Many spouses, children and siblings of persons with disabilities or incapacitated elders hire non-family caregivers. If non-family caregivers are paid to provide such services, they are either employees or independent contractors. This article addresses how this determination is made and the tax and overtime obligations of the employer for each.
Who is an Employee?
Under Mississippi law*, a worker who is paid wages is presumed to be an employee. The worker, however, can rebut the presumption by showing that he has been and will "continue to be free from control and direction over the performance of such services both under his contract of service and in fact." Such a person who is paid for services but is not an employee is considered an “independent contractor.” (*§ 71-5-11(J)(14) of the Mississippi Code of 1972 )
To determine whether a worker is an employee or independent contractor, Mississippi courts rely on the following factors: (1) the extent of control exercised over the details of the work; (2) whether or not the one employed is engaged in a distinct occupation or business; (3) the skill required in the particular occupation; (4) whether the employer supplies the tools and place of work for the person doing the work; (5) the length of time for which the person is employed; (6) the method of payment, whether by the time or by the job; and (7) whether or not the work is a part of the regular business of the employer. The primary factor is the right to or degree of control over the worker and the work. See Miss. Employment Sec. Comm’n v. PDN, Inc., 586 So. 2d 838, 841-42 (Miss. 1991).
The employer of an “employee” must withhold the employer’s share of federal and state income taxes for employees whose W-4 form does not reflect they are exempt from withholding. See IRS Publication 15 – Employers’ Tax Guide. The employer is also required to withhold 6.2% of the employee’s wages (up to $128,400 of wages) for Social Security taxes, and 1.45% for Medicare taxes (with no limit on taxable wages). Social security and Medicare taxes apply to the wages of household workers you pay $2,100 or more in cash wages for 2018. The Publication states: “You’ll generally be liable for social security and Medicare taxes and withheld income tax if you don't deduct and withhold these taxes because you treated an employee as a nonemployee.” This withholding obligation applies to payments to a child or spouse for caregiving services where the payments exceed $50 per calendar quarter.
The employer of one who is an independent contractor need not withhold taxes but must issue a MISC-1099 to the independent contractor for wages in excess of $600 paid during the year.
Hours and Overtime.
The Fair Labor Standards Act (FLSA) established minimum wage and overtime protection for many workers who, by their service, enable individuals with disabilities and the elderly to continue to live independently in their homes and participate in their communities. The Final Rule, effective January 1, 2015, addresses when minimum work hours and overtime will not be required for home care workers. The Rule contains several significant changes from the prior regulations, including: (1) the tasks that comprise “companionship services” are more clearly defined; and (2) the exemptions for companionship services and live-in domestic service employees are limited to the individual, family, or household using the services; and (3) the record keeping requirements for employers of live-in domestic service employees are revised. Domestic service workers employed to provide “companionship services” (such as companions for elderly persons or persons with an illness, injury, or disability) are not required to be paid the minimum wage or overtime pay.
The term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury, or disability who requires assistance in caring for himself or herself. Under the Final Rule, “companionship services” also includes the provision of “care” if the care is provided attendant to and in conjunction with the provision of fellowship and protection and if it does not exceed 20 percent of the total hours worked per person and per workweek. Companionship services is primarily focused on the provision of fellowship and protection, with an allowance for certain care services in order to support consumers in living independently in their homes. 29 U.S.C. §213(a)(15).
Under the Final Rule, “fellowship” means to engage the person in social, physical, and mental activities. “Protection” means to be present with the person in their home or to accompany the person when outside of the home to monitor the person’s safety and well-being. Examples of fellowship and protection may include: conversation; reading; games; crafts; accompanying the person on walks; and going on errands, to appointments, or to social events with the person. 29 C.F.R. §552.6(a).
The definition of companionship services allows for the performance of “care” services if those services are performed attendant to and in conjunction with the provision of fellowship and protection and if they do not exceed 20 percent of the employee’s total hours worked in a workweek per consumer. The companionship services exemption is not applicable when the employee spends more than 20 percent of his or her workweek performing care; in such workweeks, the employee is entitled to minimum wage and overtime. In the Final Rule, “care” is defined as assistance with activities of daily living (such as dressing, grooming, feeding, bathing, toileting, and transferring) and instrumental activities of daily living, which are tasks that enable a person to live independently at home (such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care). Household work that primarily benefits other members of the household, such as making dinner for another household member or doing laundry for everyone in the household, results in loss of the companionship exemption and thus the employee would be entitled to minimum wage and overtime pay for that workweek.
Live-in domestic service workers who reside in the employer’s home permanently or for an extended period of time and are employed by an individual, family, or household are exempt from overtime pay, although they must be paid at least the federal minimum wage for all hours worked. These employers must also maintain an accurate record of hours worked by live-in domestic service workers.
A family that seeks to hire an in-home caregiver must consider the possibility that the worker may get injured in the course of their caregiving duties and may seek compensation or payments for medical expenses from their “employer” – even though the family thought it was an independent contractor situation. Therefore, such a family should discuss obtaining worker’s compensation insurance to cover such costs and insulate the family’s personal assets from such a claim.
This brief summary of the laws mentioned is not a complete guide for hiring an in-home caregiver, and you should contact Courtney Elder Law Associates or seek professional help from an employment attorney to guide you through that process for your particular situation.