Legal Pitfalls When Hiring Domestic Help

Vol. 28 No. 7

By

Robert A. Kraft practices personal injury, Social Security disability, and elder law in Dallas, Texas. Kathryn M. Kraft practices employment law in Dallas.

 

Think like a lawyer before you hire household help. The seemingly simple act of hiring a landscaper, house cleaner, sitter for an elderly parent, or any other domestic worker could actually turn into a much more complex transaction—one that touches on many areas of law.

Consider just the most obvious legal factors. You may be entering into a binding contract with someone you barely know. You may be responsible for paying the person wages. The person will have some degree of access to your home and probably some interaction with people either inside or outside your house. The person may even drive your vehicle in the performance of the job.

So, what if the person you hire to clean your house is an illegal alien? What if the gardener asks to be paid in cash and doesn’t report the income? What if the roofer falls off a ladder and breaks an arm? What if the window cleaner drops a bucket from the second story onto your friend’s child? What if the tree surgeon miscalculates and a limb crushes your neighbor’s car? What if the exterminator assaults a visitor? What if the caregiver steals the silverware? What if, what if, what if . . . ?

Readers of this magazine are lawyers. The previous paragraphs should have triggered thoughts of contract law, employment law, tax law, immigration law, product liability law, negligence law, insurance law, criminal law, and even more. Hiring household help presents many challenges and hazards. Obviously, this is not a simple subject that can be covered in any depth in an article of this length. And it should go without saying that this article is not legal advice, so you must research these issues on your own (or retain a lawyer in your state to do so) before hiring household help.

 

Making the Hiring Decision

We suggest you treat the employment of a household worker just as you would treat the employment of someone in your law firm. You’ll need to review a résumé, have an interview, contact personal and professional references, and complete a thorough background check.

In the interview, you should watch the applicant’s demeanor. Be alert for clues that may indicate a character flaw or a personality disorder. Remember, this person may have unlimited access to your home, including access to the valuables in your home and, in the case of a caregiver, to your elderly parent and/or your children. To find the best fit, try to ask open-ended, relevant questions without indicating what the “right” answer should be. Above all else, don’t hire someone whose answers and demeanor make you feel uncomfortable.

Federal equal opportunity employment laws may not apply to your specific hiring situation, but as a general rule, it is probably best to follow these anti-discrimination guidelines.

You should call the references provided. You could assume a potential employee wouldn’t list the name of someone who would give a bad reference. But if you can get the reference to chat with you in response to friendly questions, you may learn surprising things about the applicant.

You can do a background check using LexisNexis Accurint, PublicData.com, or similar sites. You may discover pending lawsuits or even a criminal history.

Now let’s look at some specific legal areas involved in the hiring of domestic help.

 

Tax Law

Usually when you hire someone to handle a project at your house, you hire the person as an independent contractor, not as an employee, so employment law issues won’t arise. For example, if you hire a plumber to repair a leaking pipe and you provide no specific instructions regarding how you want the pipe fixed, you’ve hired an independent contractor. Some people may mistakenly believe they can avoid employment and tax law issues altogether by classifying all household workers as independent contractors. Don’t make this mistake. Misclassifying a worker is illegal and can lead to fines, tax evasion charges, and serious professional consequences for attorneys.

The employee/independent contractor classification hinges on the level of control you can exert over the worker (and not on how you describe the relationship, your payment scheme, or the worker’s full-time/part-time status). In a nutshell, if you control not only what work is done but also how the work is done, you’ve hired an employee. So, if you hire a housekeeper and require the housekeeper to scrub the kitchen with your cleaning supplies and to polish your table according to your methods, that housekeeper works for you as an employee. (For more information on domestic worker classification, please review the information posted by the Internal Revenue Service on its website.)

If you’ve correctly identified a household worker as an employee, you will likely need to pay Social Security, Medicare, and federal income taxes, depending on the total wages earned by the worker and other factors. Some states may also require you to pay other taxes (such as an unemployment tax or a disability insurance tax), so you should contact the appropriate state agency regarding your obligations. Your tax accountant should be able to guide you through this process, or you can review the information posted by the IRS on its website.

Although it may seem like both a tremendous headache and a financial burden to comply with tax laws, doing so benefits not only you, but also your employee. In addition to the peace of mind that comes from doing the right thing, you may be able to obtain workers’ compensation insurance for injuries occurring in your home and, if you are employing a nanny, you may be able to take advantage of the federal child care tax credit. Your employee will likely gain access to unemployment insurance, workers’ compensation coverage, Medicare, and Social Security benefits, while building an employment history and maintaining the verifiable income needed for loan applications.

We strongly recommend you consult with a tax attorney or accountant regarding whether your domestic helper is an employee or independent contractor and about your duty to withhold and pay taxes. We are not tax lawyers, and we are not giving tax advice in this article.

 

Employment Law

If you’ve hired an employee, you must comply with all applicable employment laws. The “biggie” here is the Fair Labor Standards Act (FLSA) because this federal law will cover most domestic workers. To comply with the FLSA, you must pay your employee an amount at least equal to minimum wage for every hour that your employee works. (Some states set a minimum wage higher than the federal government’s standard, so you should verify that your pay rate complies with the appropriate standard.) You must also pay your employee overtime compensation calculated at one and one-half times the regular hourly rate for all hours over 40 worked in any one week.

If you anticipate that your employee will work more than 40 hours each week, even if your employee “agrees” to a weekly pay rate, you should structure a written compensation agreement that complies with this law. For example, if you and your employee agree on a weekly salary of $600 for a 45-hour work week, the employment contract should explicitly state that the employee earns $12.63 per hour for the first 40 hours, $18.94 per hour for five hours of overtime work each week, and $18.94 per hour for any additional overtime work.

 

Contract Law

This brings us to another topic: contract law. Entering into an employment agreement with a domestic worker enables you to set forth the parties’ expectations at the outset and can prevent problems from later arising. At a minimum, the contract should cover work hours, compensation, job responsibilities and duties, benefits, house rules (such as no smoking indoors), payroll frequency, tax treatment, confidentiality (so your employee doesn’t share your family’s secrets), and termination of employment, including a notice provision. In most situations, you should employ a domestic worker on an “at will” basis, which means that either party may terminate the relationship at any time.

As mentioned above, in many circumstances when you hire someone to work in your home, such as a house painter, you will be hiring the person as an independent contractor. Quite often, an independent contractor will propose that you sign a form contract. You should review any proposed contract carefully to ensure that you are not agreeing to be held financially responsible for issues beyond your control; do not hesitate to mark out or to modify the proposed contract’s provisions. If possible, you should arrange that the final payment will be made only when you are fully satisfied with the work and/or you obtain a warranty for the work.

 

Immigration Law

In addition to the tax law issues raised above, another hot-button issue (and one that seems to trip up politicians) concerns immigration law. Be aware that the burden of hiring a person who is authorized to work in the United States falls on you.

According to Dallas, Texas, immi­gration attorney Kenneth G. Wincorn, under current immigration law, the homeowner who employs a domestic worker is responsible for checking the work credentials of the employee.

A Social Security number is necessary to prove eligibility to work. In some instances, a taxpayer identification number may be provided along with a Social Security number. At this time, it is not considered proper to question the status of the employee further. Basically, you’re only allowed to ask if the worker is eligible to work in the United States, and you’re not allowed to ask where the worker was born or where the worker’s parents were born. If the potential worker cannot provide evidence of eligibility to work, it is not legal for you to employ that person.

Of particular concern is the situation encountered by many who employ immigrant house cleaners. The paperwork that they can provide includes proof of permanent residency, work authorization from the immigration service, and a Social Security card. It will be necessary to file a Form I-9, Employment Eligibility Verification, with the U.S. Citizenship and Immigration Services. (This form can be located on their website, under Forms.) Violation of the law regarding illegal employment can result in both civil and criminal penalties.

 

Negligence Law: Liability for What Happens to the Employee

If your employee is injured at your home, you may be held liable under certain circumstances. If you know a throw rug has a tendency to slide out from under people, and you don’t warn the housekeeper, the housekeeper could try to hold you liable for injuries sustained in a fall. If you hire a roofer and give the roofer a ladder you know to be defective, you better hope that ladder doesn’t collapse with the worker on it.

Assuming that your employee is not under a workers’ compensation insurance policy, some injuries might be covered under your homeowner’s insurance. But you will probably have to pay a deductible, and your policy limits might not be sufficient to pay all damages. You may also run into an insurance policy exclusion for injuries occurring to employees or independent contractors. Read your homeowner’s insurance policy to see what it says about such situations.

 

Negligence Law: Liability for What the Employee Does

You may very well be held accountable in civil law for the negligent acts of a domestic employee if those acts cause injury to another person or damage to someone’s property. For example, the house cleaner might invite a visitor into the home just after waxing the floor. If the visitor isn’t warned of the condition of the floor and falls, the homeowner could potentially be held liable.

 

Negligent Entrustment Law and Respondeat Superior Law

Will your employee be driving your vehicle as a part of the job? If so, you will probably be on the hook for any damage or injuries caused if the employee has a collision. Even if the employee will be driving his or her own vehicle, you could be liable for negligent entrustment if you don’t check the employee’s driving record and criminal background. Regardless of your employee’s background, you might still be held liable under respondeat superior, or the master-servant theory. Remember that consent to drive your vehicle may be implied in some situations, even if not expressly stated.

A rather famous case a few years ago in Michigan involved a young nanny driving her employer’s Hummer. She was texting on her phone, ran a red light, and killed a young boy in another vehicle. Do you have enough automobile liability insurance to cover a tragic event such as that?

Generally the car’s insurance is primary, and the driver’s insurance is secondary. This is why you should think hard about letting an employee drive your vehicle.

It is usually possible to specifically exclude certain drivers from your auto­mobile insurance, but this can raise the potential for personal liability with no insurance coverage to help you. You will want to verify that your employee has automobile liability insurance if he or she will be driving in the course of the job.

We recommend you consider buying an “umbrella” insurance policy to provide coverage over and above your automobile and homeowner policy limits. You can usually purchase millions of dollars of excess coverage for a relatively small premium.

 

Criminal Law and Civil Repercussions

If you come home and your refrigerator is gone, you’ll probably notice that pretty quickly. But it can take days or weeks to notice that a piece of jewelry is missing. By then it will be almost impossible to prove that a particular employee or independent contractor took it. It’s best to hide or lock away such valuables when you have a worker in the home.

If someone you hire commits a criminal action against a visitor to your home, you may be facing serious questions about the thoroughness of your background check. In other words, if you hire someone with a history of criminal assault, and then that employee assaults someone at your house, you may be held liable in civil law for any damages sustained. You almost certainly would not face any criminal charges unless you aided the employee in the commission of a crime. However, if you leave a loaded weapon where the employee can easily find and use it, you might face criminal charges, depending on the laws of your state.

 

A Safer Alternative

One option will relieve you of many of the potential pitfalls mentioned in this article. You can hire almost any type of domestic worker through a licensed agency. A reputable agency will provide workers who are bonded and insured, and the agency will have both reviewed the immigration paperwork and performed background and reference checks on the workers.

These employees may be covered by workers’ compensation insurance through the agency, which would remove most financial concerns of any on-the-job injuries. Although it may be a little more expensive to use an agency, doing so can provide much greater peace of mind. If you do use an agency, carefully review the contract to see exactly what protection the agency offers you and what exposure you may still have.

 

Conclusion

Hiring a domestic worker touches on several areas of law. You should think through all the potential problems that might arise and take any precautionary actions possible. You might save yourself time, money, and even professional repercussions.

 

 

 

 

 

 

 

 

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