Nannies, Housekeepers, and Gardeners, Oh My! – Am I an Employer?

Many of us need the valued help of others to make our lives run smoothly. I, for one, would not be able to be a practicing attorney and mother of two busy boys, without the assistance of baby-sitters and the woman I call “my fairy princess,” Vicky, our housekeeper. When I first brought someone into our home, I never thought of myself as an “employer.” I thought about it as two people having different needs that served a similar purpose (i.e. I needed to work, or go grocery shopping, or take a shower), and the baby-sitter needed money to support their livelihood. I did not consider the legal ramifications of this employment relationship. I assume that many of you have a cash arrangement and an understanding about hours, and that the idea of filing quarterly tax statements and taking out deductions for disability insurance, and the like, is a more daunting task than you want to handle. Well, before you stick your head in the sand (as I once did), there are some things you should know about when to declare a household worker an employee, and what legal requirements attach when that threshold has been met.

ARE YOU A HOUSEHOLD EMPLOYER?

If you pay wages to people who work in and around your home, you may be considered a household employer. Types of household workers, include, but are not limited to: baby-sitters, caretakers (who do not work with an agency), housekeepers, gardeners, pool maintenance workers, cooks and au pairs. People who are not considered household employees are: carpenters, nurses from a nursing registry, electricians, private secretaries, tutors, workers from an employee leasing service or provided by an independent business. The worker is an employee if you control, not only what work is done, but how it is done. It does not matter if the worker is part-time, temporary, or full-time, or that you hired the person through an agency.

WHEN MUST I REPORT THE EMPLOYEE?

You must report a new hire or someone you have re-hired to the New Employee Registry (NER) within 20 days of their start work date, which is the first day that they have performed services for you that were subject to wages. You are also required to file Employer of Household Worker(s) Quarterly Report of Wages and Withholdings, if your employee meets the criteria described below.

DO YOU OWE TAXES ON YOUR HOUSEHOLD EMPLOYEE?

The answer to this is, it depends. Now, if numbers scare you the way they scare me (I was a public policy major in college to avoid math), then hold onto your hats. I will simplify it the best way I can. If you employ one or more people to perform work in your home and pay cash wages of $750.00 or more in a calendar quarter, you must register with the Employment Development Department within 15 days after paying the $750.00 in total cash wages. The EDD has set up an online portal for filing this, called E-services for Business. It is fairly intuitive to use. Meals and lodging are not counted towards the $750.00 cash wage threshold. So, if you have a live-in nanny that you pay less than $750.00 in a calendar quarter, you do not have to count the meals or room provided to him/her as part of the cash wages requirement. You do, however, have to count the meal and lodging amount in your taxes if you pay more than $750.00 in cash wages. Thus, if you pay $750.00 in cash wages and meals worth $75.00, you must register the worker as an employee, and withhold State Disability Income (SDI) on the entire $825.00. There is another threshold you must be aware of as well, if your cash limit is less than $1,000.00 in a quarter period (without meals and lodging), you do not have to pay towards Unemployment Insurance (UI) and Employment Training Tax (ETT), but you must register, report the wages and withhold SDI on the amount of wages + meals and lodging. So, to sum up: if you pay $750.00 or less in a calendar quarter, you can continue to stick your head in the sand; if you pay more than $750.00 in cash, you must register and report wages and deduct SDI; if you pay more than $1,000.00 per calendar quarter, you must register, report wages, and deduct all applicable state taxes.

ARE MY HOUSEHOLD EMPLOYEES SUBJECT TO ANY PAID SICK TIME?

Yes, you must pay sick time even if you only have 1 employee! Household employers in California must pay up to 3 days (24 hours) of paid sick time each year, so long as their employee works at least 30 days. The employee may start using their sick time 90 days after they begin working for you. Employers can frontload their sick time pay at the beginning of the year, or can have an accrual system, whereby the employee receives one hour of sick time for every 30 hours worked. Sick time can roll over to the next year, but can be maxed out at 48 hours (best to have this in writing). If the employee is terminated, employers do not need to pay for unused sick time.

WHAT OTHER BENEFITS MUST I PAY FOR?

If your nanny, caregiver, or other household employee drives their own vehicle on the job, you must reimburse them. The current federal mileage reimbursement rate is 53.5 cents per mile, and covers the cost of gas and general wear and tear on the car. Household employers must also carry workers’ compensation insurance, to help with medical expenses and lost wages should the employee have a work-related injury or illness.

WHEN MUST I PAY OVERTIME?

Nannies are entitled to overtime pay equal to time and a half if they work more than 9 hours in one day or 45 hours in a week. This includes household workers, such as nanny, housekeeper, maid or personal attendant. Nannies may be paid on a salary if the amount they receive is at least as much as would be required under the minimum wage laws that comply with the Federal Labor Standards Act. In California, the minimum wage is higher than the federal minimum, and the employer must pay the higher amount. The current minimum wage as of January 1, 2017 in California, varies by city. (You can look up your city’s minimum wage at https://www.dir.ca.gov/dlse/faq_minimumwage.htm)

WHAT ARE THE PENALTIES OF GETTING CAUGHT?

Household employers who do not properly withhold taxes are subject to criminal and civil penalties. The criminal charges are mostly levied upon those who act intentionally to defraud the government, as opposed to those who act out of ignorance, or neglect. However, civil penalties and interest on wages that have not been properly paid may attach regardless of intent.

Disclaimer: The content of this article is offered only as informational and should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter.

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