Hiring a caregiver or other domestic worker directly for your household can be a rewarding way to support your loved ones, but it also means stepping into the role of an employer—with all the legal responsibilities that come with it. If you’re considering hiring help at home, or you already have, understanding your legal liabilities is essential to protect your family, your finances, and your peace of mind.

At Clara, we help families like yours navigate these requirements every day. Here’s a clear, practical guide to your key legal liabilities as a household employer-without the legalese.

Who Is a Household Employer?

If you hire someone to work in your home and you control what work is done and how it’s done, you are a household employer. This includes caregivers, nannies, housekeepers, and gardeners. Even if you only have one employee, these rules apply.

Your Main Legal Liabilities

1. Payroll Taxes and Withholding

As a household employer, you are responsible for:

• Withholding and paying Social Security and Medicare taxes (FICA): If you pay a household employee $2,800 or more in 2025, you must withhold 7.65% from their wages for Social Security and Medicare, and also pay a matching 7.65% from your own funds.

• Federal and State Unemployment Taxes: If you pay $1,000 or more in any calendar quarter, you must pay federal (FUTA) and, in most states, including California, state unemployment taxes.

• Income Tax Withholding: While not always required, you may need to withhold federal and state income taxes if your employee requests it.

Failure to properly withhold and pay these taxes can result in significant IRS penalties, back taxes, and interest. Even a small oversight can trigger audits or legal action.

2. Workers’ Compensation Insurance

Most states, including California, require household employers to carry workers’ compensation insurance for their employees-even if you only have one part-time worker. This insurance covers medical expenses and lost wages if your employee is injured on the job.

• Without workers’ comp, you may be personally liable for all costs related to a workplace injury, and you could face fines or even criminal charges for noncompliance.

• Homeowner’s insurance typically does not cover workplace injuries for employees.

Clara can help you secure the right insurance and ensure you’re compliant from the start.

3. Wage and Hour Laws

You are required to:

• Pay at least the federal, state, or local minimum wage (whichever is highest).

• Pay overtime (usually time-and-a-half) for hours worked over 9 in a day, and 40 in a week, depending on your state’s laws.

• Provide pay stubs and keep accurate records of hours worked, wages paid, and taxes withheld for at least three years.

Failure to comply can result in wage claims, lawsuits, and government penalties. Clara handles all of this for you right out of the box.

4. Employment Eligibility and Documentation

You must verify that your employee is legally eligible to work in the U.S. using Form I-9, and keep this form on file. You’ll also need to provide and collect other forms, such as:

• Form W-4 (for tax withholding)

• State wage notices (such as California’s Form 2810.5)

• Benefit notices (unemployment, disability, paid family leave)

5. Anti-Discrimination and Labor Laws

You cannot discriminate against your employee based on race, color, religion, sex, national origin, disability, or other protected categories. These laws apply to household employers just as they do to businesses.

• Background checks must be conducted in compliance with federal and state laws, including the Fair Credit Reporting Act (FCRA)

• Harassment, wrongful termination, and privacy violations can all lead to legal liability

6. Written Agreements and Contracts

While not always required by law, a written employment agreement is one of the best ways to protect yourself and your employee. It should clearly outline:

• Duties and responsibilities

• Work schedule and pay

• Benefits and time off

• Confidentiality and privacy

• Dispute resolution procedures

Clara offers templates and guidance to help you create a contract that meets legal standards and sets clear expectations. Learn more here about the importance of proper contracts for domestic workers.

Risks of Noncompliance

If you fail to meet your obligations as a household employer, you could face:

• IRS and state tax penalties (often in the thousands or tens of thousands of dollars)

• Lawsuits for unpaid wages, overtime, or wrongful termination

• Personal liability for workplace injuries

• Denial of unemployment benefits for your employee, triggering audits or investigations

• Reputational harm and stress for your family

How Clara Simplifies Compliance

At Clara, we know these requirements can feel overwhelming. That’s why we act as your partner and facilitator—helping you:

• Set up compliant payroll and tax withholding

• Secure workers’ compensation insurance

• Draft and maintain proper employment contracts

• Stay up to date with changing laws and regulations

Our team is always available to answer questions and provide personalized support, so you can focus on what matters most: caring for your loved ones.

Conclusion

Becoming a household employer brings real legal responsibilities—but with the right support, it doesn’t have to be stressful. By understanding and meeting your obligations, you can protect your family, your finances, and your peace of mind.

If you’re ready to hire a caregiver or want to make sure you’re compliant, Clara is here to help. Reach out to us today to learn how we can make in-home care simple, safe, and legally sound for your family.