Don’t get sued by the nanny
You are urged to consult with experienced labor and employment counsel to ensure that you are compensating your nanny properly and have provided the necessary forms mandated by law. Rest assured, however, as there are easy and quick fixes that our labor & employment experts can provide you to avoid a costly and arduous legal nightmare.
Like it or not, the nanny that cares for your child is your employee, and you are their employer. But that shouldn’t be surprising. Because like most bosses - you set their schedule, dictate what they can and cannot do in your home and with your kid, and you pay them at the end of the week. So how much does a nanny cost? They could end up costing more than you think. There are a few ways to avoid falling into hot water - knowingly or not - when you employ help for childcare.
How to avoid hot water
What you may not realize is that as an employer, you have similar legal obligations to those of a traditional company with its workforce. In other words, you and your significant other don’t get a pass because the nanny’s workplace is your home instead of an office building or factory. It is imperative that you understand how to comply with the relevant labor and employment laws and take the necessary steps now to avoid a costly lawsuit or investigation by a government agency.
How Much Does a Nanny Cost: a firsthand encounter
I know you’re thinking: “That won’t happen to me” or “I’ve never heard of a family being sued by their nanny.” My advice…think again. The New York State legislature felt so strongly that household workers were not being treated fairly it went so far as to create a Domestic Workers’ Bill of Rights several years ago, and assigned specific government agencies to enforce compliance with the law, such as the New York City Department of Consumer Affairs. The Department of Labor enforces wage laws on behalf of domestic employees in other states. If you don’t play by the rules, you’ll be met with stiff monetary penalties.
That’s in addition to back wages and other damages that may be due to your nanny. Importantly, in some jurisdictions like New York and New Jersey, there is a six-year statute of limitations. Breaking the law could mean a nanny working with your family for many years could collect damages going back a full six years, or a former nanny that may not have worked for you for the last five years still would have a full one-year to bring a claim against you for that specific time period. Yikes.
“But I’m fair.” Or so you think…
You’re probably also thinking “This nanny costs me an arm and a leg” or “I can’t possibly be doing anything wrong, and certainly not anything illegal.” But it’s not always what you pay the nanny. Rather, compliance with the law deals mostly with how you are paying the nanny.
Unknowing bad habits to break
Get rid of bad habits like paying the nanny a fixed daily or weekly amount, e.g. $150/day or $750/week. Instead, pay an hourly rate that is at or above the current minimum wage, e.g. $15.00 in New York City, and time and one-half of that hourly rate for each overtime hour they work, e.g. 40 hours, or 44 hours if the nanny lives in your home.
Wages must be paid and calculated on a weekly basis.
What happens if you don’t comply
Still not convinced it’s worth it? Let me show you why paying your nanny a flat $750/week for 50 hours of work (or $150/day for a 10-hour workday, 5 days per week) will expose you to liability for unpaid overtime.
Breakdown of potential monetary compensation
First, you must compute the nanny’s regular rate of pay by dividing their total weekly wages by the number of hours worked, i.e. $750/50 hours = $15.00. Luckily, you satisfy your minimum wage obligations (in New York City) because the nanny’s regular rate is $15.00, which is equal to the current NYC minimum wage.
Second, you must compute overtime wages due to the nanny, because no overtime premium, or time and one-half their hourly rate, was paid for the hours worked over 40 that week. In order to do so, compute half of the nanny’s regular hourly rate ($15.00 x .5 = $7.50), and multiply that rate by the number of overtime hours worked that week ($7.50 x 10 hours). In this example, the overtime premium pay would be due irrespective of where you are living/your nanny is working in the United States. Therefore, you owe the nanny $75 per week in overtime wages.
Unfortunately for you, the legal exposure doesn’t end with the $75 in overtime wages due.
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Written by Stash Wealth Staff Writer
Stash Wealth Staff Writers are knowledgeable about personal finance topics. Their objective is to unravel the complexities of finance trade jargon, products, and services in order to equip HENRYs with a sound understanding of financial matters.