Are Domestic Workers Employees?

Generally, nannies are characterized as employees under federal law because they are usually “dependent” on one family or one employer for their work. The U.S. Department of Labor (DOL) expounded on this issue in 2015 through an Interpretation letter.

The essential question in determining whether a worker is an independent contractor or an employee is whether the worker is dependent on the employer. The DOL provided six factors to guide analysis and advised that each of them should receive equal weight.

In regards to a nanny relationship, there are two specific factors that generally indicate an employee relationship. First, a nanny relationship is generally a long-term relationship – there is a sense of permanence to the relationship. In contrast, a worker who works intermittently for an employer and does work for others is more likely to be considered an independent contractor.

Second, the DOL discussed the nature and degree of control that the employer exercises over the worker. If the worker maintains control over the meaningful aspects of his job such that he is operating his own business, he would be considered an independent contractor. This is usually not the case with full-time domestic workers.

Ultimately, the DOL looks at the nature of the business and whether an employee is dependent on an employer. The DOL concluded that most workers are, in fact, employees. Most nannies work exclusively for one family, and the family has a great amount of control over when the nanny works and what she does for the family.

Given this information, if you are hiring a nanny or a domestic employee, we suggest you do the following:

(1) Put in place a contract with your nanny that states that the nanny is an at-will employee and specifically explains the expectations and work hours for the nanny.

(2) Expect to pay the appropriate taxes associated with hiring an employee. The IRS defines employees and independent contractors in essentially the same way as the DOL. Many families pay their household employees “under the table” as independent contractors. Often times they do not get caught by the IRS, but if a nanny files for unemployment benefits, this can pose a legal issue for the family.

(3) In Illinois, you are required to provide workers’ compensation insurance for your full-time domestic employees – these are individuals who work 40 or more hours for 13 weeks or more in a calendar year. Contact a local insurance provider to add workers’ compensation insurance.

(4) If your nanny works over 40 hours in a given week, you need to compensate her with overtime wages of time and a half payment. Track when she starts and ends her work every day to make sure you are meeting this requirement. This rule is different if the nanny lives with the family.

For more information please contact Karuna Brunk at Malecki & Brooks Law Group LLC at +1.630.948.4907.