Why Does My Nanny Family have to Pay Me Hourly? I Want a Salary.
Nannies and other domestic employees are classified under the Fair Labor Standards Act (FLSA) as non-exempt. The term non-exempt employee refers to a worker who IS subject to the terms of the FLSA regarding such issues as overtime compensation and minimum wage coverage, contemporaneous time tracking record keeping, as well as nanny pay frequency. FLSA requirements are determined not by the type of pay (hourly or salary) but by the type of work that is performed.
In simple terms, you are a household employee and are required to be paid an hourly wage including overtime pay per the provisions of the FLSA. If you were to receive a “salary” that covers a work week of more than 40 hours, an employment agreement must explicitly state the regular and overtime rates of pay. See our exclusive Hourly Rate Calculator for help.
If consistency of pay is your objective, there are other options to reach that result and still maintain compliance. Many families solve this dilemma by guaranteeing a weekly wage, and stating it in FLSA compliant hourly and overtime rate language. For example, a live out nanny in Connecticut that typically works five 9-hour days per week and is seeking $800 weekly. Occasionally the family may need her for an extra hour or two, or may return home early and dismiss her early. If the compensation agreement is written properly, the family can pay the same amount every week (within boundaries) and keep the situation legal.
The family normally schedules the nanny for 45 hours, and will never need her more than 48 hours in a week, the compensation agreement could be written as follows:
Employee Weekly compensation of $800.00 gross, based on a gross hourly wage of $15.38 and a 48 hour work week. Employee guaranteed minimum Weekly compensation of $800.00 gross. Weekly hours worked in excess of 40 per week to be compensated at $23.08 gross per hour.
Written this way no matter what the week works out to, so long as the total hours never exceed 48, the arrangement is compliant. If the family ends up needing the nanny for 50 hours in a given week, it is clear that the additional 2 hours will be paid at $23.08, and be in addition to her standard $800.
It is important to note that the FLSA specifically calls out household hourly employees in the statute as non-exempt employees, covered by the rules and protections of the FLSA. This is not a grey area, subject to individual interpretation.
Overtime rules can vary by state. In some states, if you live in the home of your employer you are due wages for every hour worked but not necessarily an overtime rate. Also there is one particular exception in household employment where a traditional salary may be paid. If you are a Head of Staff and have management responsibilities over other staff in the household (control hiring and firing for instance) then you may be eligible for an exempt status.
Employers often believe, incorrectly, that the act of paying a salary makes the employee exempt from overtime rules. However, just as applying the labels “employee” or “independent contractor” in a work agreement doesn’t determine a worker’s actual status in the eyes of the IRS or the law, the same is true for exempt and non-exempt workers in the eyes of the Department of Labor. The FLSA legislation was designed to cover, and protect, as many workers as possible and there is no doubt that nannies and other household employees are covered under the act.
The Department of Labor is vigorous about protecting workers’ rights under the FLSA. The DOL has, for example, created and published free phone apps to help workers independently track the days and hours they work, helping them create their own time and attendance records. Using GPS, the records created by these apps are strong evidence when filing a wage and hour claim. New York household workers have a toll free hotline they can consult when they feel they have a grievance over unpaid hours or overtime. These workers are assisted in filing wage and hour complaints. 75% of these complaints settle for cash payments that in 2014 ranged from $5000 – $100,000 – payments the household employer must make to the employee. Wage and hour complaints are also a powerful payroll tax enforcement tool used by state governments to collect unpaid unemployment taxes. More than 30 states have formal information sharing agreements with the Internal Revenue Service to facilitate collection by the federal government of unpaid Social Security and Medicare taxes.
Why does this matter? There have been many high profile wage disputes involving nannies and failure to make overtime payments and/or to maintain accurate time tracking records. Nannies in these disputes have been awarded large sums of back pay – simply because the employer failed to correctly classify and compensate the nanny in the first place. Google “Daniel Snyder Nanny Overtime” for a real life example.