Case Study: Workers’ Compensation Penalties for Household Employers

If you employ a nanny or domestic employee, you may be required by law to provide and maintain Workers’ Compensation coverage, depending on your state’s laws. As the case study below shows, failure to comply could lead to extensive workers’ compensation penalties.

The Situation

According to New York State law, any employer with employees working more than 40 hours per work week must provide workers’ compensation insurance coverage. A household employer living in New York State paid a nanny to care for his children, but ignored the workers’ compensation coverage requirement. In addition, to save herself from a long commute several times a day, the nanny stayed at the employer’s house to rest, exercise, watch TV and do her own laundry when the children were at school or involved in activities away from home.

According to New York State law, if an employee is on work premises, he or she is considered to be working. Therefore, not only was the household employer unsure as to the hours the nanny actually worked, he was also penalized $37,000 by the New York Workers’ Compensation Board because the nanny was on premises throughout the day.

GTM’s Solution

After immediately enrolling the household employer in a workers’ compensation insurance policy, GTM’s payroll and tax experts, along with the household employer, identified exactly when the nanny worked, specifically targeting when the nanny put in more than 40 hours a week. With this information, GTM then worked with the New York Workers’ Compensation Board to reduce the fine.

The Results

GTM worked with the board to significantly decrease the household employer’s penalty by knocking the compliance issue to only one year. During the year identified, GTM and the household employer showed that the nanny—although on premises—actually worked or was in the home 40 hours or more for only a small number of weeks during school breaks or when a child was home ill. With this information, GTM negotiated a reduced fine of $429; a $36,571 reduction!

For more information, contact GTM’s Household Employment Experts at (888) 432-7972.