Household Employers – legal need to know. 7 of the basics.

Aside from payroll taxes, there are other legal considerations when hiring a nanny or caregiver.  Like payroll, these items might seem daunting but once you get some basic familiarity with the rules, it’s not too hard.

1. Employee vs. Independent Contractor. It is almost certain your household employee is an Employee and not and Independent contractor.  That is why you need to pay employment taxes and withhold for your employee.  This is why you cannot just 1099 your employee at the end of the year.

The Department of Labor considers a very detailed range of factors to determine whether a worker is an employee or contractor. The most significant is the “control test”. The control test almost always determines that a child care provider is an employee and not a contractor.

  • Control Test: Determine if you have the right to control what work is done and how it’s done. If you have significant control, the worker is likely an employee.
  • ABC Test (California): This test is more stringent and requires you to prove:

          The worker is free from your control and direction.

          The worker performs work that is outside the usual course of your business.

          The worker is customarily engaged in an independently established trade, occupation, or business.

2. Minimum Wage and Overtime:

Federal, State, and Local laws:

Federal: https://www.dol.gov/general/topic/wages/minimumwage

State: https://www.dol.gov/agencies/whd/minimum-wage/state

and Local: https://laborcenter.berkeley.edu/inventory-of-us-city-and-county-minimum-wage-ordinances/

Overtime Pay

In many cases, household employees are entitled to overtime pay for hours worked beyond a certain threshold, typically 40 hours per week.  But check each federal, state and local source to see if overtime kicks in over a certain threshold per day, regardless of how many hours a week.

Important!  Important!  Your nanny or caregiver is an hourly employee.  You may not pay your household employee a salary.  This means you must track and keep record of hours worked.

3. Workers’ Compensation Insurance:

State Requirements: Most states require you to carry workers’ compensation insurance for your household employees. If they don’t you probably want to get it anyways as you would still be liable for injuries on the job. Caregivers of elderly people are especially prone to injury.  Savvy Nanny Payroll Services has an excellent Workers Comp partner just for household employers.  Click here for everything Workers Comp

4. Unemployment Insurance:

State Requirements: Unemployment Insurance is paid through your Savvy Nanny Payroll Services account.

5. Recordkeeping:

Wage and Hour Records: Maintain accurate records of hours worked, wages paid, and taxes withheld.

Tax Records: Keep records of tax filings and payments.

6. Employment Contracts:

Written Agreement: Consider having a written employment agreement that outlines terms and conditions of employment, including wages, hours, duties, and termination procedures.  Though a contract is not mandatory, it is very helpful as a reference if there is a dispute.

7. Family and Medical Leave Act (FMLA):

The Federal law only applies to employers with 50 or more employees. However, there are state FMLA laws, some of which apply to employers with only a single employee. You can check here for more info:

Consult with an Attorney: If you have specific questions or concerns, consult with an employment attorney to ensure compliance with all applicable laws.

By understanding and complying with these legal obligations, you can protect yourself and your household employee.