Hiring Family vs. Employees: Facts vs. Misconceptions for NYS Employers

Hiring family into a business often feels informal — but under New York State labor law, family members are employees unless a very narrow exception applies. Most employers are surprised to learn that NYS does not offer broad exemptions for family labor like some other states or federal agricultural rules.

Below is a clear breakdown of what employers must know.

 Minimum Wage & Overtime

• Family members must be paid at least minimum wage.

• Family members must receive overtime over 40 hours/week unless they meet a bona fide exemption.

• NYS does not exempt family members from wage requirements like some federal agricultural exceptions.

• Family members cannot “volunteer” in a for-profit business

• All family members need to be on payroll if acting as employees.

• All taxes should be withheld (unless exempt under the narrow parent-child federal rule)

Child Labor Laws (NYS)

• New York is stricter than federal law.

• Children working for their parents in a family business:

  • Age 14–17:

    • NYS does regulate hours:

      • Limited hours during school (per usual)

      • Must have working papers (employment certification) (per usual)

      • Night shifts restricted (per usual)

      • Breaks required (per usual)

  • Under 14

    • NYS prohibits employment except in:

      • Family farm work

      • Modeling/entertainment (with permits)

      • Newspaper deliver

      • Casual domestic work

      • Babysitting

      • NOT allowed under age 14 in restaurant, retail, or most family business settings.

Workers’ Compensation

• NY requires all employees, including family members, to be covered unless the business is

  • A sole proprietorship → spouses and children are NOT automatically exempt

  • A partnership → partners are exempt, but family-member employees are not

  • A corporation → all workers must be covered, including family

  • NYS Workers’ Comp law does NOT recognize “family employee exemptions” in the way some states do.

 Disability & Paid Family Leave

• Family-member employees in NY:

  • Must be covered by NYS Disability Insurance (DBL)

  • Must be covered by Paid Family Leave (PFL)

  • Only owners/shareholders in certain structures may opt out

Unemployment Insurance (NYS)

• Family employees ARE subject to NY Unemployment Insurance unless the business is a sole proprietorship employing the owner’s spouse or minor child. (wages must be subject to this “tax” rate).

• In all corporations (S-corps, C-corps), family employees count as employees.

• Exceptions:

  • Sole proprietor hiring spouse → Not covered under UI

  • Sole proprietor hiring a child <21 → Not covered under UI

  • Any other relative or business structure → UI applies.

Other Tips:

• Avoid the negative and even toxic impacts of bringing family dynamics to work.

  • Avoid reporting relationships that could cause issues.

  • Make sure the rules apply to everyone evenly. Even your family members.

  • Document issues and discipline the way you would anyone else.  

  • Be mindful of even the perception of favoritism which is a culture killer.

  • Maybe avoid hiring family members altogether and complicating your business more than is necessary… it rarely works out.

• Document their employment as you would anyone else

  • All required paperwork like I-9s, tax forms, etc. are required.

• Avoid cash payments to family

  • This is a major audit trigger for tax and wage violations.

  • Consult a CPA before making any exceptions on taxes, wage payments, etc. to ensure compliance.