*The IRS, Department of Labor and INS have many more rules to follow than the ones I will mention in this article. I chose to write about the most common mistakes for efficiency.
As a business, there are advantages and disadvantages to being/hiring an Independent Contractor (IC). As a Maid Service Customer, it’s very risky and unfavorable to hire an Independent Contractor Maid even if you hire the IC through a service that claims to have the IC covered by Workers Comp.
When a cleaning service classifies its workers as ICs, they’re stripping them of important rights and benefits. They’re putting Customers at great legal and personal risk even if they say they carry Workers comp and Liability.
In NY State, most cleaning companies or agencies do not qualify to classify its cleaners as ICs. So most times they may be operating illegally. In which case, insurances and assurances to the Customer become null and void if something happens.
A sign, that a cleaning service may be operating illegally and misclassifying workers is if the agency collects the fee rather than the IC that is sent to your home. The IC should collect the fee directly and under their own name. The only time a company can accept payment for an IC in a cleaning company in NY, is if the cleaning company actually belongs to the IC that is doing the job for you. This applies even if the cleaning company calls themselves “a referral agency. An example of a current illegal operation: (http://www.businessinsider.com/handy-cleaning-lawsuit-2014-11).
The IRS and Dept of Labor considers an IC an Employee on that basis alone, even if the agency treats them as ICs in other ways. A call to the DOL or IRS is any easy way for anyone to confirm this. (link to Dept of labor).
I suggest taking time to do this since any incident can trigger legal liability for you as a Customer. The law doesn’t accept ignorance as an excuse and unemployment benefits or other claims can be tempting to file when times are hard, even for a usually honest worker.
Housekeepers that work for multiple customers can still be considered your employees if you hire them independently or through a third party service.
Cleaning services that send Independent Contractors cannot control the quality of work, the training or provide Customers with many important safeguards, to do so would turn them into Employees. The Washington Post quotes about another cleaning company that is operating illegally… “to maintain its relationship with employees as independent contractors, the company can’t train them or provide much in the way of material assistance. Theoretically, Homejoy is just organizing the masses of people who already offer their cleaning services independently.
Often, these “ICs” turn out to be homeless or in another position that may increase risk to a Customer. (http://nymag.com/daily/intelligencer/2014/09/silicon-valleys-contract-worker-problem.html)
The independent contractor strategy is sometimes a scam. The company may be using this method to pay its “contractors” less than fair wage. In some cases, even less than minimum wage. This tactic is also very popular because it allows the maid service company to employ illegal aliens.
The liability isn’t with the company. It’s with the IC and its Customers. Which leads to another question:
What happens when something goes missing or a crime like identity theft is committed by someone who had access to your personal information from mail, wallet, ID, etc? You guessed it. The maid service isn’t responsible if the worker is an IC. The IC and the Customer are responsible.
In fact, the terms of service of some Independent Contractor cleaning companies like Handy.com, state “if Handy.com is found to be liable for any tax or withholding tax in connection with your use of Users’ services, then you will immediately reimburse and pay to Handy.com an equivalent amount, including any interest or penalties thereon.” In other words, if Handy.com is forced to reclassify its contract workers as employees, its customers – not the company itself – will be on the hook for any extra costs. Handy is currently undergoing multiple law suits and federal prosecution. http://valleywag.gawker.com/handy-sued-for-being-a-hellscape-of-labor-code-violatio-1657889316 .
The IRS’ 2015 Household Employer Tax Guide states “The worker is your employee if you can control not only what work is done, but how it is done. If the worker is your employee, it does not matter whether the work is full time or part time or that you hired the worker through an agency or from a list provided by an agency or association. It also does not matter whether you pay the worker on an hourly, daily, or weekly basis, or by the job.” It further states… “If an agency provides the worker and controls what work is done and how it is done, the worker is not your employee.” Which by the way is another reason why it is a good idea to let the cleaning service office staff know how, when and where you want the work done so you do not inadvertently risk making yourself an employer.
Here are some other points to keep in mind.
- ICs can file for unemployment and name you one of their employers when doing so even if they have multiple Customers.
- The Department of Labor can make you responsible for labor issues (overtime, sick days, etc).
- The IRS can make you responsible for tax withholding and payroll issues.
- You cannot control ICs work, time or place. This is one of the biggest reasons NY State disqualifies most Maid or cleaning services from calling their workers ICs and why you should be wary of such claims. It’s nearly impossible to do this in this nature of business.
- ICs can hire or bring in other people to the job without your consent or knowledge.
- Companies that send ICs cannot train or exercise quality control. To do so, would be illegal.
- If an IC is caught for unreported income and collects social services that they’re not entitled to, hirers can become part of a federal and state investigation including Customers.
- ICs cannot legally be Drug tested as they are not employees.
- If you hire ICs, they must show proof of insurance and a record of self-employment tax payments in their own name or their own business name, not a 3rd party company name. This ensures you’re not on the hook for their liabilities.
- If a cleaning company says your IC has liability insurance or that they’re covered by the company’s general liability, check to see that, that insurance is directly under the name of the IC or a company that is owned by the IC coming to your home, If it’s under a 3rd party company name, it only covers incidents that involve actual Employees of that Coverage for you or the IC in your home may be denied if something happens.
- Companies that hire independent contractors cannot verify legal status because they’re not employees, so how can they claim to obtain a thorough background check? Checking legal status is the number one safeguard to consider. If someone illegal harms you intentionally or accidentally, they can disappear because they are untraceable.
- You should always report wrongdoing. If you hired your Maid as an IC or off the books altogether, be prepared, it might get you in trouble if it triggers investigations with the Department of Labor, INS and/or the IRS.
- Hiring an IC Maid, even from a company, is almost like going out to the street, picking a stranger and hiring them yourself except that these strangers seek you out, which may be worst. Criminals target Maid Services because it is like hitting the jackpot. It’s easy access to your personal info, your items, your loved ones, etc. They would also seek to be hired as “Independent Contractors” to avoid legal status, drug tests or thorough background checks which would be required as formal Employees.
Some IC’s come with good intentions but it’s just a matter of time before something happens:
- They get hurt, they get sick, they sue. If you hired them as ICs you’re not covered for their injuries or disabilities on your job or as a result of servicing you over time. No matter how nice they are. They’re not going to tell their loved ones that they can’t fund their college fund, pay their rent etc., because ” they liked you as a Customer”. Once they can’t work anymore, their priorities and values can shift.
- If they get in financial trouble, they might file unemployment naming you as a past hirer.
- Many decide they’ll go back to their country if they’re foreigners. They may have intentionally or unintentionally caused the Customer harm. I’ve heard many stories where a Maid was loyal for years, then changed plans and actions knowing they’re leaving for good.
- ICs are usually not long term. Employees have a sense permanency. This holds them to higher standards and accountability because they’re part of an accountable organization.
- If an IC is filing, but hasn’t kept up with those additional taxes all year, he/she could end up owing a lot of money and choose to point you out as an employer rather than face IRS trouble.
- If you find a legitimate Maid or cleaning service with actual employees, make your payments to Cleaning Services Inc. or Cleaning Services LLC – and not to Mary Jones.
Not all companies that use ICs are scams, but in reality this strategy is easy to manipulate. Often companies that say it hires ICs are misclassifying them especially if they are household workers. Once the law catches up with them or an IC looking to benefit reports them, all involved, including Customers can become part of an investigation or entanglement.
Most of us go through great lengths to safeguard ourselves, our loved ones and our property. We subscribe to lifelock, put alarms on our doors, buy insurances, scrutinize people we meet, etc. Only to gladly open the door and let a potentially very risky Stranger come into our houses, gaining access to the very core of everything in our lives (Drawers, IDs, children, pets, valuables, privacy, personal info, etc.).
This is only ONE reason choosing the right Maid or Cleaning Service is extremely serious and important business, not one that should be sought out within an Independent Contractor frame or advised by a simple referral like a Superintendent who might be getting a kickback or trying to “hook up” a “friend/relative” who may not even really be verifiable.
Independent Contractors can be a good solution for some situations, just not something as vulnerable as hiring personnel that may have the ultimate access to your entire life.