TN 8 (02-11)
RS 02101.119 Employment Status of Child-Care Services
A. Introduction to child-care services
To determine if an employer-employee relationship exists where a worker performs child-care services, as in other types of employment, depends on whether the worker is subject to the right of sufficient direction and control to establish the relationship of employer and employee under the usual common-law rules. This is a question of fact to resolve based on the facts and circumstances in the individual case. However, certain general policies have evolved, as outlined in this section.
B. Service performed in the home of a child’s parents
In cases where a worker performs child-care services in the home of a child's parents, we generally find that an employer-employee relationship exists. We determine this because the majority of the factors we consider to apply the common-law rules are present. While the child’s parents may not give the worker detailed instructions on how to perform the job, the worker exclusively performs domestic services and the right to direct and control the worker is obviously present. For coverage rules on domestic services performed in a private home or by a relative, see RS 01901.200 and RS 01901.250.
C. Services performed in the child-care provider’s home
Generally, a worker who cares for another's child in his or her own home is not an employee because the factors that indicate an employer-employee relationship exists are not present. In the usual case, the instructions the parents give to the child-care provider are general in nature, such as diet, health, rest, and special foods to give to the child. The parents tell the worker who to contact in an emergency. Otherwise, the employer does not instruct the worker and the worker may exercise judgment on such matters as the amount of time and attention the child requires, the types of meals to serve, and the manner of coping with situations that may arise. The worker may perform household chores when the child does not require personal attention. Generally, the child-care provider receives a fixed weekly fee, does not hold himself or herself out to the public as engaging in such work, and has no license for such work.
Under these circumstances, the worker is not subject to sufficient direction and control to create the relationship of employer and employee under the usual common-law rules. See SSR 61-27 , C.B. 1960-65, p.157.
D. Agency is the employer of the worker
The situation may arise where an individual may contract with an agency to obtain the services of a companion or child-care worker. In this situation, the question becomes who is the employer, the individual or the agency.
The agency is the employer when the following factors are present. These factors form a reasonable basis to conclude that the agency retains the right to direct and control the sitter’s services to establish an employer-employee relationship under the usual common-law rules.
The agency sets standards and issues rules and regulations to guide the appearance of the worker and the performance of services;
The agency advertises and holds itself out to the public as engaging in the business of furnishing a service;
The agency sets the fees to be charged and notifies the worker where to report and the hours to be worked, etc.;
The worker pays the agency a specified amount or a percentage of the wages and he or she must notify the agency when not available for an assignment and usually agrees to restrict their work to that furnished by the agency;
The agency maintains a register of names and addresses of workers whom the agency determines are qualified to perform specific services; and
The individual makes quality service complaints to the agency, and the agency may remove the worker's name from its register.
Where the above circumstances are present, the agency is the employer since the above factors form a reasonable basis to conclude that the agency retains the right to direct and control the services of the worker and establish an employer-employee relationship under the usual common-law rules.
E. Individual is the employer
The worker is considered the employee of the individual when development establishes that the factors outlined in RS 02101.119D.1. through RS 02101.119D.5. in this section are substantially lacking.
F. IRS position
IRS applies rules based on Section 3506 of the Internal Revenue Code. An agency that is in the business of placing companions or childcare workers in touch with individuals who need their services is not the employer of such workers if the agency does not pay or receive the worker’s wages, and the worker compensates the placement agency on a fee basis. If the worker is not an employee of the person for whom the services are performed, the worker is considered self-employed.
G. SSA position
Since there is no provision in the Social Security Act comparable to Section 3506 of the Internal Revenue Code, there is no basis for treating a worker who is, in fact, an employee of the placement agency (by applying the common-law rules to the factual situation) as a self-employed person.
H. SSA action
Field office staffs should continue to apply the common-law rules and the instructions in this section to determine the identity of the employer where a person performs these services through a placement agency. If SSA determines the placement agency is the employer and the agency was not reporting amounts paid to the worker as wages, correct the individual’s earnings record via the ICOR (Earnings Modernization Item Correction) system as appropriate (see RS 01404.120).
I. Effect of licensing on determining the employer
There may be instances where State or municipal law requires a license for a child-care agency to be an employment agency for business tax or other regulatory purposes. This fact may indicate that the agency would not be the employer of the child-care provider. A licensed employment agency generally provides an employment referral service only, and does not retain control over the manner and means of the performance of services of the individuals it refers.
However, a licensed employment agency may be the employer of workers if, in addition to its activities as an employment agency, it also offers child-care services to customers through individuals, who under the usual common-law rules, are subject to its direction and control. Whether such individuals are employees of the agency is a matter of fact to be decided based on the facts and circumstances in the individual case. The agency is the employer when the factors outlined in RS 02101.119 are met.
IRS Publication 926, Household Employer’s Tax Guide at http://www.irs.gov/pub/irs-pdf/p926.pdf