Hello everybody. Regular AOA readers of this column know that my most passionate recommendation to owners and management companies who employ resident managers is have their managers sign a written employment agreement setting forth the terms and conditions of the hiring.
My second most passionate recommendation is the topic of this month’s column, namely: Obtain written time records from your resident manager which document the days and hours the manager works each month.
The principal reason for this recommendation is that without such reports, owners and management companies may be exposed to a manager’s false and hugely inflated claims of unpaid hours worked throughout the manager’s many years of employment. With no records, the employer will have a most difficult time rebutting the manager’s testimony if he/she sues in court or files a complaint with the California Labor Commissioner for unpaid wages.
The General Law of Record Keeping
Resident managers are employees, not independent contractors. That means that such managers will not receive an IRS “1099” form following the end of each tax year.
It also means that each employer of the manager, whether the employer is the owner or the management company, must obtain and retain the following information from the employee throughout the entire duration of employment: “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. Meal periods during which operations cease and authorized rest periods need not be recorded.”
(IWC Order 5-2001, section 7(A)(3))
The law does not require the manager to keep such records, but it does compel the employer to do so. Unfortunately, there is no exception to the employer’s record keeping obligation just because the manager neglects or refuses to provide a written report of those hours.
If the employee fails to tender time records, the employer has two options. First, he may continue to employ the manager, but at his own risk as the manager may later claim that he/she worked far more hours than the employer believes and then the manager may seek compensation for those additional hours. I have defended numerous cases where the manager claimed hundreds of extra hours of work because the employer had not received any time records by which to refute those contentions.
Second, the employer may terminate the manager. In most instances, a manager who is faced with either providing time records or being fired, will provide the records.
What hours of work are reportable?
According to Wage Order 5-2001 of the Industrial Welfare Commission, only “time spent carrying out assigned duties” constitute compensable hours worked by a resident manager. Conversely, a resident manager’s on call time, standby time, and waiting time at the apartment complex are not compensable.
Here is an example. Assume that the manager advertised an open house for a vacancy at the building for Monday December 26, 2016 from 9:00 a.m. to 5:00 p.m. Also assume that the manager waited around all day for prospective applicants to show up, but because that date was the start of Kwanzaa, only one potential tenant came during that eight hour span. Further assume that the manager spent a total of fifteen minutes showing the applicant the vacancy. How much time did the manager work carrying out assigned duties? All 8 hours? Only 15 minutes? 7½ hours because the manager was entitled to a 30 minute lunch break? Stop! Before reading further, what do you think? Please reread the hypothetical to see what you believe is the right answer. It is a tricky issue.
Most owners conclude that all 8 hours are compensable working time because the manager had to remain on the premises and was available for the full day. But the correct answer is: Fifteen minutes. That is the total time for which the manager was actually carrying out the assigned duties. The rest of the time he was merely waiting to carry out such duties. Accordingly, under the example given above, the employer is only required to compensate the employee for 15 minutes of work.
Recent California cases explain that because the manager is at home and free to engage in personal activities while he is waiting around at the building (e.g., watching television, talking on the phone, cooking, brushing his teeth, playing cards, or entertaining), the employer need not compensate the employee for that time. Of course, the employer has the discretion to pay for that time should he so desire, but there is no legal obligation to do so.
That said, I have a somewhat flippant way of characterizing compensable time for a manager: “If he is not moving, he is not working.” Of course, that is not completely accurate. But nevertheless, most managers are only paid for actively doing things. They are not hired just to sit and think. (I know that managers reading this article might dispute my last statement. But compare a manager’s engagement with that of a chess master hired by a novice player to teach chess. The chess expert is paid primarily to think, not to move about, whereas with a manager, it is mostly the other way around.)
There is one significant exception to my “flippant” characterization of compensable time. Authorized rest periods are compensable time even though the manager is not actually working. In general, an employee who works 4 hours per day or some major fraction thereof is entitled to a 10 minute period of resting time for which the employee must be compensated.
So, let me now answer the question I posed at the outset of this section, namely: What hours of work are reportable? The answer is: Only those hours that the resident manager is actually carrying out assigned duties, i.e., actually doing work.
If the manager is merely waiting around at the property to perform work some time thereafter, then those hours need not be reported. On the other hand, if a manager, while on company business is offsite, such as waiting in line at a bank for a teller window to open so that the manager can deposit the rent checks, that waiting time is reportable and is compensable. So too would be the driving time to and from the bank.
What Type of Records Should Be Kept?
As noted above, to be completely compliant with law, the employer must keep records showing the beginning and end of each daily work period and total daily hours worked.
The problem with such record keeping is that it is impractical for the manager to log that time and such logs are notoriously inaccurate. Unlike clerks at a supermarket or servers at a restaurant who punch in and out with a time clock when arriving at work and leaving for home, managers do not work continuously throughout the day. They start and stop numerous times, such as to pick up a piece of trash lying on the ground in the morning, then two hours later, to show a vacancy, and then late in the evening to speak with a tenant who is complaining about another resident’s loud music.
Unless the manager logs in and logs out each time he does anything (which is completely impractical), he will forget the amount of time he spent performing each of the various tasks throughout his intermittent day. Still, the law requires the owner to keep such records.
As a practicing attorney who has represented many hundreds of owners and management companies that have been sued, brought before the Labor Commissioner, or threatened by managers’ lawyers to pay substantial sums of money for unpaid work, I propose a secondary, more effective method of record keeping. Although this proposal does not fully comply with law, it is, from a practical perspective, probably the best defense an employer can have against a manager’s exaggerated hours of work one, two, three or four years later.
The method is to require the manager to deliver to the employer on a monthly basis a certification of the total monthly hours that the manager performed work during the preceding month, together with a certification that the manager did not work more than 8 hours per day, 40 hours per month, or 6 days in a row. The certification should also contain a section which allows the manager to state that he did work more than 8 hours per day, 40 hours per week, or 6 days in a row, if that was the case with respect to such overtime work.
So long as the total reported monthly hours fluctuate each month and do not exceed the monthly maximum established in the employment agreement, it will be difficult for the manager, and probably not credible, to later claim in court or at any other official proceeding that he in fact worked numerous additional hours. The jury, judge or Labor Commissioner is unlikely to find his testimony of additional hours believable if the monthly hours in the certification fluctuate, but still remain below the maximum number of hours.
While this secondary procedure for timekeeping does not fully comply with law (because it does not break down the beginning and end of each work period on a daily basis), it is likely to dissuade a manager, and better still his attorney, from filing a lawsuit for unpaid wages. That is because the resident manager agreement, if properly drafted in conjunction with a separate certification document, will specify the maximum number of allowable hours per month and that the hours are not to exceed 8 per day or 40 per week, or be performed over a duration of more than 6 days in a row, and will then provide the amount of wages for that work.
On the other hand, because daily time logs filled out by the manager typically report about the same number of hours worked each day by the manager, they are rarely accurate as no resident manager will work the same number of hours every working day throughout the month. Such inaccurate reporting opens the door for the manager’s litigation lawyer to develop creative arguments, such as the employer improperly instructed the manager as to how to fill out the daily log and therefore the manager should recover for additional non-reported hours.
In any event, the key to successfully defending a manager’s suit for unpaid wages, or better still to deter a lawyer from filing such an action in the first instance, is for the employer to obtain from the manager a monthly certification in which the total hours fluctuate month by month, and, hopefully, those hours are always reported at less than the maximum monthly hours authorized by the employment contract.
As noted at the outset of this article, my most passionate recommendation is that owners and management companies obtain a signed written employment agreement from the resident manager at the time of hiring. If that was overlooked when the manager was first engaged, then at least draft and have the manager sign such an agreement as soon as possible thereafter. “Better late than never” should be the guiding principle.
My second passionate recommendation is that employers require the resident manager to turn in time records in accordance with California law. In addition, and perhaps more important from the perspective of successfully defending a wage and hour lawsuit, is for the employer to obtain signed monthly certifications of the total hours the manager worked, and certifying that the manager did not (or did, if that is the case) work more than 8 hours per day, 40 hours per week, or 6 days in a row during the preceding month.
With respect to nearly all existing resident manager employment contracts, owners and management companies should promptly confer with the lawyers who drafted their agreements to ensure that the contracts will comply with the applicable 2017 California and local City laws pertaining to minimum wage payments, offsets against wages for reduced rent, sick leave payment compensation, cell phone compensation, etc.
Owners and management companies using printed form agreements should have counsel review them for legal sufficiency and compliance. Such form agreements are unlikely to comport with law.
A detailed discussion of the 2017 laws will appear in my column in the January 2017 issue of this AOA magazine.
Dale Alberstone is a prominent litigation and transactional real estate attorney who has specialized in real property law for the past 39 years. He has been appointed to periodically serve as a judge pro tem of the Los Angeles Superior Court and is a former arbitrator for the American Arbitration Association. He also testifies as an expert witness for and against other attorneys who have been accused of legal malpractice.
Mr. Alberstone has been awarded an AV rating from Martindale-Hubbell. An AV rating reflects an attorney who has reached the heights of professional excellence and is recognized for the highest levels of skill and integrity. You may Google “Dale S. Alberstone” for further background.
The foregoing article was authored in October, 2016. It is intended as a general overview of the law and may not apply to the reader’s particular case. Readers are cautioned to consult an advisor 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, 1900 Avenue of the Stars, Suite 650, Los Angeles, California 90067. Phone: (310) 277-7300.