Be Careful When Hiring an “Independent Contractor” to Care For Your Loved One
By: Terri Murphy
In today’s economic climate, everyone is looking for a less expensive solution for everything. But when it comes to hiring someone to come into your home to care for your loved one, cheaper is not always better, and it may not be as much of a savings as you might think. The use of private pay home care services is soaring in the United States and many families do not understand the risks to which they or their loved one can be exposed to by hiring home care services from an individual who claims that they are an “Independent Contractor.”
The number of families purchasing private duty home care services continues to grow. Many cite the desire for a higher quality of life and independence as the reasons for the choice of care at home. Most of these services are paid for out-of-pocket; using available disposable income to hire the care that they need in their home. Because of this, they often turn to Independent caregivers that offer a cheaper solution, without really understanding the implications of their choice. This has resulted in unfortunate situations for seniors, families and the home care industry in general.
There are many unexpected or hidden issues that consumers face when employing these individuals in their home. One major issue is that there IS an employer-employee relationship that is created in most of the care situations. With few exceptions, elder caregivers do not fall under the IRS guidelines of “independent contractor” (as indicated in IRS Publication 926). Unfortunately, most families are not aware of this. Individuals working as “independent contractors” do not know, or just do not communicate to the family that this relationship most likely will result in the creation of an employer-employee relationship, not an independent contractor relationship. Both the worker and the family can suffer significant financial liabilities.
Liabilities, abuses, payroll taxes
Families of those receiving care are confronted by a confusing array of federal and state laws. The simplest and most direct requirement is that anyone who gets a paycheck must pay the government any taxes due. This includes Social Security, Medicare, Federal and State unemployment tax, and State and Federal payroll taxes.
When the family is the employer (and if you are issuing payment to them, then you ARE the employer), and responsible for compliance, and none of these taxes are being paid, the government may sue the family or their estate for back taxes, interest and penalties. In a situation where many days of care, or many hours each week of services over a long period of time have been delivered, this tax responsibility can be a substantial amount. Other remedies that authorities may seek can include civil fines and criminal penalties. You might think that the government won’t ever find out about your employee, but you are most likely to be “caught” when your former “independent contractor” files for unemployment or social security benefits. This could be years down the road, and their filing could have nothing to do with you. At this time YOU, not the worker, will be required to pay all back taxes, including the workers federal and state withholding taxes. There is no statute of limitations with the government.
Worker related injuries
This is the most potentially devastating result for families and workers who are unaware of the employer-employee relationship. If no workers’ compensation protection is provided (as mandated by law for employees in nearly every state, and definitely in Michigan), and the worker sustains an on-the-job accident, the liabilities can be substantial. Medical costs and disability payments for workers could cause financial hardship for even a very wealthy family. Many families incorrectly assume that homeowner’s insurance will cover this type of loss, when, in fact, homeowner’s insurance usually specifically excludes employees in the home.
Abuse and exploitation
Most workers who enter the home care industry are caring, giving people. Unfortunately, there are also those who know that it is very easy to take advantage of frail, functionally limited, often cognitively impaired clients. An individual, working on their own, is most likely not insured or bonded and has no one supervising their work. No one has done a background investigation on him or her either. Insurance, bonding, background investigations, supervision, scheduling, and worker training are important benefits to consumers and are provided by a qualified agency that hires their workers.
Remember, if you do choose to hire and “independent contractor”, you must understand what your responsibilities are as the “employer.” In these challenging economic times everyone is constantly searching for ways to cut expenses. Be careful when it comes to providing elder home care services for your loved one, don’t be penny-wise and pound-foolish.