Paying employee "under the table"

[CAnewbie]

I'm looking at buying an existing laundromat, it's unattended, but there is a person that comes to clean and lock up every night. The current owner pays her cash "under the table", and has been doing this for years. I would worry that she could claim she got injured, and if I don't have legitimate Worker Comp insurance, I would be in BIG trouble, correct?

The current owner says he doesn't worry since there is no record of the employee (since he gives her cash), and that if she tried to file any kind of claim, he would deny that she is his employee (and he says that she wouldn't want to do that anyway, because she would be admitting to fraud herself...not paying her taxes). Is that the right way to look at it?

Does anyone know what the risks are for paying an employee under the table? Has anyone experienced, of heard of any cases of problems/trouble with it? I can't seem to find anything on the internet (except sites that says it violates labor laws). I'd hate to lose everything from something stupid like this if something were to happen.

[Howard]

Why are you asking this question - it seems that you are already 99.998% sure of the answer. You may find someone that will tell you it is OK to do this, but we all know better. You should do what you think is right.

[SecretarytoBraveDave]

You must determine the risk versus reward, just like when you entered the business world.

Some people pay cash, sleep at night and enjoy the reduced tax liabilty. However, there is the chance you get caught, and whether the employee gains from cash payments, they could do serious damage without implicating themselves very easily if you ever pissed them off. Be very careful if you choose to walk down this path.

[millenniumplus]

Agree with the previous two post. Additional food for thought is, how much would you save
by not having legit workers comp insurance? Obviously owners do it - that owner did it for 3
years. That emloyee may be in trouble by breaking labor laws (fraud) as well but in the end
you may be the one to lose the most. With lawyers - who knows. My suggestion is to "do
diligence" with regards to how much your workers comp insurance and insurance will cost.
Maybe you can get the price down and make your decision easier to swallow. Your
accountant should be able to write it off come tax time.

[brucehwalker]

When you tell a lie, you have to tell many more lies to cover up the intial one. It often is hard to remember what you said to cover your tracks so you tell more lies.

If you tell the truth all the time about everything, you never have to remember what you said, because it is the truth.

I can think of very little benefit to you for paying Under the table, especially when considering fraud, income invasion, and prison time are the end result. Not to mention the risk of being some hairy felon's girlfriend at the state penn... /ubbthreads/images/graemlins/crazy.gif I'd report EVERYTHING.

[abrash]

i'm dealing with a similar situation myself...
it's definitely in your favor to put that employee on the payroll. it'll cost you more, but it's worth the safety. if that employee doesn't like the idea you can always find another janitor. one of the other employees would more than likely jump at the chance for more hours. janitorial duties could be split up into closing and opening practices.

[MsEntrepreneur]

If I could make a suggestion..I would contact your local employment security commission. With one emloyee you may not need too much coverage and it is not all that expensive for this type of job. But to CYA you need not pay anyone under the table without the proper 'insurance' because (from personal experience) you can get burned.