Domestic Help - Exempt Status

mrosari · September 2003

Here goes...a medium sized company (80 employees) privately held, family owned, puts its domestic help on the payroll for benefit purposes, as an exempt employee. What kind of issues should we be concerned about?

Dasher · September 2003

tax issues, defined benefit (health) plan issues, labor law issues, but most of all ethical issues. I would not work there.

mrosari · September 2003

I appreciate your response and I tend to agree with you. But I'm trying to be precise in communicating what kind of violation this might be. The domestic help is on the payroll and the taxes are paid. I know it smells, but what law is being violated? I also had called the DOL and they said that the individual could be paid out of company funds, just not out of payroll funds. I really want to make this right but I need a "compeling reason" to make my case. Ethics may not be as compelling a reason, but showing where we are violating the law might be. Thanks.

Don D · September 2003

If the person does not meet the requirements set forth under the benefit plan then it is fraudulent to show them as meeting them. That could invite insurance fraud charges or IRS charges related to a 401k. It is also a violation of the IRS code to show as an employee one who is by no means an employee of the corporation to which the federal tax ID number is assigned. It is also a violation of the Social Security regulations to falsely claim that one is employed for the purposes of employer and employee tax contributions to the SSA. Since IRS collects SSA funds, you are violating both in tandem. It is a violation of your state employment security law to show employees on your quarterly report who are in fact not employed. In the event that person were to file a claim for UI, your company would be placed in an awkward position, at best and an illegal one at worst. I would not even explore ethics as a consideration since it is painfully obvious that your boss has a pretty weak ethical foundation. He's probably also without benefit of a moral compass. I'm afraid I can't be more clear and apologize if this is insufficient.

Dasher · September 2003

[font size="1" color="#FF0000"]LAST EDITED ON 09-30-03 AT 12:45PM (CST)[/font][p]Just got back to this thread. Don D has covered it all -- and much better than I did originally.

Our insurance plan defines the covered group. You may wish to look at the specific language in your plan documents -- surely domestic worker for the boss is not included.

If ethics will not impress him, ask how he will like the responsibility of paying a million dollar bill (plus) when the insurance company refuses to pay for the domestic employee's cancer treatments, and cancels the companies insurance coverage for the entire group because of fraud.

Good luck.

Whatever · September 2003

In addition, if they get injured on the job, the wc carrier will instantly become of suspicious because of the location where the accident happened.

Domestic Help - Exempt Status

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