A baking company's worker classification strategy backfired when a federal court saw through it
Federal court shuts down employer strategy of forcing workers to form corporations as workaround to employment law protections.
In a decision handed down December 22, 2025, the United States Court of Appeals for the Second Circuit ruled that employers cannot dodge employment protections simply by requiring workers to create corporations and sign contracts through those shell companies. The case, involving two truck drivers and a baking company, offers a clear warning to HR departments everywhere: courts will look past corporate paperwork to see what is really happening on the ground.
Nathaniel Silva and Phil Rothkugel started working for Schmidt Baking Distribution in 2020 as regular delivery drivers, classified as W-2 employees through a staffing agency. Their jobs were straightforward. They drove trucks to Schmidt's warehouse, picked up fresh baked goods, delivered them to stores, and stocked shelves.
Several months in, Schmidt gave them an ultimatum. To keep working, they would need to form their own corporations and sign new agreements as business entities. Neither driver had ever run a company before, but Schmidt walked them through the process. Silva created Silva's Baked Goods. Rothkugel formed Trout Slayers Baked Breads Inc.
The new contracts called the arrangement an independent contractor relationship and included mandatory arbitration clauses that would prevent the...
President Donald Trump marked his first year back in office by presiding over a meandering, nearly two-hour-long press briefing to recount his accomplishments, repeating many false claims he made ...