Renters and Homeowners Insurance Is Not Enough
Many overwhelmed professionals hire full-time nannies, housekeepers, or elder companions, not realizing they are now domestic employers. They have roughly the same responsibilities as any other employers in New York. There are exceptions, but their renters or homeowners insurance policies usually will not cover many of the losses related to such employment, once a household helper:
- Works more than 30 hours per week on average
- Moves in for the employer’s convenience
- Or alleges these employment conditions knowing you can’t disprove them
In short, you need separate insurance policies to cover the risks of domestic employment.
Full-Time Domestic Workers Are Not Independent Contractors
You might be thinking, “I am not an employer. My domestic employee is an independent contractor.” Let’s unpack that.
An independent contractor is:
- An independent business owner,
- Who has (or is seeking) multiple contracts with a variety of clients,
- And those contracts are for the same types of services the contractor provides you
If your full-time domestic worker does not meet all three criteria, you have probably hired an employee. Let’s be honest. It’s highly unlikely that worker will be able to show multiple contracts or clients, you the work you need done requires a full-time or live-in schedule. The New York State (NYS) Department of Labor (DOL) and Workers Compensation Board (WCB) can add, and their examiners know humans need time to sleep, eat, and have a life outside of work.
Misclassifying Domestic Workers Can Be Costly
Maybe you’re still not convinced. We’ve had many clients come to us with skepticism and indignation, ready to fight the penalties assessed by the NYS WCB because their accountants told them they meet the Internal Revenue Service (IRS) criteria. Even when that is true, you might be at risk for a NYS audit or penalties for failures, such as:
- Not securing workers compensation (WC), disability (DB), and Paid Family Leave (PFL) insurance
- Not paying Safe and Sick Leave Pay
- Not ensuring all employees complete the mandatory Sexual Harassment Prevention training annually
For every 10-day period you lack workers compensation insurance, a $2,000.00 penalty accrues. So, you’ll often owe at least $12,000.00 before the penalty notices catch up to you. The good news is that NYS doesn’t want to take your home; it wants you to comply with the law. We can usually help you reduce, if not rescind the penalties, once you have Proof of Insurance.
Resolve your penalties for failure to provide Workers Compensation, Disability, or Paid Family Leave insurance.
There Are Also Record-Keeping Requirements
Regardless, we’ll work together to get you in compliance and settle the penalty issues at the lowest possible amount under the circumstances. I often recommend you hire a payroll company to process payroll taxes, track paid sick leave, and help you maintain compliance. My clients have had success with:
Case Study: Anita’s Frequent Falls
“Anita” was 98 years old when her 70-year-old daughter found me. A holocaust survivor who moved to the United States from Russia, Anita still lived independently in the New York City apartment her husband bought before their children were born. She fiercely intended to maintain her autonomy, but she kept falling, which led to a series of ambulance rides and emergency room visits. Eventually, the hospital social workers required her to have a companion with her at all times. Otherwise, she would have to be admitted and further options would be explored.
The decision to hire 24-hour care seven days per week was easy. Anita’s expenses were low, and she and her husband had saved for their later years. The challenge was in hiring the companions.
Calculating the Need
There are 168 hours in one week. Assuming each companion worked 40 hours, Anita needed four of them. Her daughter volunteered to cover the other eight hours.
Finding Affordable Help
Thinking higher pay would attract more loyal companions, Anita dug deep into her retirement savings and paid the workers several dollars more than minimum wage to:
- Sit with her
- Share meals with her
- Walk with her on errands
- Sleep in the apartment
She did what most people do and asked friends for referrals. Two worked out well. Another was good enough. The fourth was rude, difficult, and unreliable. So, Anita fired her and began looking for a replacement. Before she found a new companion, the one we will call “Rudy” filed a workers compensation claim. That’s how Anita found out she needed a separate insurance policy to cover her workers.
Defending an Uninsured Claim
The Workers’ Compensation (WC) system is effectively a No-Fault process in which claims are presumed to be compensable, unless the employer has clear and convincing evidence that, for example:
- The accident didn’t happen
- It didn’t happen in the course and scope of employment
- It’s not the type of injury the WC law intended to cover
In other words, Anita had an uphill battle. Her former employee was probably going to be awarded sums of money to pay he medical expenses and to compensate her for lost time from work. She might also be penalized for not having the requisite insurance.
Settling All Issues
Remember what I said about the WCB’s intent? It wasn’t to take Anita’s home or make her last two years of live more stressful than they already were. After significant litigation, we settled the penalties and underlying claim for approximately $15,000.00, which Anita had to pay out of her own pocket. Fortunately, the Board agreed with us that her payment of the settlement amount was punishment enough.
What We Cover In a Free 15-Minute Consultation
If you are a domestic employer and get a penalty notice, we can usually help you:
- Keep your domestic worker and get in compliance
- Reduce penalties for not providing DB, PFL, Unemployment, and WC insurance
- Set up systems to give you peace of mind
Note that we no longer defend employers in WC injury claims, finding it inconsistent with our goal to keep people out of court. But after more than 24 years working in the WC system, we can refer you to a competent firm with extensive experience in that area.
Testimonials
[Y]ou are the best in this area!! ~ J.C., CPA, NY
[Nance’s] attention to detail and [her] assistance and follow-up throughout this entire process was so welcoming. ~ K.S., Bookkeeper, NY