Understanding the Liabilities of Employing Domestic Staff 

Employing domestic staff, such as nannies, housekeepers, and gardeners, is a great way to help manage busy homes. However, many people don’t realize that by bringing on household service providers, you become an employer, which comes with a host of responsibilities, including certain legal obligations and liabilities, even for just one employee.

It’s important for household employers to understand these obligations to maintain compliance. Employment liability can arise in unpredictable situations – and often brings legal, financial, and reputational issues when it does. Unfortunately, many household employers do not have the time or resources to proactively research this information before hiring a new employee and ensure it’s continuously abided by, but failure to meet these requirements can result in serious consequences.

Let’s break down the importance of understanding the liabilities of employing domestic staff, and explore why household employers must strictly follow employment laws in order to maintain compliance and steer clear of legal and financial issues.

What are household employees?

A household employee is someone who works in or around a private home and performs domestic duties or personal services for the homeowner and, in many cases, their family. These employees work part-time or full-time and, depending on the role, may live with the family. The overwhelming majority of household employees are W-2 employees, but misclassification of these workers as 1099 independent contractors is common.

What are common types of household employees?

 Common titles of domestic service providers include:

  • Nanny
  • Housekeeper
  • Personal assistant
  • Driver
  • Caregiver
  • Property manager
  • Dog walker

  • Gardener/Landscaper
  • Chef
  • Maintenance
  • Security guard
  • Tutor
  • Bookkeeper
  • Family member on payroll

What are some of the liabilities of employing domestic staff? 

Employment liability can range from adhering to labor laws and ensuring compliance with wage and hour laws in your area, all the way to taking swift action if an employee gets hurt on the job or raises concerns around improper behavior from coworkers. The scope of employment law is ever-changing and regulations can differ down to the local level, leaving many household employers overwhelmed by the time and energy it takes to stay current with them. A few things to consider are…

Procuring adequate insurance coverage

Many people with household staff believe they don’t need to procure insurance coverage for employees. Their misunderstanding typically occurs because they either misclassify the workers as independent contractors or assume that their homeowners’ policy will cover any expenses if an injury occurs. This is typically not the case.

In fact, workers’ compensation insurance is a requirement for employers in 49 states, and most homeowners’ policies have exclusions when the home is also a worksite (which is the case when employing W-2 workers on your property).

Types of insurance coverage that household staff employers may want to procure include:

  • Workers’ compensation: This type of insurance covers medical expenses, lost wages, and other expenses related to workplace injuries and illnesses. Most states require employers to provide workers’ compensation benefits, even if they only employ one person. Unfortunately, injuries like slipping on an icy porch, tweaking one’s back when lifting someone, or twisting an ankle walking down the stairs are common with household employment.
  • General liability insurance: This covers bodily injury, property damage, and other types of liability related to your staff’s work. Also, this insurance covers legal expenses if you are named in an employment-related lawsuit from someone claiming to have been hurt due to your household employee’s work.
  • Professional liability insurance: This insurance covers any errors and omissions that may occur in your household staff’s work, such as a chef who used an ingredient that caused a guest’s allergic reaction. It may also be pertinent to obtain excess liability insurance, which covers claims that exceed the limits of a primary insurance policy.
  • Auto insurance: If any domestic staff member uses a vehicle to do their job, such as running errands for your family or driving your kids to school, you might be required to carry auto insurance to cover accidents or other liabilities. Obtaining auto insurance for household employees will protect you, whether the employee is driving your car or their own.
  • Employment practices liability insurance (EPLI): This insurance covers claims related to employment practices, such as discrimination, harassment, and wrongful termination. It’s critical to maintain this coverage and ensure that you follow HR best practices to avoid these allegations in the first place.
  • Property insurance: Most household employees work in or around your home. Property insurance could be helpful to protect your residence and your belongings. It also covers your home in the event that vandalism or other damages occur.
  • Cybersecurity insurance: As technology plays an increasingly critical role in the job duties of today’s workforce, protecting your sensitive and personal information online is extremely important. Cybersecurity insurance can help by safeguarding you from any financial losses that stem from a cyber attack, such as a hacker emptying a bank account.
  • Theft and crime insurance: With staff members coming and going from your property or properties, it’s a good idea to protect your valuables in case of theft or another crime.

Abiding by wage and hour laws

Wage and hour requirements are not always as straightforward as you may think. Laws can vary depending on the location, and can become even more complicated when your employees travel for work. Complying with these laws not only helps employers avoid the legal and financial consequences of mishandling employees’ compensation, it can also improve overall satisfaction and reduce turnover by ensuring employees are paid fairly.

Wage-related requirement you may be responsible for include:

  • Minimum wage: Like with any other job, household employees are entitled to pay for every minute they work, including overtime. Minimum wage can vary at the state, county, and city levels, so make sure you know wage requirements in the area where the work is performed — even if you’re just visiting. For example, if you live in Florida but travel to New York City with your personal assistant, you must pay that employee and act in accordance with New York laws, not Florida laws, during that time.
  • Overtime pay: You must pay overtime to domestic service providers who work more than 40 hours per week. This rate is usually 1.5 times their regular pay rate, although some states may have different overtime rules, such as overtime applied for workdays that last longer than eight hours.
  • Paid time off (PTO) and sick leave: Your staff can use PTO to take sick days, a vacation, or time off for any other personal reason. Many states and counties now mandate that all employers – even household employers of just one domestic worker – provide a baseline level of sick leave or paid time off.
  • Sleep time: If your domestic employees live with you or are required to be on duty during specific hours of the night, you may have to pay them for sleep time, even if they are asleep or not working.

Complying with other labor laws

There’s a vast range of other labor laws that household employers are also responsible for complying with at the federal, state, and local levels. Many of these laws change throughout the year, so it’s imperative to stay up to date or consult an employment expert who can help. A few key examples of labor laws to be aware of include:

  • Tax requirements and recordkeeping: You are responsible for withholding and paying certain taxes, like Social Security and Medicare taxes. You must also keep accurate records of your staff’s hours worked and all wages you’ve paid.
  • Background check laws: Employers can face liability if background checks aren’t conducted properly, such as if the employee is checked prior to an offer being made, if they are not provided with the correct disclosure or waiver forms prior to the check, or if information is accessed during the check that is prohibited by law from being considered in the application process. For this reason, employers who perform background checks must comply with federal Fair Credit & Reporting Act (FCRA) laws. It’s important to use a reputable and reliable firm to conduct these searches.
  • Title VII: According to Title VII of the Civil Rights Act of 1964, employers are prohibited from discriminating against employees based on race, color, religion, sex, or national origin. This law applies to household staff as well, and many states, counties, and cities have even more specific laws protecting unique groups of employees.

What are the consequences of noncompliance?

When you fail to comply with the appropriate laws in your state, you can face lawsuits from staff, including for discrimination, harassment, wrongful termination, and unpaid wages. In addition, you could face:

  • Financial penalties from lawsuits and having to pay punitive damages
  • Legal penalties, fines, and even jail time depending on the severity of the incident
  • Reputational damage, which may make it more difficult to find household staff in the future or lead to other unforeseen consequences
  • Disruption of household operations if staff quits or is fired
  • Extra time and energy spent managing these situations, regardless of whether the claims are valid or not

How can household employers assess their liability?

It’s understandable for employers to wonder about the amount of risk they will face when hiring, managing, and terminating household staff. Employment relationships can be extremely nuanced, sensitive, and difficult to manage – and the personal nature of household work can exacerbate issues even further.

To determine your risks as a household employer, consider the following:

  • Review all federal, state, and local employment laws in the area the work is being performed to ensure you understand what rules and regulations to obey
  • Identify and mitigate potential risks, such as the likelihood of a workplace injury occurring and if you have the correct insurance policy in place
  • Develop and implement employment policies that address issues such as workplace safety and codes of conduct
  • Consult an employment attorney or a firm that specializes in household employment

Reduce your liability by outsourcing employment

Even if you use a payroll company or CPA to handle employee administration, you are still exposed to a significant amount of risk related to employment law compliance, HR management, and more. The most comprehensive and reliable way to minimize liability when employing household service providers is to outsource the employment relationship to a third party.

TEAM is the leading provider of comprehensive payroll and HR services for families with domestic staff, offering a holistic solution that manages payroll, taxes, insurance, and employer liability. Our unique Employer of Record model allows clients the flexibility to select and manage the individuals working in their home, while fully outsourcing both the administrative hassles of timecards, payroll, taxes, and HR management as well as the considerable risk of being an employer. 

If you have questions about navigating the complex requirements of household employment, our team of experts will support you throughout the employee lifecycle to eliminate the administrative burden and reduce your liability. Contact us to learn more.