TN 9 (05-11)
RS 02101.125 Family Employment When Parents Work for their Children
A. Introduction for family employment when parents work for their children
From 1940 to 1960, we excluded a parent’s services performed in the employ of his or her son or daughter (either natural, adopted, or stepchild) from coverage. After 1960, we cover such services, except for most domestic services (work within the household) and service not in the course of the employer's trade or business. For further discussion of the family employment exclusion, including the exception to the domestic service exclusion in the 1967 amendments relating to domestic service a parent performs under certain conditions for a son or daughter, see RS 01901.250. For development procedures for these cases, see RS 02101.125D. in this section.
Where the law does not specifically exclude services from coverage, the fact that the family relationship exists does not preclude a legitimate employment relationship between parents and their children. However, in these cases, document the file to show that the parents rendered services in a genuine employment relationship and that they received wages.
Work conditions and circumstances surrounding arrangements where a parent alleges rendering services for his son or daughter may sometimes be difficult to develop, especially when it involves agricultural work and the parties live together on the farm. In other cases, facts that show the likelihood of a genuine employment relationship may be a matter of field office (FO) knowledge. For example, the FO may know a father works in his son’s hardware store because he cashes his paycheck every Friday at the bank across the street, etc. The development required in a particular case may vary between the extremes of these examples.
Although benefit applications request that applicants list all employers during the current year plus the preceding two years, the applications do not specifically ask whether their children employed applicants. When SSA identifies a family relationship between an applicant and an employer, e.g., by relating surnames and addresses, through FO knowledge of the particular parties involved, etc., the development guides outlined in RS 02101.122B. through RS 02101.122C. in this section apply. In agricultural cases, develop the cases under the procedures in RS 02101.125B. and RS 02101.125C., both in this section.
B. Development when valid employment relationship can be readily established
In cases other than those involving agricultural work, assume the employment relationship is valid if certain circumstances exist, as illustrated in Example A. If you establish that the worker is able to perform the services, the pay is reasonable, and the services are consistent with the nature of the business, you do not need to develop any further. The absence of any one of these circumstances indicates the need for additional development, as shown in Example B. When you need to develop the case, describe the family relationship between the alleged employer and employee on Form SSA-5002 (Report of Contact), or on the RPOC screen in MCS.
To obtain the necessary information, ask the following questions:
Is the worker capable (physically and, where appropriate, by education, or experience) of doing the alleged work?
What is the worker's average salary? How does this salary compare with the salary paid to other employees doing similar work for this employer or for other employers in the area?
What type of work does the worker do? How many hours per week does the worker perform these services?
Sawyer has been employed as a carpenter all of his adult life. For the past nine years, he worked part-time for his son, a building contractor. The union sets his pay rate. His son decides how his dad should do the work as well as the results of the work. Sawyer’s wages are covered for Social Security. No further development is necessary.
Kate reports that she worked as a bookkeeper in her son's law office for the past two years. Kate has never worked and has a fourth grade education. Further development is necessary. Include in the file an assessment showing that evidence of the alleged employment relationship is credible and valid.
C. Development to ensure valid employment relationship
If the worker performed services in the course of a genuine employment relationship, fully develop if:
the answers to the questions in RS 02101.125B. in this section, or some other information casts doubt on the employment credentials, and
in all cases, where the worker alleges agricultural work.
In addition to the items mentioned in RS 02101.125B. in this section, obtain separate statements from the employer and employee as to:
What was the specific agreement when the employer and employee entered the arrangement?
Did the alleged employer retain the right of control under this agreement?
Did the employer list the worker as a dependent on the employer's personal income tax return?
Did the job exist before the employer hired the worker?
How long did the son or daughter employ the worker in this work? If only long enough to obtain insured status, in what prior employment was the worker engaged? This question elicits information as to the prior means of support.
If the worker or the employer terminated the relationship, did another worker fill the job?
What evidence can be furnished as to actual payment of wages, e.g., cancelled checks, pay envelopes, etc.? An FO’s statement that the evidence appears authentic is sufficient.
If the employer claimed the worker's wages as a business deduction, verify from the employer.
If the worker reported these wages for income tax purposes, verify from the worker.
If the parties’ statements are contradictory, or there remains a question of good faith, obtain statements from two other individuals who have seen the worker at work or have knowledge of the facts.
Cases developed under RS 02101.125C. in this section may require a written determination, as provided in GN 01010.365, Informal Determinations – Adjudication.
D. Development when a parent alleges work performing domestic services for their child after 1967
When the worker meets the coverage requirements, establish:
the age of the son or daughter;
the marital status of the son or daughter;
the physical or mental condition of the son’s or daughter’s spouse or child; and
whether the worker meets the four-week test, (Did the parent provide care and supervision of the son or daughter’s child for at least four continuous weeks in the calendar quarter?)
If the worker meets these requirements, develop to the extent necessary to determine if the worker performed domestic services in a genuine employment relationship.
IRS Publication 15, Employer’s Tax Guide at http://www.irs.gov/pub/irs-pdf/p15.pdf