The Risks Of Hiring Someone Without Insurance

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If you have hired someone to do work around your home, are you aware of the legal risks if that person is injured? Here are some helpful guidelines to follow:

Your Insurance Responsibilities

What happens if your employee is injured on the job? Usually, employers are responsible for paying for workplace injuries, and state law requires employers to have workers' compensation insurance to cover them. Whether you'll need it or not depends on the state you're in -- some states exclude domestic employees entirely, while others limit it to employees who work a certain amount or to employers of a minimum size. (The U.S. Department of Labor, at www.dol.gov, has a table listing each state's rules.)

If you're required to purchase workers' compensation insurance, you may be able to obtain the coverage through your homeowners' insurance policy. Though coverage for workers is generally excluded, you can potentially buy a rider or endorsement, depending in part on your state's laws.

Also, you'll probably have to pay for state unemployment insurance for your domestic worker. This provides income replacement and other work placement services to the worker if you end the employment relationship and the person is unemployed. The cost of this insurance varies by state.

Paying Your Employees

If you hire a domestic employee, you will have to comply with state and federal laws regarding paying that employee. For example, you must pay the employee at least the minimum wage in your state. (As a practical matter, you may have to pay much more than the minimum wage, because it may be hard to find someone willing to work for any less.) You may also have to pay overtime, though federal law doesn't require it for a household employee who lives in your home or for caregivers. (To learn more about the rules of overtime pay, read Nolo's article Overtime Pay.)

To learn more about the rules for hiring independent contractors, see Nolo's book Working With Independent Contractors, by attorney Stephen Fishman. For advice on hiring, paying, and maintaining a positive employment relationship with someone who cares for your kids, get Nolo's book Nannies & Au Pairs: Hiring In-Home Child Care, by Ilona Bray (Nolo).

Who to Hire

After doing some preliminary research about the qualifications you're looking for (a carpenter with fine woodworking skills or a nanny with a background in child development, for example), you'll probably have a few options:

Hire a company. Usually, if you hire a company to do the work, the company will send over qualified workers and be in charge of paying them. It will also pay employment taxes and have insurance coverage to protect you in case of worker injury or damage to your property. (Ask for proof of this insurance.) It's not uncommon to hire companies to clean your home or garden or to service your pool.

Hire a worker through an agency. If you want a skilled professional but don't know where to look or want one already individually vetted by a third party, you can hire through an agency. You may pay the agency directly, in which case the agency will probably be the actual employer and will cover insurance, handle employment taxes, and pay workers. (You should confirm this with the agency first.)

Other agencies may charge you a fee to find you a qualified employee, but you will be the employer and handle these tasks. This is common when hiring a nanny, for example.

Hire an individual. If you want to screen and select your own service provider, pay and negotiate directly, and direct the person's work, your best bet is to hire an individual. As we'll explain below, you have more obligations as the employer if you elect this route.

Read more at Nolo