Domestic workers could be losing thousands of dollars a year because they are classified as independent contractors when they are actually employees, according to a recently published report by the National Employment Law Project (NELP). This practice, known as misclassification, can result in the worker ending up paying taxes that should be paid by the employer or not receiving the pay and protections to which she is entitled. The NELP report analyzed the potential financial losses resulting from this practice across ten occupational groups, including house cleaning, child care, and in-home care.
According to the analysis, a home care worker who works 2,000 hours a year could lose up to $10,058 in wages, benefits, and employer contributions if treated as an independent contractor rather than an employee. This situation can occur, for example, when a family hires a nanny to work Monday through Friday, sets her schedule, gives her instructions, and supervises her tasks, but nevertheless tells her that she is an independent contractor and must handle all her own taxes.
What is the difference between an employee and a contractor?
An independent contractor is self-employed and runs their own business. An employee works within an employment relationship in which another person or company directs their work. For example, a babysitter may be an employee if the family sets her schedule, tells her how to care for the children, and supervises her tasks, even if she works only a few days a week. Similarly, a housekeeper may be an employee of an agency if the agency assigns her the homes, sets her schedule, and tells her how to perform the cleaning.
The Internal Revenue Service (IRS) explains that a domestic worker is an employee when the person who hires her has the right to control what tasks she performs and how she performs them. She may be an employee even if she works part-time or is paid by the day. The rules for determining her classification may vary depending on the law and the state.
Your employer cannot decide that you are self-employed simply by writing it into a contract. The Department of Labor clarifies that receiving a Form 1099 or being paid in cash does not determine your classification either; what matters is how the employment relationship actually functions. Furthermore, having multiple clients or purchasing your own cleaning supplies, for example, does not automatically determine whether you are an independent contractor. For this reason, the Department of Labor explains that the employment relationship must be reviewed in its entirety.
What signs might indicate misclassification?
If you’re paid as an independent contractor, these questions can help you determine whether you’re being misclassified:
- Who sets your schedule? Do you decide it, or do you have to follow the schedule set by the family or agency?
- Who directs your work? Do you decide how to provide the service, or do you receive instructions and supervision?
- Who provides the materials? Does the family or agency supply you with products and equipment?
- Do you run your own business? Do you seek out clients, organize services, and make decisions about how to grow your own business?
- No single answer determines your classification on its own. You must review the entire employment relationship and the applicable law.
How can misclassification cost you money?
One of the most obvious costs is in Social Security and Medicare taxes. When a domestic worker’s wages are subject to these taxes, the worker and the employer generally each pay a portion equal to 7.65% of the wages. In 2026, this requirement generally applies when an employer pays at least $3,000 to the same employee during the year, with some exceptions.
The amount includes cash payments, checks, and other forms of payment, according to the IRS. Self-employed individuals generally must cover both portions through the self-employment tax. If you are misclassified, you could end up paying the portion that should have been paid by the employer. You could also stop receiving overtime pay or sick leave pay when applicable law entitles you to these protections.
What rights might you be missing out on?
An incorrect classification could prevent you from receiving payments and benefits to which you are legally entitled. Just because your employer treats you as a contractor doesn’t mean you’ve lost those rights; you can seek guidance to find out if you’re entitled to claim them.
- Minimum Wage and Overtime: Incorrect classification as an independent contractor may prevent you from receiving the minimum wage or overtime pay to which you are entitled. These rights depend on the laws of the place where you work, the tasks you perform, who hires you, and whether you live in the household where you work.
- Sick leave: If the laws in your state or city cover domestic workers, you may be entitled to time off for sick leave. Whether that time is paid and how many hours you can take depend on the rules where you work.
- Unemployment insurance and workers’ compensation: Being treated as a contractor can make it difficult to have your employment recognized for these programs.
What can you do if you suspect you’ve been misclassified?
Gather information that shows how your work is organized, such as schedules, pay stubs, contracts, and messages with instructions. Also keep your tax forms and expense receipts. Write down what tasks you perform and who supervises them.
Where can you find support?
If you believe you are being misclassified as an independent contractor, you can contact a domestic workers’ organization or a legal aid organization. To learn about your rights and find local support, you can consult the National Domestic Workers Alliance directory of chapters and affiliate organizations. There, you can find organizations that work with nannies, cleaners, and caregivers in cities across the country.
Note: The National Domestic Workers Alliance is a partner organization of La Alianza Noticias.
Editor’s note: This article was originally written in Spanish and translated into English by Tilde Language Justice Cooperative
