In any type of job, employers must ensure they are protected from accusations of illegal employment practices. Household employers are no exception. Our payroll partner, GTM Payroll Services, provides this look at steps you can take to make sure you are following applicable labor laws.
As a family that has hired someone to work in their home – like a nanny, senior caregiver, or housekeeper – you are now considered a household employer and should understand and follow applicable labor laws just like any other business.
Here are seven steps to take to help ensure you are protecting yourself from allegations of wrongful employment practices.
1. Create a nanny contract
The first step you should take with your nanny is to create a nanny contract or work agreement so you both are on the same page in terms of expectations and can discuss any concerns either party may have even before employment starts. This detailed outline establishes a clear understanding and reduces the chance of issues between your nanny and family.
A nanny contract is also legally binding so be sure you are thorough in detailing your employment arrangement. If you are using a placement agency to find a nanny, get their advice and input. The contract should be easy to read and understood by you and your nanny.
To further ensure the safety and legality of all parties involved, we recommend that your work agreement be reviewed by an employment attorney.
2. Establish an employee handbook
Like any employer, families with household help must establish fair personnel practices and policies. Providing your worker with a household employee handbook that explains the workplace (i.e. your home) rules, practices, and policies is a necessity and presents clear advantages to the employer. Is smoking allowed indoors or around children? What can your worker use that is considered employer property? What are the procedures in case of an emergency? An employee handbook lets workers know what the rules and practices are within your household. While highly prevalent in the corporate workplace, employee handbooks are just as valuable in household employment. They cement your household’s employment and personnel policies.
All new workers should receive an employee handbook upon hire and sign a receipt acknowledging that they have received the document. The receipt should state that the employee was provided with information on important household policies and procedures
If you need help putting together a household employee handbook, call us at (800) 929-9213 and a certified human resources advisor can answer your questions and even create a customized handbook for you. There is a fee for this service and would be in addition to any nanny payroll and tax services.
3. Set up workers’ compensation coverage
Workers’ compensation covers your employees’ necessary medical bills, as well as a portion of their lost wages if they get hurt or sick while on the job. Coverage also protects you, as an employer, from liabilities. In many states, it is a requirement to have workers’ compensation as a household employer. Even if it is not required in your state, we encourage you to consider voluntary coverage, to help protect you and your employees.
Not having the required coverage is one of the costliest mistakes a family can make. In New York State, for example, you could face a fine of up to $2,000 per every 10-day period of noncompliance. On top of fines and penalties, you could face legal action from your employee or need to cover their medical expenses and lost wages.
4. Understand how to properly terminate your employee
Firing your nanny isn’t easy. Since you’ve invited this person into your home and they care for your children, there may be personal bonding that goes beyond a typical employer-employee relationship. You are also taking away their source of income with potentially very little notice. While separations can be tough to initiate and emotional, there are legal ramifications if performed incorrectly.
Your nanny works at the will of your family. This is called at-will employment. You can fire your nanny at any time for good reason or no cause at all. You do not necessarily need to give a warning before a termination provided it’s indicated in your work agreement. It also means your employee can also quit at any time. Potential exceptions to at-will employment include a signed contract for a fixed period of time and violations of state law.
You will want to make sure the termination is consistent with relevant state employment laws to minimize any chance of legal action by your employee.
Your employee should be paid for all work performed up to their termination even if they are immediately fired. You may need to pay for unused paid time off based on your work agreement. Never withhold pay for hours worked as that can get you into legal trouble. Check with your state’s labor department on the laws around the final paycheck. It could be required by the next available payday or at the time of termination.
5. Know that discrimination law and domestic worker protections can apply to household employment
As an employer, you should familiarize yourself with the discrimination laws of your state. Some laws may only apply to larger employers but more and more states are expanding workplace protections to household employees and establishing domestic worker bills of rights.
6. Follow minimum wage and overtime laws
Perhaps the biggest reason families find themselves in legal trouble with former employees, is because they did not pay an overtime rate for hours worked over 40 in a workweek (overtime rules differ for live-in employees and in California) or failed to pay minimum wage.
Under the Fair Labor Standards Act, nannies and other household employees are considered non-exempt workers which means they need to be paid an hourly rate of no less than the applicable minimum wage and an overtime rate.
According to the FLSA overtime pay standards, “covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay.”
While the federal minimum wage is just $7.25/hour and hasn’t changed in several years, many states, cities, and counties have minimum wage rates that supersede the federal rate. A household employee must be paid at least the highest minimum wage of the applicable federal, state, and local rates. Check out your state or local minimum wage rate.
7. Pay your employee legally
When you pay your nanny “off the books,” you open yourself up to financial and legal trouble. Getting caught paying your nanny “under the table,” may mean significant fines and penalties, payment of back taxes, and interest owed on back taxes. On top of the IRS and your state tax agency getting their share, you could face legal action from a disgruntled employee looking to recover lost benefits from being paid illegally. Not paying your nanny taxes is also considered tax evasion and can be damaging to any career aspirations.
GTM can help
On top of their comprehensive payroll and tax services, which can help ensure your nanny is paid the right way and your taxes are filed on time, every time, GTM also offers Household HR services. This includes everything from creating an employee handbook, providing harassment prevention training for employees (required in states like California, Connecticut, and New York), and consulting on employee management. To learn more or to get started with a PHR-certified HR advisor, call (800) 929-9213.
And for help with hiring a nanny or other household employee, contact us at (518) 348-0400.