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Writing a FLSA-Compliant Work Agreement

The Fair Labor Standards Act (FLSA) sets the minimum standards for employee compensation, including minimum wage and overtime treatment rules. The US Department of Labor (2008) reports that wage and hour disputes, primarily over improper overtime compensation, have tripled since 1997.

Nannies have always been covered by the FLSA - they are properly 'hourly' employees, subject to overtime payments for extra hours worked. Washington Redskins owner Daniel Snyder was sued by his former nanny for unpaid overtime - and lost! He was ordered to pay his nanny $44880 - earned in the course of 20 months of employment!

The FLSA overtime rules apply the "time and one half" standard to household workers who do not live with their employer for hours worked over 40 in a week. Live in domestics must receive their regular hourly rate for every hour worked in a week. Live in domestics do not qualify under federal rules for the overtime differential.

Household employers especially have a very difficult time defending these suits. The burden of proof lies with the employer, and employers typically maintain inadequate records at best. Poor time tracking, errors in overtime calculations, and improper deductions from payroll are common employer mistakes.

How can families minimize their exposure to FLSA claims by current or former household staff?

  • Use FLSA compliant work agreement language. Make sure that the household worker's compensation is stated in $/hour terms. The HomeWork Solutions' Hourly Pay Rate Calculator can help with this.

    Example: Employee Weekly compensation of $800.00 gross, based on a gross hourly wage of $15.61 and a 47.5 hour work week. Employee guaranteed minimum weekly compensation of $800.00 gross. Weekly hours worked in excess of 40 per week are compensated at $23.41 gross per hour.
  • Maintain accurate, contemporaneous time tracking records. This is easier than it sounds. Many families with nannies successfully put the Nanny Log to work as a time keeping record. A Week at a Glance calendar, with the worker documenting their daily start and stop times also works well. At the end of every week, tally up the hours worked and have the worker sign the tally.
  • Pay overtime when due. All families occasionally require additional hours or days worked from their household staff. Paying the overtime when earned can save many headaches later down the road.
  • If a bonus is offered in the work agreement, make it discretionary. To qualify as discretionary, both the fact and amount of the bonus must be completely within the employer's discretion.

    Why? A guaranteed bonus - for example 2 weeks payroll at the end of a year's service - will change the employee's regular rate of pay. Hypothetically, the employee earning $500 ($12.50/hour)per week for a 40 hour work week would have a regular rate of pay of $500 * (52 weeks pay + 2 weeks guaranteed bonus) / 2080 hours = $12.98/hour. All overtime paid in the prior year legally would have to be recomputed at this new regular hourly rate.

The FLSA sets the minimum standards for the overtime treatment of household workers. Some states, including New York, Maryland and Minnesota, apply stricter standards to the overtime calculations for live in household workers.

See Related Articles

10 Tips for Writing the Nanny Work Agreement
What to Include in the Work Agreement?
Nanny Salary: Crafting a FLSA Compliant Work Agreement
Sample Nanny Work Agreement

About the author: Kathleen Webb co-founded HomeWork Solutions Inc. in 1993. Her firm, established in 1993, provides household employers with nanny tax compliance services. She is the working mother of 3, a long term nanny employer, and she shares a wealth of personal and professional experience.