Nanny Diaries: Those Honorary Family Members Are Still Employees

Families who decide to personally employ a nanny often fail to understand that their legal obligations as an employer begin the moment their new nanny walks through the front door. Even more dangerous, after years of satisfactory performance, many families regard their nanny not as an employee, but as part of the family. However, state and federal employment laws apply to all domestic employees, and many families place themselves at high risk if they do not manage their nanny and any other staff members as employees and in strict accordance with employment laws.

Failure to understand the employer-employee relationship can expose all family members to personal litigation for violations of employment-related conduct toward those they employ. Even inappropriate conduct among different members of the household staff can create a legal exposure for the family. Because the household is seen as a safe and informal space and vague verbal contracts are all too common, many families either ignore or fail to comply with their legal responsibilities as employers. 

One example that frequently invites litigation: given the challenging economic climate, families with older children seeking to trim their costs may terminate the employment of a nanny whose services are no longer essential. To protect against allegations that the dismissal was a wrongful termination, or possibly motivated by age or racial bias, experts advise household employers should document performance expectations and keep a well-documented human resources file on every employee. Additionally, a written agreement between the household employer and employee should contain an “employment at will” clause that allows termination without cause for any reason. Precautionary background checks that go beyond simple internet searches are also recommended for any family employing domestic staff. Meanwhile, no matter how attentive, household employers need to know that they cannot totally control the work environment. Just as in a traditional workplace, household employers can be held liable for conduct viewed by their staff as obscene, discriminatory, or offensive.

Given these many risks, a select group of personal insurance carriers have developed specialized coverage solutions to address the employment practices risk exposure facing families employing household help. Such solutions provide coverage not only for damages that may be awarded by a court, but far more importantly, both the legal costs to defend the family such allegations, and the services of a public relations firm to help the family minimize the damage to their reputation. Often, these same carriers can assist policyholders with services that include comprehensive pre-employment background checks. Most who learn of the broad coverage that is available agree the protection is well worth the modest annual cost. Those facing this risk should strongly consider securing this valuable form of protection.

Tim O’Brien
SVP, Property & Casualty
Assurex Global