Workers Compensation for Household Employees in 5 States

Your home is also a workplace

If you employ a nanny, a housekeeper, a house manager, a private chef or a driver, your home is someone's job site.

I'm Jason Rodriguez. I hold both the CIC and CPRM (Certified Personal Risk Manager) designations, and I work as an independent advisor for families in Delaware, Pennsylvania, New Jersey, Maryland and Virginia. A lot of my time with high net worth families and family offices goes to one question: what happens if someone who works for us gets hurt?

The answer depends on where the work happens.

Employee or independent contractor?

Start with status, because everything else follows from it. IRS Publication 926 puts the test simply. A worker is your employee if you can control not only what work is done, but how it is done. It does not matter whether the work is full time or part time, or whether you found the person through an agency.

A worker is usually self-employed when they bring their own tools and offer their services to the general public as an independent business. And if an agency provides the worker and controls how the work is done, the worker is not your employee.

Most nannies and housekeepers work on your schedule, in your home, with your supplies and your instructions. That makes them employees. Calling someone a contractor on paper does not change it.

The federal "nanny tax" in brief (2026)

Here are the basics from Publication 926 for tax year 2026:

• If you pay any one household employee $3,000 or more in cash wages in 2026, Social Security and Medicare taxes apply. The total is 15.3% of cash wages, split evenly between you and the employee.
• If you pay total cash wages of $1,000 or more in any calendar quarter of 2025 or 2026, federal unemployment tax applies to the first $7,000 of each employee's wages.
• You report these taxes on Schedule H with your Form 1040, and you give the employee a Form W-2.
• For a regular hire, you and the employee each complete Form I-9.

The same publication tells household employers to check state unemployment tax and workers' compensation requirements. The figures change yearly, so confirm them with your CPA.

State by state: is workers' comp required?

I checked each rule against the state's own code or agency page. Treat the table as a starting point, then confirm with the agency or your attorney.

What I take from the table

Three things stand out.

First, the thresholds in Delaware and Maryland are low. A regular nanny or housekeeper will usually pass $750 in three months, or $1,000 in a quarter, within weeks.

Second, exempt does not mean protected. Pennsylvania and Virginia do not force you to buy coverage. The injury, the medical bills and the lost wages are still real.

Third, staff travel. New Jersey's labor department says even out-of-state employers may need coverage if work is performed in New Jersey. If your Pennsylvania nanny spends July at your shore house, ask the question before the trip.

One more point for family offices. If staff are paid through an LLC, a trust or the office itself, confirm who the legal employer is. The household rules above are written around private homes. My post on trusts and your insurance policies explains why the name on the paperwork matters.

What your homeowners policy does and does not do

A homeowners policy usually includes personal liability coverage and a small medical payments coverage for people hurt on your property. Families often assume that takes care of staff. Often it does not.

In general terms:

• Liability coverage responds when you are legally responsible for an injury. It is not built to replace an employee's paycheck while they recover.
• Many policy forms exclude injury to anyone eligible for workers' compensation benefits that you were required to provide, or chose to provide.
• Some forms give limited treatment to a "residence employee." The definition and the limits vary by insurer and by state.
• New Jersey's workers' compensation statute refers to coverage for domestic servants and household employees written through a homeowners or personal liability policy. Do not assume yours qualifies. Get it confirmed in writing.

Please check your own policy. I'm glad to read it with you.

Why families buy workers' comp even where it is optional

Where the law exempts household staff, I still recommend a voluntary policy for most clients with regular employees. Workers' compensation is designed to pay for medical treatment and wage replacement after a job-related injury. Without it, the injured person's main path may be a claim against you personally.

There is also a human reason. The person who cares for your children should not have to worry about a hospital bill after a fall on your stairs.

Opting in works. Pennsylvania's Act says that once an employer has purchased insurance for people in domestic service, neither the employer nor the insurer may use the domestic exemption as a defense. The coverage is the same workers' compensation policy a business buys, written for a household.

Employment practices liability at home

Wrongful termination, harassment and discrimination claims are not only a corporate problem. Two examples from our region:

• New Jersey's Domestic Workers' Bill of Rights took effect July 1, 2024. According to the state labor department, domestic workers are now covered by the New Jersey Law Against Discrimination. Employers must give a written contract to staff who work more than five hours a month, and those contracts cannot contain non-disclosure, non-competition or non-disparagement agreements.
• Virginia's Human Rights Act defines "employer" to include a person employing one or more domestic workers.

I flag the New Jersey contract rule for families who rely on confidentiality agreements. Talk to employment counsel before you reuse an old template. Rules in the other states differ, so ask there too.

From the insurance side, homeowners and umbrella policies generally do not cover employment claims. Employment practices liability coverage for household employers is the tool built for that.

When staff drive family vehicles

If a nanny does school pickup in your SUV, or a house manager runs errands in a family car, tell your agent. My rules of thumb:

• Disclose anyone who regularly drives your vehicles to your auto insurer.
• With the person's written permission, review their driving record before you hand over the keys.
• If staff use their own car for your errands, ask how their policy and yours would respond.
• An umbrella policy adds liability limits above your home and auto policies. Read how it treats employees, workers' compensation and employment claims, because umbrellas differ.

A hiring checklist

1. Decide employee or contractor using the IRS control test.
2. Get an EIN and set up payroll, withholding and Schedule H reporting.
3. Complete Form I-9 for regular hires.
4. Check the workers' comp rule for every state where the person will work, including vacation homes.
5. Buy workers' comp, or decide in writing not to where it is optional.
6. Put the job in writing: duties, pay, schedule, driving and time off. In New Jersey, follow the state's contract rules.
7. Tell your agent about new staff. Ask how your homeowners, auto and umbrella policies treat them, and ask about employment practices liability.
8. Review it all once a year, or whenever staff or homes change.

If you would like a second set of eyes, reach out to me. No pressure.

General education, not legal advice.

Book a 30-minute review: https://calendly.com/prominentins/30min or call (302) 351-3368.