Running a household is a lot of responsibility. Most of us delegate out some household work to third parties like housekeepers, gardeners, or babysitters and nannies. And most people tend to pay cash for these and think nothing of the relationship. But in California, these are usually classified as domestic workers and are subject to various tax and employment laws.
Although California does not require a written employment contract, putting the employment relationship in writing is a way to protect against liability if the relationship breaks down. In a dispute about overtime, hourly pay, vacation time, etc., without a written contract you can’t prove your intended agreement.
Wages and Overtime
Domestic workers are entitled to minimum wage just like any other employee in California. Furthermore, they are protected by overtime laws. Specifically, they are entitled to 1.5 times their hourly pay for more than 8 hours/day or 40 hours/week. Anything more than 12 hours per day is paid at twice their regular hourly pay. There are additional regulations as they relate to live-in workers.
In California, taxes owed depends on whether the worker is classified as an employee or independent contractor. Often people may think they are hiring an independent contractor, but the courts would classify them as an employee. The main consideration in determining the type of employment relationship hinges on control of the worker–how much control the worker has over the type of work done and when it is done, whether they control the business part of the work, or whether they bring their own materials. As you can imagine, these considerations often point toward an employer/employee relationship. However, it is not automatic, and although not determinative, a written contract can help direct the intent of the relationship.
If the domestic worker is an employee, the household employer is required to withhold taxes, withhold and pay Social Security and Medicare taxes, as well as pay unemployment taxes. Additionally, California requires household employers to provide workers compensation coverage.
If the domestic worker is an independent contractor and is paid $600 or more in a calendar year, then the employer is required to provide a Form 1099-MISC. Then the domestic worker is responsible for paying his or her own income and self-employment taxes.
Bypassing the Technicalities
Overwhelmed by the rules and classifications? Don’t just ignore them. There can be severe consequences, mostly monetary, for failing to comply with these regulations. These can include IRS penalties for failure to pay employer taxes or costs associated with a lawsuit or dispute related to overtime or proper wages. If you don’t want to deal with the headache of tracking breaks, overtime, vacation, and tax documents, a great way to deal with it is to hire your domestic workers through a service. You’ll pay a premium, but the potential cost for failure to comply with the laws could be much more costly. Consult an attorney and/or tax professional to discuss what you should be doing when hiring domestic workers.
Obligatory Disclaimer: Did you like what you just read? I’m glad! But please know this post is for information purposes only and is not considered legal advice, nor does this create an attorney-client relationship. Head over to my legal blog to check out other relevant information and contact me through there if you want to discuss your legal needs.