Labor & Employment Law | Apartment Owners and Their Resident Managers (16 or More Units)
Updated: Oct 4, 2018
This article discusses California labor and employment legal issues pertaining to the relationship between apartment owners ("Owner(s)") and their resident managers ("Manager"). This article is intended as information, not as legal advice. Readers must consult their own legal counsel and should not rely on the author's opinions as those opinions are not intended to be taken legal advice.
California law requires that residential apartment buildings with 16 or more units must have an onsite, resident responsible person. The responsible person can be, and often is, a Manager that resides in a unit of the building ("Managers Quarters"). California law recognizes that the resident Manager is almost always a non-exempt employee of the Owner. Among other things, this means that the Manager is not: (a) an independent contractor; and (b) exempt (which means, among other things, that he or she may not be paid on salary and is protected by minimum wage (generally $10.50/hour in most counties for employers with 25 or fewer employees), overtime (1.5x - 2x base hourly minimum wage, depending on a multitude of factual details), and other labor laws protecting non-exempt employees). As a non-exempt employee of the Owner, the Manager is entitled to meal and rest breaks and bi-monthly pay checks, among other things, and the Owner is required to maintain certain detailed wage-related records concerning the Manager's services.
Owners that ignore the foregoing and unlawfully elect to treat their managers as either independent contractors or salaries-exempt employees may face serious and costly legal repercussions, including potential wage and hour litigation.
Moreover, with regard to buildings that are 16 or more units in size, the Owner is capped by California law as to how much the Owner may charge the Manager for the Manager's Quarters. Depending on several factor, including the number of employees the Owner has and whether or not the Manager is a single person or a couple, the maximum rent for the Manager's Quarters is generally capped at an amount not to exceed $593.05/month ("Manager's Rental Cap").
For Owners wishing to credit the cost of the Manager's Quarters against the hourly-rate, minimum wage salary otherwise earned by the Manager for services rendered, it is imperative that the Owner obtain a properly-drafted and executed employment agreement with the Manager before making any such deductions to the Manager's salary. Without a properly draft, executed written employment agreement, the Owner's credit against the Manager's salary could be deemed unlawful and result in wage and hour violations against the Owner; this would be true even where the Manager enjoyed the "free" use of the Manager's Quarters. Stated otherwise, where there is no properly-drafted employment agreement with the Manager concerning the Owner's intention to credit the cost of the Manager's Quarters against the Manager's minimum wage salary could mean that the Manager will have a right to bring a valid wage and hour lawsuit against the Owner. Such actions generally have a three (3) (and sometimes four (4)) year statute of limitations, which may result in many thousands of dollars in damages, penalties and lost productivity. The moral of the story is that if the Owner intends to barter the cost of the Manager's Quarters against the Manager's minimum wage salary, the Owner must make sure to first obtain the signed employment agreement.
Important Exception to the Dollar Amount of the Manager's Rental Cap: Owners may in certain instances take advantage of a loophole pertaining to that rule that would ignore the specific dollar cap (e.g., disregard the $593.05 cap) and, instead, charge the Manager a higher amount capped at 2/3rds of the ordinary rental value of the unit (i.e., the Manager's Quarters). To take advantage of this loophole, the Owner must still have a written employment agreement with the Manager and must pay the Manager his or her full hourly-rate of minimum wage (via outgoing check) and then require the Manager to pay the Owner the rent (i.e., the 2/3rd of the ordinary rental value of the unit) back (via incoming check). In so doing, the Owner is foregoing the ability to directly credit the cost of the Manager's Quarters against the Manager's minimum wages and, therefore, earns the benefit of charging more than the $593.05 capped rent. For example, if the unit has an ordinary rental value of $2,700 and the Manager has worked 65 minimum wage hours (i.e., $10.50 x 65 = $682.50 in gross wages), the Owner has two options. Option 1: charge the Manager no more than $593.05/month in rent for the Manager's Quarters by means of crediting the monthly rent against the Manager's earned wages -- resulting in a gross wage payment of $89.45 by the Owner to the Manager (i.e., $682.50 minus $593.05). Option 2: pay the Manager the full hourly minimum wage earned ($682.50) and get from the manager a rent check for $1,800 (i.e., 2/3rds of the ordinary $2,700 rental value of the unit). In this particular example, Option 2 would be a better fiscal choice for the Owner because, assuming the Manager does not default on his or her rent payment, the Owner would actually receive a net payment of $1,117.50 from the Manager (i.e., $1,800 minus $682.50) once both checks are exchanged.
Note, however, that whether the Owner takes advantage of the legal loophole methodology relating to the manager's rent or instead uses the alternative "credit against wages" method discussed earlier, in either instance the Owner must have a written, voluntarily executed and properly drafted employment agreement with the manager.
Also note that as an employer, the Owner is directly responsible for keeping accurate records of hours worked by the Manager, rate of pay, total wages paid each payroll period, etc. The Owner is also required to provide the Manager with a itemized pay stub with wage checks, which must be paid to the Manager on at least a bi-monthly basis.
Finally, where the Owner requires the Manager to carry and use the Manager's own (personal) cellular telephone for work purposes, the Owner is legally required to reimburse the Manager for a reasonable percentage of the monthly cellular service cost of the device.
If you are an Owner wishing to protect yourself or a Manager that feels that he or she is being taken advantage of by your employer, you should promptly seek the advice of competent labor and employment legal counsel.