I know that many clients believe I am borderline delusional when I tell them that what they are proposing to do – and sometimes have been doing for a long time – could lead to legal problems. But I know from whence I speak. I frequently defend property owners and employers in lawsuits brought by resident managers and over the course of many years and many lawsuits, have developed a pretty good sense of what behaviors by an owner or employer are apt to get them into trouble and blossom into legal claims.
This article shares my insights and experiences so that, hopefully, you will gain a better appreciation for how your actions – or inaction – just might be planting the seed of a future legal problem. I examine this issue retrospectively. I start with a typical resident manager lawsuit – the “effect,” if you will, in the proverbial “cause and effect” loop – and then look backwards to the prior conduct that may have been the “cause” of each claim in the lawsuit. Congratulations if you do not recognize any of your own conduct in the discussion below – but realize you are the exception, not the rule.
Here is a sample lawsuit caption.
The legal claims being asserted appear on the right side of the caption. I will go through each of them (although nos. 7-12 will appear in a separate article), discuss what the defendant owner may have done to earn the privilege of paying a lawyer to defend him and examine how he might have done things differently.
I. Failure to Pay Overtime
In California, employees are entitled to overtime when they work more than 8 hours in a workday, 40 hours in a workweek, or a 7th day in a workweek. Truth be told, most overtime claims I see in resident manager lawsuits do not have merit. They often are brought by plaintiff lawyers who do not understand that on-site managers, unlike most employees, are not entitled to be paid for “on call” time.
A. Conduct that might give rise to an overtime claim
But that is not to say a resident manager’s overtime claim never has merit. If your resident manager works regular full-time hours and then also responds, off-hours, to calls or texts from tenants – or you – she may be working overtime. Your manager may also be working overtime if he/she works weekdays – even minimal hours – and then also shows vacant apartments or performs other work on weekends. Also, be mindful of employees who work for you in another context (an office, for example) and then also manage your building during off-hours.
If you allow any of these situations to exist – and have not paid overtime – then you have put yourself at risk.
But even if none of those situations exists, you still may inadvertently be creating a situation that breathes potential life into an overtime claim. How? First, by failing to ensure, as a practical matter, that the manager is not required to work overtime to satisfactorily perform his/her job. Second, by failing to affirmatively document in a manager agreement, through a written contract, that he/she will not work overtime – at least not without written authorization. And, lastly, by failing to regularly obtain – and review – the manager’s time records.
II. Failure to Pay Minimum Wage
The law requires employers to pay non-exempt (think hourly) employees at least a minimum wage, the amount of which varies by location. For illustrative purposes, I will use the City of Los Angeles’ minimum wage ($16.04/hr., as of this writing)
In my experience, owners typically do not purposefully decide to pay less than the applicable minimum wage (although they sometimes fail to keep up as the minimum wage increases). Rather, plaintiff’s lawyers more commonly assert minimum wage violations based on the manager’s contention that he/she worked more hours than given credit for, which resulted in a minimum wage violation. So let’s explore how this might occur.
A. Conduct that might give rise to a minimum wage claim
Minimum wage violations sometimes occur when an owner tries to pay a flat amount each month, regardless of how many hours the manager worked. Doing this is a bad idea for several reasons, not least of which is that it becomes a minimum wage violation if the manager outworks the “salary.” So, for example, if the owner pays $600 every month and the manager claims to have worked more than 37.4 hours (at $16.04/hr.), then the owner will have paid less than the minimum wage.
Even if an owner pays based on the hours recorded in a resident manager’s time records – a good thing, of course – the owner remains vulnerable if those time records reflect an identical number of hours worked each month. Why? Because such time records are suspect, given the irregular nature of an on-site manager’s job. Perfectly symmetrical time records make it easier to believe the resident manager’s claim – a claim I frequently hear – that he/she “doctored” time records to comply with the owner’s admonition not to exceed a certain number, but that the records do not reflect his/her true hours. This, of course, could create a minimum wage claim.
Lastly, minimum wage violations occur when an owner pays using a rent credit without a written agreement authorizing him to do so (in which case that the law would not recognize the rent credit as payment).
Your best protections here, again, are a well-written employment agreement, not paying a flat monthly amount, i.e., a “salary,” and regularly obtaining and reviewing time records that truly reflect the hours worked.
III. Failure to Provide Meal Breaks and Rest Breaks
Like all non-exempt employees, resident managers must be given an opportunity to take at least a 30-minute meal break if they work more than five hours in a day. The meal break, which is unpaid, must start before the end of the fifth hour of work. They also are entitled to a paid 10-minute rest break for each 4 hours they work, which this break, to the extent possible, should be taken in the middle of each 4-hour period.
I will be honest with you. When I defend claims that a resident manager could not take meal breaks or rest breaks, I rarely take that claim particularly seriously. After all, resident managers typically (but not always) work from home and operate free of oversight and on their own schedule. So it rarely is true that, had they wanted, they could not take the requisite breaks.
A. Conduct that might give rise to a meal and rest break claim
However, don’t give life to a potential meal and rest break claim. If you have an on-site manager who works sufficient hours per day to be entitled to these breaks, make sure your manager knows that he/she is entitled to them and contractually agrees to take them — and that they are work-free. Also make sure that timesheets reflect that he/she has taken a meal break because if they do not, a legal presumption will exist that he/she did not do so.
Stay tuned for part two, in which I hope to address the remaining legal claims.
Gary Ganchrow chairs the Litigation Department at Parker Milliken Clark O’Hara and Samuelian, which has been providing full legal service to the Los Angeles community for more than a century. He has served as an Adjunct Professor at the USC School of Law and is a frequent contributor to AOA Magazine. He regularly advises on, litigates and writes about a variety of employment, property management and business matters, and can be reached at 213-683-6535 and [email protected]. This article is for informational purposes only and should not be considered legal advice or establishing an attorney-client relationship.