Hello everybody.  On July 1, 2020, resident manager laws will change in many cities
throughout California.  Fortunately, the on-site laws promulgated by the state of
California will not change in any significant fashion until January 1, 2021. 
My column this month will address a number of the 2020 changes of city laws and
remind AOA members of other important aspects of California law pertaining to on-site
managers.
New Minimum Wage Laws
All resident managers in California are employees, not independent contractors.  That
means they should receive W-2 forms for wages earned.  They should not receive
1099s.
As employees, the minimum wage promulgated by California and various cities regulate
the minimum compensation that employers must pay to resident managers.  The
California minimum wage for resident managers is presently $12.00 per hour provided
that the employer has less than 26 employees, and remains at that amount for the
remainder of 2020.  It rises to 13.00/hr. on January 1, 2021.

If the employer has 26 or more employees, the California minimum wage is $13.00 per
hour throughout 2020.  It rises to $14.00/hr. on January 1, 2021.
Because most employers of managers have less than 26 total employees, the remainder of
this article will be limited to employers with less than 26 employees.
While California requires a minimum wage payment of $12.00 per hour everywhere in
the state, it does not prevent local municipalities from enacting their own ordinances
imposing a higher minimum wage during 2020.  For example, on July 1, 2020, the
minimum wage in the City of Los Angeles as well as the unincorporated areas of the
County of L.A. rises from the present $13.25 per hour to $14.25 per hour.
The minimum wage in the cities of Berkeley and San Francisco rises from $15.59 per
hour to $16.07 per hour on July 1.
The minimum wage in Malibu rises to $15.00 per hour on July 1 of this year. The city of
El Cerrito raises the minimum wage to $15.37 on July 1.
The city of Mountain View remains fixed at $16.05 through the end of the year, but on
average throughout 2020, it has the highest minimum wage of any city in California.
It is important that employers check with the cities in which their managers work to
ascertain what minimum wage is applicable.

“On-Call” Time is Not Subject to the Minimum Wage
With respect to managers who live on site as a condition of employment (typically in a 16
or more unit building), California law only requires that the employee be paid the
minimum wage due for the time that he/she spends “carrying out assigned duties.”
Conversely, if the manager is not actually performing work for the employer, then the
minimum wage need not be paid.
In other words, under California’s statewide law, “on-call” time, “stand-by” time, and
“waiting” time are not compensable because managers are not actually performing
services during those periods.  (Lawyers wishing to research this issue in depth should
read Brewer v. Patel 20 C.A.4 th 1017; Isner v. Falkenberg 164 C.A.4 th 1393; Van
Nothdurft v. Streck 227 C.A.4 th 524.)
Here is an example: A manager who waits around for, say, five hours on a Sunday to
show a vacancy to prospective tenants is only required to be paid for the time he/she
actually interacts with the applicants.  The time the manager is waiting after one applicant
leaves and the next applicant arrives to view the apartment is not compensable.  That is
because the manager is only “waiting” to work but is not actually working (i.e., the
employee is not “carrying out assigned duties”).  The reason waiting time is not
compensable is that the manager is considered to be at home (i.e., anywhere on the
property), so he/she is free to engage in personal activities while not otherwise working.
I am not aware of any California city that requires a manager to be paid wages for
waiting, standby or on-call time while present on the property.

Allowable Offsets to the Minimum Wage
Under California law, certain offsets can be taken against payment of the minimum wage
provided that (1) the manager’s rent is reduced below the ordinary rental value, and (2) a
voluntary written agreement is signed by the manager agreeing to the offsets.
Throughout 2020, California law caps those offsets at $677.75 if only one manager is
employed and $1,002.56 if a couple is employed in the apartment unit.  Those wage caps
will increase on January 1, 2021, but the new numbers won’t be published until
November or December 2020.
Thus, if a manager’s rent is reduced by at least $677.75, the employer need not pay that
manager any wages for the first 56.4 hours worked per month under California’s
minimum wage law.  [$677.75 divided by $12.00 = 56.4]  (One exception to 56.4 “free”
hours is that if the $677.75 cap exceeds 2/3rds the fair market rental value of the unit,
then those “free” hours are reduced to the 2/3rds rental value amount divided by 12.)
If a couple is employed, then the first 83.5 hours need not be paid under  California’s
minimum wage law.  [$1,002.56 divided by $12.00 = 83.5]  (One exception to the 83.5
“free” hours is that if the $1,002.56 cap exceeds 2/3rds the fair market rental value of the
unit, then those free hours are lowered to the 2/3rds rental value amount divided by 12.)
If the required on-site manager expends more than 56.4 or 83.5 hours performing work,
then he/she must be paid the minimum wage for those extra hours.

One problematic issue to applying the rent reduction credit to the wages owed is whether
individual cities that establish their own minimum wages will allow their wages owed to
be offset by the same $677.75 and $1,002.56 offsets that California allows to be taken
against the California minimum wage.
In other words, ordinances in many cities mandate that managers must be paid a higher
minimum that what California requires.  But those ordinances are silent as to whether the
employer can credit any portion of the reduced rent to the payment of the wages.
Because California and cities are different governments, cities are typically allowed to
pass laws that are more onerous than California laws, such as a higher minimum wage.
But cities would not necessarily be required to follow California law as to the permissible
$677.75 and $1,002.56 offsets.  So it remains an open question as to which cities, if any,
would accept California’s offsets to a city’s minimum wage.
One other comment about the minimum wage: if a manager works more than 8 hours a
day (but less than 12 hours), more than 40 hours a week, or more than 6 days in a row,
then that extra time is overtime and compensable at 1-1/2 times the minimum wage.  In
some instances, a portion of any discounted rent must also be added to the usual hourly
rate to calculate the overtime rate, but that is too technical to explain in this article.

Sick Leave Time
In general, California provides that every manager who works more than 30 hours per
year is entitled to paid sick leave time.  That sick leave time is usually a minimum of 24
hours per 12 months of employment.
The meaning of this is that the employer may not reduce the wages that the manager is to
receive for the first 24 hours the employee does not work due to an illness or takes off for
a medical check-up.  Also, the 24 hours of “sick” time need not be on consecutive days.
The employee may divide it up over the 12 month period.

If the employee does not take any sick leave time during the given 12 months, then under
California law, the 24 hours will roll over to the next year and become 48 hours.
However, a correctly drafted resident manager agreement can prevent any rollover of
unused time under California law.  Basically, it is a “use it or lose it” concept if the
employment contract properly so provides.
Local cities often impose more stringent sick leave requirements.  For example, the City
of Santa Monica provides for a minimum of 40 hours of sick leave per year for
companies having less than 26 employees.  In general, Los Angeles allows 48 hours per
year of paid sick leave time.  Also, certain cities (such as Los Angeles), have different
laws pertaining to the amount of time that rolls over if not used during the 12 month
period.

Owners and management companies should check with the city in which they have on-
site managers to ascertain the applicable sick leave requirements for their respective
cities.  Also, bear in mind that the COVID-19 emergency orders of California and various
cities may mandate additional sick leave time.

Maximum Rent Charges
Many AOA members have contacted me to ask, “What is the minimum monthly rent that
the employer must charge the manager?”  There is no required minimum monthly rent.
There is only a maximum rent which may be charged in 2020 to a  manager who is
required to live on-site as a condition of employment.  The maximum rent is $677.75 for
a single manager and $1,002.56 when a couple is employed.  That means that even if an
apartment unit has a $3,000.00 monthly market rental value, rent may not be charged in
excess of $677.75 or $1,002.56.
There is one exception to those maximum rent limitations.  I call it the “Check
Exchange” exception.

The Check Exchange Exception
The Check Exchange exception allows the owner or management company to charge a
manager as rent up to, but not exceeding, 2/3 the fair market rental value of the unit (and
not be limited to $677.75 or $1,002.56) provided that the employer pays the employee the
full minimum wage for every hour the manager actually works without taking any credit
against the wages for the reduced rent.
Here is the reason I call this the “Check Exchange” exception:  Managers who are
charged rent typically pay it on the first day of the month.  Then, mid-month and
following the end of the month, the owner is required to pay the manager the amount the
manager earned based on the minimum wage for that month.  (By law, wages are
required to be paid semi-monthly although many owners pay them in a single payment at
the end of each month.)  Because the manager pays his rent by one check at the beginning
of the month and the employer later pays the manager his wages by another check, and
even though the payments are not concurrent, it is something like an exchange of checks.
For simplicity, I call it a “check exchange.”

What type of Work is a Resident
Manager Required to Perform?
Surprisingly, California law does not require that a manager live on site even if the
building is 16 units or more.  Instead, the only requirement is that a “responsible” person
lives on site.  That responsible person is usually a manager, but could be a roller coaster
tester, a train conductor, swimming instructor, barber, school bus driver, janitor,
housekeeper, caretaker, teacher, newspaper delivery man, dermatologist, waitress,
professional ping pong player, or any other relatively normal person 18 years or older.
For simplicity, in this article I refer to all such responsible persons as “managers.”
With respect to the duties required, California law does not require that the manager
perform any duties of any kind whatsoever.  The only requirement is that the responsible

person living on site have “charge of the apartment house.”  That 5-word expression is
not defined by the state of California.
However, certain cities have their own, more onerous, laws concerning such on-site
employees.  For example, West Hollywood requires that an actual “manager” in a rent-
controlled building having 16 units or more be physically present on-site in the apartment
complex 5 days a week, Monday through Friday, for a minimum of 4 business hours per
day.
West Hollywood wants the hours be fixed from 8 a.m. to 5 p.m. every weekday.
However, the city allows the employer to establish different hours so long as the manager
is physically present on-site four hours a day, 5 days a week, Monday through Friday.
West Hollywood also requires that the scheduled hours be posted at each public entrance
to the apartment building.
Employers should check the local ordinances of their respective cities to see if their
municipalities have a residency requirement more stringent than California’s
requirement.

Employers, not Managers, Must Keep Time Records
Surprisingly, California does not require the manager to keep time records of any kind
documenting the hours that he or she works.  Instead, the State requires the employer to
keep time logs.  Specifically, California requires the employer to maintain the following:
“Time records showing when the employee begins and ends each work period. 
Meal periods, split shift intervals and total daily hours worked shall also be
recorded…[as well as] total hours worked in the payroll period.” (IWC Order
5-2001, as amended, Section 7)
Without time records, the employer is exposed to the manager, either in Court before the
California Labor Commissioner, claiming that he or she worked numerous hours more, if
not hundreds of hours more, per year than the employer could ever imagine or accept.
Claims of that nature often exceed $150,000 over the applicable 3 or 4 years allowed by
the Statute of Limitations.  Without the employer producing time records, the manager’s
verbal testimony will be given the benefit of doubt in a formal proceeding against the
employer.
It is therefore incumbent upon owners and management companies who employ
managers to obtain from them accurate “hours worked” records on a frequent basis, but
certainly no less than once per month.  If a manager refuses to submit time reports, then
the employer has two choices, namely:  He can fire the manager (which is the wiser of
the choices), or he can continue to employ the manager at his own peril.  If the employer
does not then terminate the employee and the manager later sues or files a Complaint
with the Labor Commissioner for unpaid or underpaid wages, then the employer will
have a high burden of proof to rebut the hours that the manager claims.

Can a Resident Manager Be
Both an Employee and a Tenant?

YES, a resident manager may be both an employee and a tenant.  If the manager performs
work for the owner, the manager is an employee (and not an independent contractor).  If
that person also pays rent to the owner, then the individual is also a tenant.  By definition,
a person who pays rent to live in an apartment unit is a tenant.
If the manager hired by the owner to perform services does not pay any rent, he is still an
employee.  But he may or may not also be a tenant, depending on how the employment
contract is drafted.
Bear in mind that one diagnostic to determine if a person is a tenant is whether the
individual pays rent.  If he does, he is a tenant.  If he also works for the owner, he is an
employee as well.

CONCLUSION
The laws pertaining to resident managers are quite technical and ridiculously
complicated.  The downside risk to owners and management companies who do not pay
attention to the legal requirements are huge.  Competent counsel in the field should be
sought to assist employers with compliance.
All that being said, the two most important recommendations I can make to AOA
members are: (1) have every new or existing resident manager sign a written employment
contract, and (2) keep accurate time records of the hours that the manager works.

Dale Alberstone is a prominent real estate attorney who has specialized in real property
law for the past 40+ years and has been drafting resident manager employment
agreements for owners and management companies for more than 35 years.  He is also a
former arbitrator for the American Arbitration Association and has formerly served as a
Judge pro tem for the Los Angeles Superior Court.  
Mr. Alberstone has been awarded a 5-Star AV rating from Martindale-Hubbell.  That is
the highest possible rating and reflects an attorney who has reached the heights of
professional excellence and is recognized for the highest levels of skill and integrity.   
The foregoing article was authored June 2020.  It is intended as a general overview of
California law only and may not apply to the reader’s particular case.  Readers are
cautioned to consult a lawyer of their own selection with respect to any particular
situation.
Questions of a general nature are warmly invited.  Address correspondence to Dale S.
Alberstone, Esq., ALBERSTONE & ALBERSTONE, 269 S. Beverly Drive, Suite 1670;
Beverly Hills, California 90212.  Phone:  (310) 277-7300.