Home Health Care Aide: Employee or Independent Contractor?

By: Kristen R. DeNoia

Many adult children strive to provide the support required for their parents to age in their own homes. At some point, this typically requires hiring a home health care aide. While many individuals choose to avail themselves of the service of a home health care agency, others choose to hire an aide privately. For those hiring privately, the question becomes whether the hired aide is considered an employee or an independent contractor. The distinction is significant; however, it is not one that is easily made. Different labor and tax laws employ varying tests for determining whether an aide is an employee or independent contractor.

If an aide is properly classified as an employee, the aging individual or her family must fulfill certain tax obligations. These include: filing a Form W-2 and providing a copy to the employee, withholding the employee’s Social Security and Medicare taxes, withholding unemployment taxes, and paying the employer’s portion of unemployment taxes. In determining whether an aide is an employee for tax purposes, a common law test premised on master/servant principles is applied. Under this test, three factors are considered: (1) behavioral control, (2) financial control, and (3) the type of relationship. Behavioral control is found where the aging individual exerts control over when, how, and where the worker performs his or her tasks. Financial control is found where the aging individual has a right to control the business aspects of the worker’s job. However, where the worker has unreimbursed business expenses and has a significant investment in her business, financial control is often found lacking. Relationship factors, including the presence of a written agreement between the parties, the permanency of the relationship, and whether the worker is provided employee-type benefits (e.g., insurance, pension, vacation leave) are also considered. Where there is behavioral and financial control over the worker and the presence of an employee-like relationship, the worker is considered an employee. If the distinction cannot easily be made, IRS Form SS-8 can be filed for a determination of worker status.

The distinction of employee or independent contractor status is also important within the scope of Workers’ Compensation laws. For example, should the aide suffer an injury while working, if the aide is an employee, the Worker’s Compensation Act bars her from suing the employer for that injury, absent the employer’s intentional wrongdoing. In determining whether an aide is an employee or independent contractor, courts use the control test and economic and functional test. Under the control test, four factors are considered: (1) degree of control exercised over the worker, (2) the method of payment, (3) who furnishes the equipment, and (4) right of termination. Additionally, the economic and functional test looks to the extent of the worker’s economic dependence.

Where an aging individual hires an aide to spend significant time, if not live in his or her home, to assist with daily activities such as bathing, cooking, cleaning, and laundry, the aide is likely to be considered an employee under most tests. Accordingly, the aging individual and his family must be careful to comply with all applicable labor and tax laws.