Workers' Compensation

Often times domestic employees work so closely with their employer that they are considered a part of the family. However long-standing the relationship may be, it’s naive for the family members to assume an employee won’t bring forth a lawsuit if they become injured or feel their rights have been violated. If you have full- or part-time employees working in your home — including but not limited to babysitters, elder-caregivers, housekeepers, landscapers, and handymen — it’s important to be aware of your responsibilities as an employer as well as to protect yourself by conducting due diligence and making sure to have workers’ compensation and employment practices liability insurance policies in place.

Know Before You Hire

Most people rely on the recommendations of a previous employer or employment agency when hiring domestic workers. But sometimes these assurances aren’t enough. It pays to conduct thorough due diligence.

At a minimum, determine whether a newly hired employee is eligible to work in the United States by completing Form I-9, which is available at uscis.gov. Hiring an undocumented worker can result in fines as well as civil and criminal punishment. Further, even undocumented workers have legal rights and can sue their employers for negligence.

Beyond the I-9, verifying all references, including former employers and banks or other financial institutions, and conducting a background screening is a crucial step in determining trustworthiness. The depth of a background check should be influenced by the scope of the employee’s position.

Workers’ Compensation

Once you’ve made a hiring decision, it’s imperative to have proper insurance protection. If your housekeeper slips on a wet floor and breaks her arm or your nanny suffers a burn while heating your child’s meal, you may still be responsible for medical expenses and lost wages even though you likely didn’t directly cause the injury. Employers can be held liable for the occupational injury or disease incurred by a worker regardless of who is at fault.

Workers’ compensation insurance provides statutory coverage for the cost of medical care and rehabilitation for injured workers as well as lost wages and death benefits for the dependents of persons injured in work-related accidents. In addition, the employer’s liability section of a workers’ compensation policy responds to the employer’s legal liability for employment-related bodily injury or disease. In most jurisdictions, workers’ compensation is the only remedy available for the injured worker.

Workers’ compensation regulations vary widely from state to state and in some cases, penalties for failing to maintain the required coverage can be severe. For example, in one state a $30,000 penalty was assessed for a six-month lapse in coverage, and in another state, the penalty was $6,000 for a two-month violation.

Make sure you educate yourself on all local, state, and federal employment laws — some jurisdictions may also mandate disability insurance.

Employment Practices Liability

You’ve likely seen headlines in the news sharing examples of claims made against high-profile individuals by their former employees. Although the potential risk may be greater if you are financially successful or famous, all employers face an ever increasing possibility of being accused of or sued for damages as a result of employment practices. In one example, a gardener was fired for habitual tardiness and he sued his former employer for wrongful termination stating they never established specific working hours. Claims of discrimination, wrongful discipline or termination, breach of contract, and harassment are just a few common charges that can be brought forth by a disgruntled employee and may potentially end in an expensive settlement and a public relations disaster.

Whether the actions are intentional or not, most homeowner’s or umbrella insurance policies do not provide coverage for defense of or damages that result from employment practices. Instead, employment practices liability insurance is the solution that covers defense costs, settlements, or jury awards related to wrongful employment act claims made by an employee. For the affluent homeowner, the risk of an underinsured, uninsured, or undocumented domestic worker can be considerable.

To learn more about insurance considerations for employing domestic staff, contact a Marsh McLennan Agency PCS Personal Risk Advisor.