Unlicensed/Uninsured Risk

[concerned42517]

A friend of mine is opening a summer daycare program that she will be operating out of her apartment, which she rents from her parents. She is doing this because the preschool she works for is renovating their facilities and, therefore, not offering a summer program. She will have 6 of her former students for about 8 weeks. My concern is that she will be doing this unlicensed and uninsured. The parents of the kids are aware of this and agreed to pay her under the table and also not to report the expense on their taxes.
My friend is extremely good with the kids and has a ton of experience. I have no concern for the safety of the children, but my worry is that she has possibly left herself open to some significant liability. What potential risk is she taking on in the event something serious happens? In the much more likely scenario that everything goes fine, what are the chances of her facing any repercussions for licensing/insurance issues or tax evasion?
This world is completely foreign to me so any input would be welcome. I am sure my friend knows a lot more than I do and has likely done her homework and weighed the risks, however, I care about her and would like to know what you all think. Thank you for the help!

[mommyneedsadayoff]

A friend of mine is opening a summer daycare program that she will be operating out of her apartment, which she rents from her parents. She is doing this because the preschool she works for is renovating their facilities and, therefore, not offering a summer program. She will have 6 of her former students for about 8 weeks. My concern is that she will be doing this unlicensed and uninsured. The parents of the kids are aware of this and agreed to pay her under the table and also not to report the expense on their taxes.
My friend is extremely good with the kids and has a ton of experience. I have no concern for the safety of the children, but my worry is that she has possibly left herself open to some significant liability. What potential risk is she taking on in the event something serious happens? In the much more likely scenario that everything goes fine, what are the chances of her facing any repercussions for licensing/insurance issues or tax evasion?
This world is completely foreign to me so any input would be welcome. I am sure my friend knows a lot more than I do and has likely done her homework and weighed the risks, however, I care about her and would like to know what you all think. Thank you for the help!

What state are you in? The amount of kids she can have will vary state to state.

As for liability, she is putting herself in significant danger. And she is also breaking federal law by not reporting income, so legally, she is heading down the wrong path.

Many apartments will not let you operate a daycare, so she should check with them. If she doesnt and they find out (6 families in and out twice a day is pretty noticeable), they could evict her and keep any deposits.

The insurance/liability stuff is a big issue, but how that works with renting is not something i know much about. All i know is that if someone gets hurt in her care, she could be in a whole lot of financial/legal trouble.

The tax thing is illegal and she may think she can get away with it, but all it takes is one parent claiming their childcare on their taxes and she could be audited and fined significant amounts. Trust me, i just the last 4 YEARS working with the IRS on a family member's back tax situation...it is NOT fun and very expensive!

Anyway, your friend is taking significant risk by doing this, so if you are able to sit down with her, it may help open her eyes...or not
But at least you will be making her aware in case she is not.

[Pestle]

I think you know what she's risking.

She's risking her livelihood. If caught, she'll never be able to again use those child-care skills you're praising. She'll lose her professional connections and she'll lose respect in the community.

She's risking her record. If caught, she may end up in court with fines she can't afford to pay. Why is it so important to her to avoid paying taxes?

Won't the other families want to claim the child care expenses they're incurring when they do their taxes?

If she's desperate for income over the summer, literally anything legal would be a better choice than this. Flip burgers. Mow lawns. Or just take the high ground: Take in as many children as is legal for an unlicensed provider to do in her state, and claim the income.

[Pestle]

Also, I don't know much about the IRS, but I bet getting caught evading taxes once will lead to audits in the future, too.

[concerned42517]

Thank you for the replies. Unfortunately, it sounds like my concerns are warranted. I will try talking to her again but I think she is pretty well set on rolling the dice and has already collected deposits from the parents. At the very least, I can maybe convince her to report her income, as the risk/reward there is pretty high in my opinion.

Her parents own the property so luckily she doesn't have to worry about eviction! It is a two family though so i doubt the other renters will be too happy.

State is Massachusetts btw. Thanks again!

[Cat Herder]

One of her co-workers turning her in should be her primary concern. They are also mandatory reporters. Her employer could also file a civil suit.

Way too many risks, IMHO.

[Blackcat31]

One of her co-workers turning her in should be her primary concern. They are also mandatory reporters. Her employer could also file a civil suit.

Way too many risks, IMHO.

Not to mention the risks she is placing on her parents (landlords) by conducting an illegal business on their property. Without the proper coverage, they are the ones that are truly going to lose should something happen.

[Cat Herder]

Not to mention the risks she is placing on her parents (landlords) by conducting an illegal business on their property. Without the proper coverage, they are the ones that are truly going to lose should something happen.

Good catch!

[concerned42517]

I do believe the school is aware that she is taking on some of the kids for the summer. I think they are looking at it as a way to appease the parents, since they aren't offering a program. Maybe she can look into getting them to at least cover the insurance? Idk, that's all well beyond my knowledge. Thanks again!

[e.j.]

I'm in MA and can tell you it is illegal to offer child care without a license. She isn't required to be insured, though.

Several years ago, someone contacted me because she wanted to get information on how to become licensed. A neighbor had reported her. An EEC rep made an unannounced visit and told her she had to stop offering care immediately. I believe she had to call all parents right then and there to come and pick the kids up. She wasn't allowed to take them back until she got her license. She got off easy. Some licensors are more strict than others. I'm not sure if they have leeway in how these kinds of things are handled or if their guidelines have changed over the years and become stricter.

Where your friend has worked in child care and obviously knows what she is doing is illegal, I would think they might be a little tougher on her, especially if one of the kids gets hurt while in her care. The dc parents are ok for now maybe but if one of their kids gets seriously hurt you can bet they won't be then. Also, while she may have decided to take the risk, I wonder if her own parents are even aware of the issues they could be faced with if something happens to one of the kids on their property? I would advise her not to risk it but that's just me.

[concerned42517]

Thanks for the reply. Good to get some insight from Massachusetts. Any idea how long the procedure takes in Mass to get licensed? I understand if it varies too widely to give an estimate.

She has all the property requirements and training, so as I see it, if she can get licensed she would be building her career opportunities instead of jeopardizing them.

[e.j.]

Thanks for the reply. Good to get some insight from Massachusetts. Any idea how long the procedure takes in Mass to get licensed? I understand if it varies too widely to give an estimate.

She has all the property requirements and training, so as I see it, if she can get licensed she would be building her career opportunities instead of jeopardizing them.

I get not wanting to jump through all of the hoops and going to the expense of getting a license for such a short amount of time but she really would be taking a big risk if she were to do child care without a license - and she'd be bringing her parents along for the ride. Even with close supervision, accidents happen and kids can get hurt. Parents who are okay with the deal now may not be so easy going if their child gets injured. They may also decide at tax time to report the money they paid her - regardless of what they agree to now.

I was first licensed over 20 years ago. It was relatively quick back then - maybe about a month from initial application to house inspection, if I remember correctly? I'm not sure how long it will take her to get licensed now, though, since some things have changed over the years. Maybe someone who has gone through the process recently will chime in.

If she already has her CPR/First Aid certifications and has had a physical within the past year, it may save her some time. If she's already been finger printed for her job at the preschool, maybe EEC would accept that instead of having her go through the process again? That could also save her time. If I were her, I'd put my application in asap. If she has all of the necessary paperwork, it may go smoothly and she may have her license in time for her summer opening. I wonder if the licensor assigned to her preschool could give her some guidance and maybe help with the process?

[concerned42517]

That's a good point about the school possibly being able to help expedite the process. If they are in fact aware that she is doing this, I would think it would behoove them to help her where they can. I know she doesn't want to hear any of this from me so it will be nice to offer some alternative advice rather than just condemning her plan.

[Cat Herder]

offer some alternative advice rather than just condemning her plan.

It is not condemning her plan to remind her she will be breaking the law. It is illegal. Period. No feelings involved. She is no more special than the rest of us.

The daycare knowing about it also makes them culpable.

It may be easier for her to get approved as a summer camp, though. Check it out: http://www.mass.gov/edu/birth-grade-...mer-camps.html

[hwichlaz]

She should at the very least, claim the income.

The risk of the other parents claiming it is pretty small though...since they are likely already claiming their max benefit with the care they get during the school year, it wouldn't financially benefit them to claim more....but it's not a risk I would take.

All licensing can really do is just shut her down. And since her parents are her landlords there isn't an issue there.

So that leaves liability. That's her biggest risk. And since she's unlicensed, a double indemnity clause in her contract wouldn't offer her much protection...especially since, while parents can sign away their own rights to sue, they cannot do so on behalf of their children. Their children, if injury caused lasting effects, could sue when they become of age to do so.