Nanny care involves many pitfalls that can result in governmental audits, fines, and even lawsuits.  Unfortunately, many parents don’t think about the pitfalls until it’s too late — after an IRS notice arrives in the mail, or in the middle of a dispute with the nanny.  The key, of course, is to be aware of legal pitfalls and to take steps to avoid them.

Although numerous issues can arise, nanny care has eight major legal pitfalls:

1.  Independent contractor vs. employee.  In nearly all cases, the IRS views nannies as employees of parents and not as independent contractors.  That means parents must pay certain taxes on a nanny’s wages and, in some cases, unemployment and workers’ compensation insurance.  Parents who attempt to skirt the law by paying their nanny under the table risk civil and criminal penalties.  For more information about why nannies are employees, click here.

2.  Taxes and insurance.  Because nannies are employees, parents must pay certain taxes and insurance.  Even parents who do so, however, make mistakes, risking penalties and audits.  For details about applicable taxes and insurance, click here.

3.  Wages and work hours.  Nannies are classified as non-exempt employees, meaning they are subject to federal and state minimum wage and overtime laws.  Parents must, among other things, keep a record of the hours worked by their nanny and pay him or her overtime, even if the nanny is salaried.  For details about wage and work-hour laws, click here.

4.  Work eligibility.  As employers, parents are required to verify that their nanny is eligible to work in the United States.  Consequently, parents must complete and retain a Form I-9 for their nanny.  For more information about Form I-9 and work eligibility, click here.

5.  Job duties.  Disputes often arise from job duties that are unclear or not fully discussed when a nanny begins work.  For example, parents might believe that a nanny should do certain household chores while a child naps, while the nanny believes that she should be paid extra wages for that work.  For more information about job duties, click here.

6.  Time off.  Parents who give their nanny paid time off, such as for vacation, holidays, and sick leave, face fines and other penalties if they fail to comply with federal and state law.  In addition, parents may face legal action from a nanny if their expectations regarding time off are not clearly spelled out in a nanny contract.  For more information about time off, click here.

7.  Termination.  Unfortunately, some parent-nanny relationships are not meant to be.   Parents may feel the need to end the nanny’s employment for some reason, or a nanny may need to discontinue his or her services.  Legal problems commonly arise where the options for ending a nanny’s services are not clearly understood or spelled out in a nanny contract.  For more information about termination, click here.

8.  Nanny contract.  Some parents hire a nanny with no written contract.  Other parents use a contract, but one that is (1) too long and won’t be read or used, (2) too short and misses critical issues, and/or (3) poorly written.  Each situation is problematic, increasing the chance of a lawsuit and exposing the parents and the nanny to all the legal pitfalls noted above.  Parents should therefore use a well-written, comprehensive nanny contract when employing a nanny.