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Hiring Home Care? A Homeowner’s Checklist to Avoid Wage Violations and Liability

UUnknown

2026-02-10

10 min read

Practical homeowner checklist to hire in-home caregivers compliantly—payroll, classification, overtime rules and local resources to avoid costly wage violations.

Hiring Home Care? A Homeowner’s Checklist to Avoid Wage Violations and Liability

Hook: Hiring an in-home case manager or care aide can ease daily life — but missteps on payroll, overtime and classification can cost homeowners tens of thousands in back wages, penalties and legal fees. Recent enforcement actions in late 2025 and early 2026 show regulators are tightening scrutiny. Use this practical checklist to hire safely, stay compliant and protect your home and savings.

The urgency: why 2026 is different

In December 2025 a federal judgment required a Midwestern health employer to pay $162,486 in back wages and damages after a U.S. Department of Labor (DOL) Wage & Hour investigation found unrecorded hours and overtime violations for case managers. That enforcement action — entered in December 2025 and reported in January 2026 — is a timely reminder that both agencies and private plaintiffs are actively pursuing wage and recordkeeping violations in the care sector.

“Between June 2021 and June 2023, case managers worked unrecorded hours; the employer failed to pay overtime and maintain proper records,” the court filing showed.

Regulators are focused on homecare because it’s a growing sector and historically under-regulated: aging populations, Medicaid shifts, and more private-hire arrangements mean more homeowners are effectively becoming small employers. In 2026 expect more audits, clearer state-level guidance and greater use of digital evidence (time-stamped logs, EVV) in enforcement actions.

Quick overview: Most important actions first

Decide employee vs. contractor using federal and state tests before any work starts.
Set up payroll and tax withholding if you hire as an employee — don’t assume “cash” hiring avoids taxes.
Track hours precisely (digital time records are now common evidence in audits).
Document a written agreement that matches how you actually operate.
Consult local resources (state labor department, DOL, IRS household employer pages) when unsure.

Step-by-step checklist for homeowners (pre-hire to ongoing compliance)

1. Define the role clearly

Before any hiring conversation, write the job description. Is this person providing direct personal care (bathing, dressing), medical case management, medication administration, or companionship? Job duties influence classification, overtime exposure and licensing.

Case manager duties often include care planning, coordination with providers, documentation — sometimes salaried, sometimes hourly.
Personal care aide duties are hands-on and typically hourly with clear overtime exposure under the Fair Labor Standards Act (FLSA) and many state laws.

2. Worker classification: contractor vs. employee

Misclassification is the single largest source of homeowner liability. Use federal and state tests — and when in doubt, treat the worker as an employee.

Federal tests to apply

The IRS’ three-factor approach examines behavioral control, financial control, and the relationship between parties. The DOL focuses on the economic realities test and FLSA factors. Many states use stricter standards — the ABC test — to determine independent contractor status.

Red flags for misclassification

You control hours, duties and how tasks are completed.
You require background checks, specific uniforms, or mandatory training without a contract reflecting true independence.
You reimburse Materials and direct care supplies while calling the worker an independent contractor.

Practical rule of thumb (2026):

If you schedule, direct daily tasks, and expect regular availability, you likely have an employee. If the caregiver runs a business, takes multiple clients, provides their own supplies, sets prices and controls hours, independent contractor status may be possible — but document everything and consult a local labor attorney.

3. Payroll basics for homeowners acting as employers

If the caregiver is an employee, you must handle payroll and employment taxes. Here are the critical steps.

Obtain an EIN (Employer Identification Number) from the IRS.
Have the employee complete Form W-4 and Form I-9 (employment eligibility verification).
Register with your state’s labor and unemployment insurance agencies.
Set up payroll to withhold federal income tax (if requested), and the employee’s share of Social Security and Medicare.
Pay the employer’s share of Social Security and Medicare, and file and deposit payroll taxes on schedule.
File Form W-2 at year-end; household employers report taxes on Schedule H if filing a personal return, or file through payroll provider.

Tip: Use a trusted payroll provider that supports household employers (Gusto, ADP, HomePay by Care.com) to reduce mistakes. In 2026 these services have tighter integrations with state reporting and EVV systems.

4. Overtime and pay rules you must follow

Under the FLSA nonexempt employees are entitled to time-and-a-half for hours over 40 in a workweek. The 2025-2026 enforcement trend shows the DOL is focused on unrecorded “off-the-clock” work, travel between clients, and unpaid training.

Weekly overtime: 1.5x regular rate after 40 hours in a workweek (federal minimum).
State variations: Several states (California, New York, Massachusetts) have daily overtime limits or different thresholds — check your state rules.
On-call and travel time: Compensable in many circumstances — time it takes to travel between clients or mandatory training is often payable.

Example: The 2025 Wisconsin case found case managers had unrecorded hours and unpaid overtime. That cost the employer substantial back wages and liquidated damages — a cautionary tale for homeowners who assume “small” arrangements fly under the radar.

5. Written agreements and contractor contracts

If you determine the worker is an independent contractor, a strong written contract is essential. But remember: a contract alone won’t shield you from misclassification claims if the facts show you control the worker.

Key clauses to include in a contractor agreement:

Scope of services with specific deliverables and outcome-based expectations (not task-by-task instructions).
Payment terms: rate, invoicing cadence, late fees.
Statement of independence: contractor has control over hours, methods, tools used.
Insurance and indemnity: contractor maintains liability insurance and worker’s comp if required.
Termination clause and confidentiality/nondisclosure if health info is involved (HIPAA considerations).

When hiring a contractor who will handle protected health information, include HIPAA-compliant business associate terms or have the contractor sign a business associate agreement.

6. Documentation and recordkeeping (your best defense)

Maintain organized, time-stamped records. In disputes or audits, documentation is often the deciding factor.

Daily time logs with clock-in/clock-out (use digital tools).
Signed job description and employment/contract agreement.
Copies of W-4 and I-9, and proof of EIN registration.
Payroll records showing withholdings, deposits and tax filings.
Receipts for reimbursements and records of mileage if reimbursed.

2026 trend: Regulators increasingly accept electronic records (time-stamped apps, EVV) and use them to verify hours. Adopt digital timekeeping to both simplify compliance and create an audit trail.

7. Insurance, workers’ comp and liability

Homeowners may face liability beyond wage claims: on-the-job injuries, auto accidents during client transport, or third-party claims.

Workers’ compensation: Many states require coverage for household workers above certain hours/pay thresholds. Check state rules — noncompliance can result in fines and penalties for medical costs.
Homeowner’s insurance: Notify your insurer; hire care workers may impact coverage. Buy an endorsed or supplemental policy if necessary.
Liability insurance: Ask caregivers to carry professional liability (errors & omissions) if they provide case management.

8. Background checks, training and health safeguards

Protect your household and your vulnerable family members.

Run criminal background checks and driving-record checks if the caregiver transports clients.
Verify professional licenses where applicable (e.g., licensed nurses, social workers).
Document required training (first aid, CPR, medication administration).
Follow HIPAA rules for handling health information; limit unnecessary access.

9. Use technology and professional services to reduce risk

2024–2026 saw rapid adoption of specialized payroll and compliance tools for homecare. Leverage them.

Payroll services for household employers: automate tax withholdings, deposits and filings.
Electronic Visit Verification (EVV): If you use Medicaid-funded services, EVV is already required federally and increasingly used for private hires as proof of hours.
Timekeeping apps: Geofenced clock-ins, photo verification and GPS timestamps preserve evidence of hours worked.
Employer-of-record (EOR) or agency hire: Shift payroll and tax liability to a professional employment organization if you prefer a hands-off approach — consider a payroll concierge or EOR.

Advanced strategies for homeowners (2026-ready)

1. Periodic internal audits

Run quarterly checks: match time logs to payroll, verify tax deposits, review overtime calculations. Audits prevent small errors from becoming costly liabilities.

2. Consider an agency or EOR

Using a licensed home-care agency or employer-of-record can remove most payroll, tax and workers’ comp headaches. It usually costs more, but reduces homeowner risk and administrative burden.

3. Build a written household personnel policy

Create simple policies covering scheduling, overtime approval, timekeeping, PTO and code of conduct. Ask employees to sign acknowledgment forms — these are powerful evidence you took steps to govern the relationship professionally.

4. Budget for compliance

Include payroll taxes, workers’ comp and overtime in monthly care budgets. Unexpected back wages and penalties are far more expensive than planned employer costs.

Common homeowner mistakes and how to avoid them

Paying cash “off the books”: Risk of wage claims, back taxes and penalties. Use payroll even for part-time hires.
Contract without matching reality: A contractor agreement that says “independent” won’t protect you if you control the worker’s schedule and duties.
Failing to record travel and training time: These hours may be compensable — document and pay for them.
Ignoring state rules: State overtime, minimum wage and workers’ comp requirements can be stricter than federal law.

Local resources and where to get help

Always verify with local agencies — state rules vary and change. Useful starting points:

U.S. Department of Labor, Wage & Hour Division: FLSA guidance and local WHD office contacts.
IRS Household Employer (Nanny Tax) page: How to withhold and report employment taxes and how to file Schedule H.
Your state labor department: Wage, overtime and recordkeeping rules.
State workers’ compensation board: Requirements for household employers.
Local Area Agency on Aging or Medicaid office: Guidance on EVV, Medicaid-funded caregiver rules and approved provider lists.
Legal aid clinics and elder law attorneys: Affordable advice for complex situations; some offer free consultations.

Sample homeowner checklist (printable)

Write a detailed job description.
Use IRS/DOL/state tests to classify worker.
If employee: obtain EIN, collect W-4 and I-9, register for state unemployment and payroll taxes.
Set up payroll (or hire payroll/EOR service).
Adopt digital timekeeping and require signed timesheets.
Purchase necessary insurance and check homeowner policy.
Run background and driving record checks.
Draft written employment agreement or contractor contract and keep on file.
Budget for taxes, workers’ comp and overtime.
Perform quarterly compliance audits.

Case example: What went wrong in the 2025–2026 enforcement action

The North Central Health Care judgment highlighted three mistakes homeowners and small employers should avoid:

Failure to accurately record off-the-clock hours.
Not paying overtime for hours over 40 in a week.
Inadequate recordkeeping that prevented the employer from rebutting DOL claims.

Learning point: Even organizations with structured HR can make errors. Homeowners who do not maintain clear, time-stamped records or who assume “part-time” status exempts them from payroll obligations risk similar exposure.

Actionable takeaways

Start with classification: If you control schedule/duties, treat the worker as an employee and run payroll.
Use digital timekeeping: Timestamped logs and EVV reduce audit risk and make overtime calculations reliable.
Document everything: Job descriptions, agreements, timesheets, and proof of tax deposits are your best defense.
Budget for compliance: Payroll taxes and workers’ comp aren’t optional costs — plan for them.
When in doubt, get help: Use payroll providers, EORs, or local legal counsel to avoid costly mistakes.

Final thoughts

Hiring in-home care is a deeply personal decision. It also makes you a small employer with real obligations. The enforcement environment in late 2025 and early 2026 shows regulators will use time records and digital evidence to identify unpaid wages and overtime. Protect your family and your finances by following the checklist above, using specialized payroll and timekeeping tools, and documenting the employment relationship accurately from day one.

Call to action: Ready to hire compliantly? Download our free homeowner hiring checklist and sample contract templates, or connect with a local payroll specialist recommended by borough.info to set up compliant payroll in minutes. Take the first step now — avoid surprises later.

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