Naturally, I consider all my articles to be super-important, but this one – which discusses terminating resident managers (and when not to) – covers a topic I believe to be underappreciated and often not given sufficient thought.
Let me introduce it with a sports analogy. Before each play in a football game, the coach tells the quarterback what play to run. But before actually running the play, the quarterback scans the entire field. If the defense has set up in a way likely to impede the play’s success, the quarterback may call an “audible” and change the play to one more likely to succeed.
I bring up this analogy because it aptly describes the process that should – but often does not – occur before an employer terminates an employee – in any context, really, but especially a resident manager. If you employ a resident manager and decide to part company with him, it is critical that you – or, preferably, an experienced lawyer – “scan the field” for potential problems before you move forward.
Number of Lawsuits Increasing
Why? Because the number of lawsuits for wage and hour violations, wrongful termination, discrimination and retaliation continues to rise, and resident managers who face losing their job and, frequently, their home, tend to fight back. Also because jurors are inclined to sympathize with the little guy and hammer employers and property owners. You’re both. In any event, win or lose, lawsuits are costly.
Of course, you can just terminate your manager and hope for the best. But when I receive calls from property owners facing legal claims after (because?) they have fired their manager, they at that point already are engaged in damage control; damage control tends to be a lot more expensive than scanning the field beforehand. On the other hand, when clients contact me because they want to replace their on-site manager (but have not yet done so), this allows me to “scan the field” to determine if doing so would be the right play at this time.
In a nutshell, I want to assess whether surrounding circumstances make the manager likely to assert legal claims and, if so, the owner’s potential exposure. This information can – and should – inform how the owner proceeds. By way of illustration, if I told you there exists a 95% chance you will be sued, a 90% chance you will lose, and likely exposure of $200,000 plus attorneys’ fees (your own and the other side’s), you may want to change the play. Conversely, if I tell you there exists a 20% chance you will be sued, a 40% chance you may lose, and the likely exposure caps out at $25,000, you may decide the risk is acceptable and move forward with the termination. Needless to say, these things tend not to break down quite so scientifically (oh that they did), but you get the point.
Things to Consider
The first thing I typically analyze is whether the owner has been paying the manager properly. As you undoubtedly know, the payment rules for resident managers are complicated, and failing to pay in full compliance with those rules often seems to be the norm, not the exception. If an owner has not been paying properly, this single fact greatly enhances the likelihood that any plaintiff’s lawyer whom the resident manager visits will see value in the case.
I also want to understand the circumstances surrounding the proposed termination. In other words, why now – especially when, as frequently occurs, the owner tells me the manager has worked there many years and never did his job well. If I learn, for example, that the employee recently lodged a complaint or suffered an injury or illness, then the proposed termination begins to sound and smell like a retaliation or discrimination lawsuit waiting to happen.
Let’s explore this. It is true that resident managers typically are “at-will” employees, meaning you can fire them for no reason or any reason. Any reason, that is, except an unlawful one. A plaintiff’s lawyer will, of course, want to claim your termination was for an unlawful reason. In this respect, timing and optics are super-important.
If an injury or employee complaint recently occurred – even if the decision to terminate really and truly is completely unrelated or was contemplated long before – you may be asking for problems by terminating now, because it looks like the termination is retaliatory. The mere timing can create a legal presumption against you that will need to be explained away. Vehement denials may not be sufficient if you don’t also have evidence – like documentation – supporting your denials. As a practical matter, bad optics may be all a plaintiff’s lawyer needs to move forward with a lawsuit and get the case to a jury.
When in Doubt, Ask
Therefore, owners should ask whether, as a practical matter, terminating now will cause them to be sued – whether justifiably or not – and, if so, can they defeat the lawsuit short of needing to pay lawyers all the way through trial.
None of this is intended to suggest that you can never fire your resident manager (although it sometimes feels that way in California). But you may want to consider alternative approaches, at least in the short term. There is no “one-size-fits-all” alternative approach and there are never guarantees, but potential options include waiting and continuing to document performance issues that would negate a claim you terminated for an unlawful reason, or reaching an agreement with your manager that includes paying a “severance” in exchange for a release of claims. As I mentioned, each situation is different and must be carefully analyzed.
The takeaway from this article should be that firing a resident manager (euphemistically referred to as an “involuntary separation”) should never be taken lightly or without fully considering the surrounding circumstances. Otherwise, you risk that rather than solving a problem, the termination will merely be the start of a bigger one.
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.