Why Household Employers Should Have a Policy
Workers’ compensation is an insurance coverage that more and more employers are finding they need to acquire, either because their state requires they provide it for their nanny, or because of the risks associated with not having a workers’ comp policy in place should their nanny get injured on the job.
Workers’ compensation is currently required for household employers in the following states*:
Both Full-time & Part-time Domestic Employees: AK, CA, CT, DE, DC, HI, IA, KS, MD, MA, MN, NH, OH, OK, SC, SD
Only Full-time Domestic Employees: CO, IL, KY, MI, NJ, NY, UT, WA
*Check with your state’s Department of Labor for more detailed information.
The following example illustrates the pitfalls of employing household help without a workers’ comp policy in place.
The Smith family decided they needed to hire a nanny, Jenny, to provide child care for their one-year-old son. Both parties agreed that the nanny would be paid “off the books” to avoid paying any taxes. Two weeks into her employment, Jenny was working in the Smith’s home and bent over to pick up the baby boy. Upon lifting him, Jenny felt intense pain in her back, and after the family returned home, Jenny informed them she needed to go to the hospital as her back was causing her great suffering.
At the emergency room, the intake desk worker asked Jenny where the injury had occurred, and she informed them it was while she was at work in the Smith’s home. At this point, her injury is now considered a workers’ compensation case and she will fill out the appropriate paperwork. The doctor informs Jenny that she will need to be on bed rest for the next two weeks, and will then require three weeks of physical therapy to heal her injury.
The Smiths now face a problem – their employee will be out of work for at least 2-3 weeks, with possibly limited availability during her physical therapy treatments. This means they will have to hire a temporary replacement for Jenny. Jenny expects that the Smiths will compensate her for the hours she will miss while recovering and will cover her medical bills as she doesn’t have health insurance. The Smiths do not want the added expense of paying for Jenny’s bills and her lost wages on top of paying a replacement nanny. But the Smiths also fear Jenny will sue them if they do not compensate her.
The Smith family is now at risk of:
- exposure to state and federal tax penalties for paying their employee illegally (“off the books”)
- exposure to state and federal tax penalties by Jenny’s private health insurance carrier (if she had her own health insurance)
- a lawsuit for medical bill payments and compensation for lost wages
- facing even further penalties if they live in a state where workers’ compensation insurance is required by law
A single work-related injury or illness could leave an employer liable for thousands of dollars in medical bills and lost wages! Paying an employee legally makes it possible for the workers’ compensation policy to step in to cover some of the employee’s lost wages in the event of a work-related injury or illness. This ultimately protects the employer from a lawsuit, and provides security knowing that coverage is available in the event of an employee injury on the job.
For the employee, a workers’ comp policy ensures that medical coverage and some of their lost wages will be paid for should an accident or illness occur.
For more information and to learn how GTM helps families obtain coverage for their employees, contact our Household Employment Experts at (888) 432-7972 or visit www.GTM.com.