Independent contractors are individuals who are not direct employees of a company but enter into an agreement (contract) to perform a specified task for the company. The company contracting for the services provided by an independent contractor must have the right to control or direct only the result of the work and not the methods of accomplishing the result.
The baking industry would face significant disruption and costs should Congress reclassify rules for designating independent contractors. Congressional legislation under consideration would make it difficult for companies to define individuals as independent contractors and thus be liable for federal and state taxes, as well as other benefit costs and fees. These proposals include:
- Reclassification of independent contractors as employees through wage and hour law;
- Possibly force companies to pay back-taxes should the independent contractor status be changed to employee status;
- New benchmarks required for classified contractors in order to qualify for independent contractor status; and
- Increased penalties for non-compliance.