Wealth Matters: When Having a Nanny Cam Isn’t Enough

At first, some of the recommendations seemed tedious to the point of overkill, like creating a household manual for our suburban home that is meant to lay out expectations and obligations but also lists every contact number that someone could need. But I did what the placement agent told me to do, and if nothing else I feel considerably more organized.

But the process got me thinking about what people in a similar position — or even people with large household staffs — have to consider. Carelessness can lead to everything from unpleasant conversations to fines and lawsuits. After all, we live in a litigious society and lawsuits can have a huge impact on someone’s wealth and reputation.

So I spent the week talking to people who give advice about avoiding the pitfalls household employers can encounter — or inadvertently create themselves. This, I was told, is “hiring and firing season” for domestic help. It roughly coincides with the end of summer and the start of the school year, a time when employers are prone to making mistakes.

Most of the problems employers run into seem to fall into the self-inflicted category.

RISKS AND LAWSUITS The conflicts that can arise in a home are the same ones that can occur in the workplace: accusations of harassment, discrimination, retaliation and failure to pay proper wages. What is different is that the informality of a household can make employers less mindful about how they are treating their employees.

Peter Piotrowski, senior vice president for the claims division at the AIG Private Client Group, said clients who have been sued by household workers frequently tell him, “ ‘I did nothing wrong and these people are like family to me.’ And they are like family — until the lawsuits are filed.”

Jack McCalmon, owner of the McCalmon Group, which works for employers and insurers to help them reduce risk, said that disagreements could escalate in a home, becoming more emotional than they would in a traditional workplace.

“It’s not always stuff like sexual harassment,” Mr. McCalmon said. “That’s what the movies make it out to be.” It can happen, he said, because someone has been there a very long time, is being paid very well and is very comfortable. “But you want to make a change” — as in you want to fire them.

Many states have employment-at-will policies — meaning you can fire someone just as easily as he or she can quit. But moving that abruptly may not be the best idea. R. Tom Hillis, a lawyer in Tulsa and founder of Galahad Advisors, which advises wealthy families on staffing issues, said he advised a “three strikes” policy, which consisted of verbal counseling, a written warning and then termination.

“There are certain things that should get people fired regardless — stealing, anything regarding the kids that could be damaging to their health, fraud,” he said. “In general, we’d advise some sort of investigation.”

If the employer is well known, even locally, the risk of being sued increases, even if the person did everything correctly. “Companies are getting sued every day and no one cares about it,” Mr. McCalmon said. “When Alanis Morissette gets sued by her nanny for not paying overtime, that’s a two-page article.”

Fear of such negative publicity, he said, sometimes forces people to settle faster and for more money than they should.

Solomon Gresen, a plaintiffs’ lawyer in California, said the best cases for him were those in which employees claim harassment or discrimination or retaliation for asking for something like time off to go to the doctor. Less lucrative ones — at least when it comes to domestic workers — are those that involve underpayment of wages.