Caring for an aging loved one at home is incredibly rewarding, but it also brings legal responsibilities that many families may not anticipate. In California, particularly in San Diego, hiring a caregiver directly can unintentionally turn you into an “employer” under both state and federal law. Hiring caregivers as employees means you take on responsibilities such as paying overtime, managing payroll taxes, obtaining workers’ compensation insurance, and other related expenses.
If you fail to meet these obligations, you could face costly wage claims and employment audits from state agencies. The good news is that working with a reputable, licensed home care agency can protect you from these risks entirely.
In this article, we will discuss the hidden liabilities of hiring caregivers independently and explain how All Heart Home Care, along with other licensed agencies, safeguards San Diego families by managing all wage and tax compliance, allowing you to enjoy peace of mind.
The Hidden Risks of Hiring a Caregiver Privately
You Become a Household Employer
When you directly hire a caregiver without going through an agency, you automatically become a household employer under California and federal law. This status entails significant legal obligations that many families are unaware they’re assuming.
California’s Strict Wage and Hour Requirements
California’s Domestic Worker Bill of Rights requires you to pay overtime at 1.5 times the regular rate after 9 hours in a single day or 45 hours in a week for in-home personal attendants. (40 hours under federal law). You must also ensure at least minimum wage (California’s minimum wage is among the nation’s highest) and comply with meal and rest break requirements for longer shifts.
Your caregiver can file a wage claim or lawsuit to recover unpaid overtime, penalties, and even attorney’s fees if you don’t follow these wage and hour laws. California law encourages such actions by awarding legal costs to workers who win claims. A well-meaning decision to save money with a private caregiver can backfire severely if you violate any labor laws.
Employment Tax and Insurance Obligations
The liability doesn’t stop at wages. Hiring privately means you’re responsible for all employment taxes and insurance coverage:
State Requirements:
- If you pay as little as $750 in a calendar quarter to a household worker, you must withhold and remit State Disability Insurance (SDI) taxes to the Employment Development Department (EDD)
- Once you pay $1,000 or more in a quarter, you must register as a household employer and pay unemployment insurance taxes to the EDD.
Federal Requirements:
- Social Security and Medicare taxes (the “nanny tax”)
- Federal unemployment tax once wages exceed certain thresholds
Workers’ Compensation: California mandates that you must cover even a single employee in your home with workers’ compensation insurance. If a caregiver gets injured on the job and you lack coverage, you could face medical bills and a state fine of $10,000 or more, not to mention potential civil lawsuits.
The Employment Audit Trap
The biggest surprise for families is how easily a state employment audit can be triggered. Lynn Prettyman, a representative of California’s EDD, explains that “the caregiver working in a domestic setting is always an employee, either of the family or the registry (referral agency).” It’s “never true” that a caregiver is an independent contractor, she emphasizes.
Many audits begin when a caregiver applies for unemployment benefits (EDD), and the state discovers that no employer paid into the system. When an EDD claim raises this red flag, they can conduct an audit of the family’s finances, resulting in assessments for back taxes, interest, and penalties for misclassification.
California’s AB 5 Crackdown
California has intensified enforcement under AB 5, a 2020 law that codified strict tests (the “ABC test”) for independent contractors. AB 5 explicitly makes it extremely difficult—essentially illegal—to treat home caregivers as independent contractors. Trying to avoid payroll taxes or overtime by calling your caregiver “an independent contractor” isn’t just risky—according to the state, it’s considered fraud.
Both California and federal authorities have ramped up enforcement. The U.S. Department of Labor recently recovered $28.6 million in unpaid wages for nearly 25,000 home care workers whose employers had misclassified them or denied them proper overtime pay. The government is closely monitoring this situation.
Bottom line: When you privately hire a caregiver, you assume all the duties of an employer—paying correct wages with overtime, issuing pay stubs, withholding and paying taxes, securing insurance, and more. Any oversights, even unintentional ones, can lead to wage claims or audits from agencies like the EDD and IRS.
Managing care for a parent can be overwhelming for adult children, and hiring help can be equally daunting for seniors themselves. Fortunately, there’s a safer option.
How California Home Care Agencies Shield You from Liability
By choosing to work with a licensed home care agency, you can avoid these employer pitfalls. In California, the law legally requires home care agencies (like All Heart Home Care in San Diego) to employ their caregivers as W-2 employees, not independent contractors. The W-2 employee requirement means that when you hire a caregiver through an agency, the agency becomes the caregiver’s employer of record, not you. All the complex compliance obligations shift to the agency, protecting you and your family.
Key Protections Licensed Agencies Provide
1. Proper Classification & Payroll Compliance
The agency classifies the caregiver as its employee and handles all payroll duties. It ensures that caregivers receive at least the minimum wage and overtime pay, as mandated by state and federal law, including California’s 9-hour/day overtime rule for domestic workers. By issuing W-2 paychecks, the agency provides detailed pay stubs and tracks hours, eliminating any risk of unpaid wage claims against you as the client. This payroll management ensures you peace of mind, knowing that all payroll responsibilities are being taken care of. The agency calculates and pays any overtime pay due, ensuring it protects you from Labor Commissioner complaints.
2. Complete Tax and Withholding Management
A full-service home care agency handles all payroll tax withholdings and filings on your behalf. For example, All Heart Home Care pays the caregiver’s state unemployment (EDD) taxes, state disability insurance, and federal payroll taxes itself. All Heart Home Care’s handling of these taxes relieves you from the stress of dealing with tax forms and filings.
The agency withholds required Social Security and Medicare contributions and pays employer payroll taxes, relieving you of dealing with the IRS or California tax forms. You won’t need to worry about quarterly tax filings, year-end W-2s, or the “nanny tax”—the agency handles it all.
3. Workers’ Compensation & Liability Insurance
Licensed, bonded, and insured agencies carry robust insurance that protects both caregivers and clients. All Heart Home Care’s workers’ compensation policy and liability insurance cover all caregivers employed by the agency.
If an accident or injury occurs during care, the agency’s insurance—not your homeowner’s insurance or out-of-pocket funds—covers the costs. Agencies also bond their staff to protect clients from theft or property damage, giving you comprehensive protection and peace of mind.
4. Audit Protection and Legal Compliance
Because the agency is the employer on record, any employment audit or inquiry is directed to the agency, not to you as the client. Reputable agencies maintain meticulous records and stay current with labor laws (such as AB 5 and the Domestic Worker Bill of Rights) to pass any inspections.
If a caregiver files for unemployment or disability, the state files the claim against the agency’s account, not yours. The agency acts as a legal buffer, ensuring you never have to deal with EDD auditors or IRS agents scrutinizing your household finances over caregiver payments.
5. State Licensing and Oversight
California’s Home Care Services Consumer Protection Act requires home care organizations to be licensed and follow strict regulations. Agencies must conduct thorough background checks, provide comprehensive training, and closely monitor their caregivers to ensure the safety and well-being of individuals in their care. California law expressly forbids home care agencies from treating workers as contractors—agencies may only employ workers as employees.
The California Department of Social Services fully licenses All Heart Home Care as a Home Care Organization and adheres to all state-mandated standards. This state oversight means agencies are continually audited for compliance, so clients don’t have to worry.
In short, a home care agency relieves the burden of employer responsibilities from your shoulders. As All Heart Home Care notes, this approach “takes the burden of potential losses or liability lawsuits off the shoulders of our clients.” The agency handles the heavy lifting—hiring, payroll, taxes, insurance, legal compliance—while you and your family focus on your loved one’s care.
Peace of Mind for San Diego Families and Seniors
Entrusting your parents or your care to a home care agency isn’t just about convenience—it’s about safety and peace of mind. Instead of juggling timecards, tax withholdings, or worrying about whether you’ve paid overtime correctly, you can trust professionals to handle everything properly.
Employment classification is especially crucial in California, where labor laws are among the nation’s most stringent and enforcement is vigorous. Using a San Diego-based agency like All Heart Home Care means you won’t be caught off guard by a wage claim or tax audit, because the agency manages every aspect of the caregiver’s employment in full compliance with California and federal laws.
Benefits for Adult Children
For adult children of aging parents, this assurance removes a massive source of stress. You can be confident that your mom or dad’s caregiver is fairly paid and legally employed, eliminating the risk of future disputes.
Benefits for Seniors
Seniors who hire care for themselves can rest easy knowing they’re not inadvertently breaking any laws or exposing their estate to hidden liabilities.
The All Heart Home Care Difference
All Heart Home Care’s mission has always been to provide compassionate, reliable home care, and that includes protecting our clients from the bureaucratic and legal burdens of being an employer. As a multi-award-winning, veteran-owned home care provider serving all of San Diego County, we combine heartfelt service with strict adherence to California’s home care regulations.
Our caregivers are thoroughly screened, trained, and supervised, and they always remain our W-2 employees—never your liability. We handle every requirement, from AB 5 compliance to filing employer tax forms, so you can focus on what truly matters: the health and happiness of your loved one.
Conclusion
Home care agencies act as a crucial shield between families and the complexities of labor law. They protect you from wage disputes by ensuring they pay caregivers correctly, and they protect you from audits by managing taxes and classification rules properly.
In California’s legal landscape, this protection isn’t just a luxury—it’s practically a necessity. By choosing a reputable, local agency like All Heart Home Care, you’re not only securing quality care for your aging parent or yourself, but also securing peace of mind knowing legal troubles won’t blindside you.
Ultimately, this allows everyone—seniors and their adult children alike—to focus on living well and cherishing each day, rather than worrying about paperwork and legal compliance.
