Updated April 5th, 2016
Law Office of D. Victor Pellegrino
2627 Genesee Street, Utica, New York, 13501
Phone: (315) 733-0417 Fax: (315) 792-8075
Member: National Academy of Elder Law Attorneys
Elder Law, Trust and Estate and Tax Sections of the New York State Bar Association
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CRITICAL INFORMATION YOU MUST KNOW ABOUT YOUR LEGAL RESPONSIBILITIES, CIVIL AND CRIMINAL LIABILITIES, FINES AND PENALTIES UNDER NEW YORK LAW
WHEN YOU HIRE PRIVATE HOME HEALTH CARE AIDES
TO CARE FOR YOUR PARENTS OR SPOUSE
Many of my clients hire home health care aides to care for their parents, without giving a thought as to what their legal responsibilities are or what their exposure is to civil and criminal laws, fines and penalties.
Many times I have a client tell me
“My mom loves this home care aide and does not want to lose her or him.”
“The aide insists on being paid off the books.”
“If I have to pay the aide on the books he/she will quit.”
“If I have to pay the aide on the books he/she will charge more.”
“We consider the aide like family and I can’t imagine him or her ever suing me or mom if he/she got injured or we had to let her go.”
“Everyone I know pays their home health care aides off the books!”
The above notwithstanding, it is no less than foolish to ignore the law and pay an employee “off the books.” It may be “penny wise”, but it is clearly “pound foolish.” My advice is DON’T DO IT, FOLLOW THE LAW!!!
Now why do I say this? Well, if you don’t have workman’s compensation insurance when you are supposed to, there is a $2,000 penalty for every 10 day period you don’t have the insurance! There are 30/31 days in a given month. If your home health care aide gets hurt lifting mom or dad out of bed, you are the insurer and become liable for all of their medical bills for the rest of their life! If they are disabled, you are required to pay what they would have gotten for disability benefits. Do the math! Do I have your attention yet?
The purpose of this letter is to discuss the obligations of a child who hires home health care aides to care for their parents. The issues discussed also apply to a spouse who hires health care aides to care for their spouse and to a Power of Attorney, Trustee or anyone else the law defines as an “Employer.”
The information set forth here for you is not optional! It is mandatory that you become aware of what the law requires you to do when you hire a caregiver for your parent or spouse and the penalties for your failure to comply with the law.
Question 1: WHAT IS THE LEGAL DEFINITION OF THE TERM “EMPLOYER” AND
WHAT DOES AN EMPLOYER HAVE TO DO?
The term “employer” means an individual or entity which pays an individual to provide services to an individual (in the home care context). The term “employer” applies to both to an individual or entity who pays employees and /or pays independent contractors.
An “employee” is an individual who gets paid by an employer for providing services and who is not an independent contractor.
In general, an independent contractor (1) has no set hours, (2) is free from the direction, supervision and control of the employer and (3) is subject to profit and loss (rather than a guaranteed payment) for an undertaking, pursuant to an agreement or contract. Usually, a home health aide is an employee, not an independent contractor.
The Internal Revenue Service (“IRS”) is the Federal agency which sets policy with respect to which employers and workers are subject to withholding requirements for Federal Income Tax, Social Security, Medicare and Federal Unemployment.
The New York State Department of Taxation is the state agency which sets policy with respect to which employers and workers are subject to withholding for state Income Tax. See EXHIBIT A, attached.
The New York State Unemployment Insurance Board (“NYSUIB”) sets policy concerning what employers and employees are covered under the New York State Unemployment Insurance Law and which employers are required to pay the New York State Unemployment Tax. See The Employers Guide To Unemployment Insurance, Wage Reporting and Withholding Tax NYS-50 found at:
The New York State Workers’ Compensation Board (“WCB”) sets policy for and administers the Workers’ Compensation system in New York State and the disability coverage required by statute. The Workers’ compensation board also determines who is an employer and whether a worker is an employee for the purposes of Workers compensation and statutory disability. See the New York State Worker’s Compensation Board Employer’s Handbook found at:
Unfortunately, the definitions of employer, employee, independent contractor and domestic worker (including home health aides) are not uniform across these government agencies. These nuanced differences make it more difficult to know what to do with each agency. In general, my advice is that due to the major risks and costs involved in making the wrong decision, if there is any possible question, err on the side of the existence of an employer-employee relationship. In general, the cost of initial compliance (paying the employer’s share of Social Security, obtaining Workers’ compensation and New York State Disability, paying Unemployment Tax, and doing the required income tax withholding, etc.) is less than the cost to deal with than the failure to classify a worker as an employee asserted by one agency, let alone three or four.
Question 2:WHAT CAN I DO TO DEFINE WHO IS THE EMPLOYER?
The “Employer” should be clearly defined. The best way to do this is for the employer to obtain a separate Employee Identification Number, (Form SS-4) from the IRS. In general, the individual receiving the home health care services will be the employer; however, there are other individuals or entities which a government agency can find to be an employer, particularly in the home health aide situation. For example, an adult child who “arranges” for a non-agency privately paid home health aide for a parent could be deemed the employer by the Workers’ Compensation Board and the State Unemployment Insurance board if the recipient of care has not obtained an Employer Identification Number or has no Employer ID# for Workers. Comp and Unemployment Insurance.
Question 3:WHAT IF I AM PAYING AN AGENCY FOR PROVIDING CAREGIVER
If you are paying an agency for providing aide services, you should confirm that the
Agency providing the aide is furnishing Workers’ Compensation coverage, paying unemployment and withholding and filing taxes. If the agency is doing these things, then you need do nothing because the agency is the employer. However, should you hire a non-agency aide in the future, remember the rules set forth in this letter will then apply to you. If you are directly paying a home care agency, then the agency is probably the employer. Caution: There are a number of aide placement agencies which assist families in finding aides, but which do not employ aides. In general, the aide is paid by the family and the agency receives a fee. Even if the agency is paid directly, and the agency pays the aide, you should still confirm Workers’ Compensation coverage by the agency and obtain a copy of a Certificate of Insurance from the agency.
Question 4: WHAT IS THE DIFFERENCE BETWEEN AN EMPLOYEE AND AN
The line between an employee and an independent contractor is technical, subjective, shifting and many times vague. In general, a worker who receives a set wage is under the control and direction of the employer (whether that control and direction is exercised) and who can be hired and fired is an employee.
In general, an independent contractor has no set hours, is free from the direction and control of the employer and is subject to profit and loss (rather than a guaranteed payment) for an undertaking, pursuant to an agreement/contract. Thus, as a practical matter, a home health aide will almost always be an employee, not an independent contractor. This is especially true in the Workers’ compensation arena.
As a policy matter, the taxing authorities, the UIB and the WCB all will tip the scales very strongly toward a finding that a worker is an employee.
Question 5: ASSUMING THE CAREGIVER IS AN EMPLOYEE, WHO SHOULD BE
THE EMPLOYER ?
I recommend that the person receiving the care, your parent, should always be the employer. This gets agents like you under a power of attorney, spouses, children, guardians and trustees out from under personal liability for failure to comply with the obligations of the employer.
QUESTION 6:WHAT DO I HAVE TO DO IF AN EMPLOYEE IS HIRED?
Please see the very clear and concise explanations in the attachment to this letter and the web sites referred to above. Please pay particular attention to the documents sent by the IRS when an Employer Identification Number is assigned, the New York State Department of Taxation & Finance information (Exhibit A) and the New York State Department of Taxation & Finance Employers Guide to Unemployment Insurance, Wage Reporting and Withholding Tax referred to above.
In general, an employer has to take the steps outline below.
The required actions include---
1. Register as an employer with the NYS Dept. of Taxation & Finance and the NYS Unemployment board.
2. Confirm that the potential employee is eligible to work in the U.S.
3. Obtain NYS Workers’ compensation and NYS Disability insurance policies.
4. Retain a payroll service to handle the withholding and tax filings.
I strongly recommend that employers pay payroll services to make the wage payments and deal with all the withholding and report filing issues. However, the standard services such as Paychex and ADP are not necessarily able to properly calculate wages due. If there is an error, the service has to deal with it, not the employer or someone acting at the request of the employer.
In terms of obtaining workers Compensation and New York State disability coverage, I recommend that you start by contacting the insurance broker the family uses for its regular insurance needs. If that approach is unsuccessful, you can go to the New York State Insurance Fund website (www.nysif.com).
Please note that only the number of full-time and part-time employees and total salary are required, not the names or social security numbers of employees.
Question 7: WHAT IF THE CAREGIVER WANTS TO WORK OFF THE BOOKS?
This is a biggggg problem for you!!! Many times a caregiver does not want taxes withheld, or the aide is an individual who is not eligible to work (an undocumented individual).
With respect to an eligible worker who does not want taxes, social security, etc., withheld, the following should be required:
1. a separate tax identification number issued to the aide for a business of providing home care
2. a certificate of workers’ compensation coverage for the business entity;
3. a 1099 agreement; and
4. a requirement to be furnished with copies of tax returns filed by the aide or a letter from the aide’s accountant saying that a Schedule C has been filed with the tax returns and includes the income from the 1099 form provided by the employer.
5. proof that the aide works for other employers
6. proof that the aide has no set hours and
7. is free from your direction, supervision and control.
If all these 7 steps are taken, there may be sufficient evidence to support that the aide is an independent contractor, provided that you are not the aide’s only client.
In my opinion, the cost of litigating this issue with different agencies, the bias of the agencies to find an employee status instead of an independent contractor status, the risk of losing that litigation and the fines and penalties involved if you lose mean that you should really treat your aide as an employee except when the aide is employed by an agency.
Is that a conservative approach? Yes, but I believe a sound approach and good advice.
For a potential aide who is not eligible to work, you must be aware that there are federal, civil and criminal penalties for employing undocumented workers. If you hire an undocumented aide anyway, a workers’ compensation policy must be obtained (see below). All employees, including undocumented employees, must be covered by a workers’ compensation policy. The public policy behind this requirement is to discourage employers from hiring undocumented workers in order to save on the workers’ compensation premium.
I know that most of my clients will prefer to hire an aide with whom the recipient care is comfortable and with whom the family is comfortable, irrespective of the issues, such as civil and criminal liability which the family feels is a remote possibility, until they happen to you.
My obligation as your attorney is to advise you of your rights and responsibilities.
The penalties for failure to comply with providing workers’ compensation and disability coverage, failure to withhold and failure to pay unemployment tax vary from annoying to draconian.
The minimum wage and overtime pay requirements for home health aides (classified as domestics) are complicated. The federal Fair Labor Standards Act (FLSA) and the NY Domestic Worker Bill of Rights (L 2010 ch 481) must be consulted. The basic rule for non-agency home health aides is that
1. an hourly wage must be paid for all hours the aide is present in the residence of at the recipient of care;
2. currently, the minimum wage for the first 40 hours (44 hours if aide is live-in) is $7.25/hr (increases to $8.00/hr on 12/31/2013) and annual increases each of the succeeding two years;
3. time and a half for all hours over 40 (over 44 if live-in)
4. 24 consecutive hours off every 7 days unless waived by aide
The bottom line is that the more hours an aide works, the higher the effective hourly (because a higher percentage of the hours are at the overtime rate)..
Question 8: IS TRYING TO SAVE MONEY ON EMPLOYEE COSTS WORTH IT?
The short answer is no! I advise all clients to treat home health care workers as employees. If a worker is injured on the job, the failure to obtain Workers Comp coverage will result in the employer having to pay all indemnity (weekly and permanency awards), medical bills and significant penalties for failure to have workers comp coverage.
The homeowner’s policy does not cover claims which are properly workers comp claims. A domestic working less than 40 hours per week does not have to be covered by workmen’s compensation, although that worker is probably an employee for other purposes.
Do you want to deal with numerous aides in order to avoid any aide working more than 40 hours per week (for comp purposes) or 44 hours per week (for overtime purposes)?
This may surprise you, but sometimes a client does not take my advice. For this reason, I am including this disclaimer in this letter:
If you are now or in the future privately paying for a home health aide and you have hired this person privately and not through an agency, I have, with this letter, advised you of your legal obligation to make deductions for Social Security and other payroll taxes, to pay unemployment taxes and to provide workers compensation and NYS disability coverage. I have also advised you that you are at significant financial risk if you do not comply with these obligations. You could also be subject to criminal prosecution. You should contact an accountant and regular insurance broker to take the necessary steps.
Please understand that as your attorney, I am not responsible should you or your children, powers of attorney or trustees fail to follow the laws referred to in this letter. Please share this letter with them.
Warmest personal regards
D. Victor Pellegrino
Hiring Household Help
Tax Bulletin MU-350 (TB-MU-350) Printer-Friendly Version (PDF)
Issue Date: December 31, 2012
If you hire household help, such as a housekeeper, babysitter, or caretaker, your responsibilities as a New York State employer may include:
This bulletin summarizes New York State reporting and filing requirements (and certain federal requirements) for household employers. It also provides general information about New York State sales tax requirements when you hire someone to do repair and maintenance services in and around your home.
Are you a household employer?
You are a household employer if you hire someone to do household work and that worker is your employee.
New employer registration
You must register as an employer with New York State if:
To register, you must have a federal employer identification number (EIN). To get your federal EIN:
After you have your EIN, register with New York State by:
Is your employee eligible to work in the United States?
The federal Immigration Reform and Control Act of 1986 requires employers to verify that new employees are eligible to work in the United States (U.S.).
For more information, visit the USCIS Web site (http://www.uscis.gov/I-9Central) or call USCIS Form I-9 Customer Support at 1 888 464-4218.
Reporting newly hired or rehired employees
Within 20 days of the hiring date, you must report to the Tax Department certain identifying information about each newly hired or rehired household employee working in New York State.
You can report new hire information online via the Tax Department New Hire Web site at www.nynewhire.com.
NYS TAX DEPARTMENT
NYS TAX DEPARTMENT
New York State unemployment insurance and wage reporting
If you pay cash wages totaling $500 or more in a calendar quarter, you must:
UseForm NYS-45,Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, and Form NYS-45-ATT,Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return – Attachment, if applicable.
New York State withholding tax
Withholding income tax (federal or New York State) from wages paid to household employees is voluntary on your part and on your employee’s part.
If you withhold New York State, New York City, or Yonkers income tax from your employee’s wages, you must report it quarterly on Form NYS-45.
You can file Form NYS-1 and Form NYS-45 and pay the tax you withheld online using the Tax Department’s Online Services. You must create an account before you can Web file.
Benefits of Web file include:
Information statement for your employee
If you withheld New York State, New York City, or Yonkers income tax from your employee’s wages, you must provide two copies of federal Form W-2, Wage and Tax Statement, to your employee that show the amount of federal wages you paid your employee and the amount of tax withheld for the calendar year.
Workers’ compensation and disability insurance
You must provide workers compensation and disability insurance to household employees who work forty or more hours per week for you.
You are not required to provide workers compensation and disability insurance for individuals you hire to do yard work or casual chores in and about your home on a part time basis. However, coverage is required when you employ a minor to operate power-driven machinery, including a power lawnmower.
Metropolitan commuter transportation mobility tax (MCTMT)
The Tax Department has determined that employers of household help are not subject to the MCTMT on wages paid to household employees.
Social security and Medicare
Although you are not required to withhold income tax on wages paid to a household employee, you may be liable for your household employee’s federal social security and Medicare taxes.
Sales tax on repair and maintenance service performed in and around your home
Generally, if you hire someone to do repair and maintenance services in and around your home, those services are subject to sales tax. These taxable services include maintaining, servicing, and repairing:
However, services are not subject to sales tax if any one of the following conditions applies:
People or businesses that perform taxable services on your property should charge and collect sales tax when you pay for those services. However, if the person or business does not charge and collect the tax, it is your responsibility to pay the tax directly to the Tax Department.
For more information, see:
If you have questions on your responsibilities as a New York State employer, contact our Withholding Tax Information Center at (518) 485-6654.
Note: A Tax Bulletin is an informational document designed to provide general guidance in simplified language on a topic of interest to taxpayers. It is accurate as of the date issued. However, taxpayers should be aware that subsequent changes in the Tax Law or its interpretation may affect the accuracy of a Tax Bulletin. The information provided in this document does not cover every situation and is not intended to replace the law or change its meaning.
References and other useful information
Tax Law: Sections 171-a, 171-h, 671, 672, 674, 675, 1101(b)(9)
Regulations: Sections 171.7, 541.2(g)
Publication NYS-50, Employer's Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax
Updated: January 3rd, 2013
Available on the web at:
I HOPE YOU FIND THE ABOVE ARTICLES HELPFUL.
PLEASE CHECK BACK SOON, I AM CONSTANTLY UPDATING THIS PAGE. :)
Warmest personal regards
D. VICTOR PELLEGRINO
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