own recreational vehicles to monitor gate traffic at remote energy and construction sites.

Gate Guard sued the Labor Department in federal court in 2010 after the agency told the company to reclassify its gate attendants as employees and pay them back wages. A federal judge ruled that the workers were independent contractors and dismissed the department's enforcement action.

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