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advisors
Oct 31, 2017

Do you have the appropriate protection for employing domestic staff?

If you have full- or part-time employees working in your home—including, but not limited to, caretakers, groundskeepers and nannies—it’simportant to be aware of your responsibilities as an employer.

At the same time, you’ll be protecting yourself if you conduct due diligence and make sure you have workers compensation and employment-practices liability insurance policies in place.

Oftentimes, domestic employees work so closely with their employer that they’re considered a part of the family. Yet, however long-standing the relationship may be, it’s important that as an employer, you not assume that employees won’t bring forth a lawsuit if they are injured or feel their rights have been violated.

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, undocumented workers have legal rights and can sue their employers. Beyond the I-9, verifying references, including references from former employers, is a crucial step in determining trustworthiness.

You’ll be protecting yourself if you conduct due diligence and make sure you have workers compensation and liability insurance in place.

WORKERS COMPENSATION

Once you’ve made a hiring decision, it’s imperative to have proper insurance protection in place. Employers can be held liable for occupational injuries sustained by a worker. 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 that employer’s legal liability for employment-related bodily injury.

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, while 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

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 public relations disaster. You’ve likely seen headlines in the news sharing examples of claims made against high-profile individuals by their former employees.

In reality, all employers face the 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 sued his former employers for wrongful termination, stating that they never established specific working hours.

Most homeowners and excess liability policies do not provide coverage for defense of or damages relating to having an employee. Instead, employment practices liability insurance should be secured to cover potential defense costs, settlements and jury awards related to wrongful-employment claims by an employee.

To be safe, have a conversation with a trusted personal insurance broker regarding each of your employees and their responsibilities to help protect you against potential lawsuits and guard against possible risks to you and your loved ones.

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