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Your Legal Corner - Client Alert Blog

What California Landlords Need to Know About Paying Live-in Resident Managers

Written By: Melissa C. Marsh, Esq., California Attorney, January 2017 Add to Favorites

In California, if a building has 16 or more units, the owner is required to have a live-in manager. See, California Code of Regulations Title 25, Section 42. Pursuant to the California Industrial Welfare Commission (IWC) Minimum Wage Order No. 5-2001 and MW-2014 a live-in resident manager is an employee, not an independent contractor, and as such must be paid the minimum wage for all hours worked. The California Industrial Welfare Commission (IWC) Minimum Wage Order No. 5-2001 and MW-2014 further restricts how much rent a live-in resident manager may be required to pay. This post seeks to outline some of the major employment law violations land owners encounter with live-in resident managers.

Written Employment Contracts Are a must for Live-In Resident Managers in California.

While some landlords provide a free unit to their live-in resident manager, other landlords set a different bargain. Many owners, unaware of the law, offer resident managers a reduction in their monthly rent in exchange for managerial services. What many landlords do not know is that to charge a live-in resident manager rent, the landlord must provide the live-in resident manager a written employment agreement. See, <>Brock v. Carrion, Ltd. 332 F.Supp.2d 1320 (2004) and California Labor Code §1182.8. Even if a properly drafted written employment agreement is provided to the live-in resident manager, the law prescribes the minimum pay a live-in resident manager must receive and the law further limits how much rent a landlord may charge (regardless of the size of the building).

Payment of the Minimum Wage is a must for Live-In Resident Managers in California.

Resident Managers are covered under California’s Industrial Welfare Commission (IWC) Minimum Wage Order No. 5-2001 and MW-2014. Pursuant to the Wage Order, a resident manager is an employee, not an independent contractor, and as such must be paid the minimum wage (presently $10.50 per hour in Los Angeles, California) for all hours worked. Regardless of whether the resident manager is receiving free rent, or a reduced rent, the law requires that all live-in resident managers be paid at least the minimum wage for all hours worked. Wage Order No 5-2001 defines “hours worked” as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work.” In Morillion v. Royal Packing Co., (2000) 995 P. 2d 139, the California Supreme Court held that “suffer or permit,” means all work that the employer knew, or should have known about including unauthorized overtime. As a resident manager is not required to hold a California real estate license, most are NOT exempt from California’s overtime pay requirements. See, California Business and Professions Code §10131.01. It is therefore very important for the owner to require he resident manager prepare him or herself and submit to the owner on a weekly, or bi-weekly, basis detailed time-keeping records, certifying the dates and actual time(s) the manager worked each day, with a total and the end of each pay period.

Compensating Live-In Resident Managers for “On-Call” Time.

If terminated, a former live-in resident manager may lash out at the land owner and in many cases will have a valid wage claim. That said, although resident managers are often required to be available, or on-call, 24/7, that dloes not mean they are entitled to compensation for all of their on-call time. In Isner v. Falkerberg, 160 Cal.App.4th 1393, the Court held that the manager is only entitled to compensation for the “time spent carrying out assigned duties.”

California Landowners Subject to Maximum Rents For Resident Manager Unit.

In addition to requiring landlords to pay a live-in resident manager at least the minimum wage for all hours worked, the Industrial Welfare Commission also limits the amount of rent that a land owner may charge for the resident manager for the rental unit occupied by the resident manager. The California Industrial Wage Commission prohibits the owner from charging a live-in resident rent that exceeds the lesser of (a) $508.38 or $752.02 per month, or (b) two-thirds the fair rental value of the manager’s unit (“Maximum Rent”). If a landlord wants to charge the resident manager up to 2/3 of the fair rental value of the managers unit (which is typically more than $752.02), the owner must: (1) have a written employment agreement with the resident manager as set forth above; (2) pay the manager via a payroll check at least the minimum wage for all hours worked; and (3) the owner must not offset from the live-in resident manager’ pay the rental fee for the manager’s unit (the resident manager must pay his or her rent by a separate check made payable to the land owner).

Penalties For Not Complying With Wage Laws.

Liquidated Damages – Doubling of Unpaid Wages.. California Labor Code §1194.2 provides that an employer (including an apartment owner and management company) may be liable for liquidated damages to a resident manager in an amount equal to the unpaid minimum wages if the employer was not acting in good faith, or did not have reasonable grounds for believing that he/she was not in violation of the minimum wage law. Thus, the employer will owe the resident manager not only the minimum wage for all hours worked, but also a liquidated damage penalty in the same amount, resulting in a doubling of the unpaid minimum wages.

Waiting Time Penalties Up To 30 Days Pay.

California Labor Code §203 provides that if an employer willfully fails to pay without abatement or reduction, in accordance with Labor Code §§ 201, 201.5, and 202, all wages due to an employee who is terminated the employee may claim a full days’ wage until paid or until an action therefore is commenced, up to 30 days. Consequently, the terminated resident manager may also be entitled to an additional 30 days day as a waiting time penalty.

Return of All Rent Deducted or Paid. If the owner failed to have the resident manager sign a written employment agreement, and nevertheless tried to offset the rent, or a portion of the rent, from the resident manager’s wages , the resident manager can sue for that amount (offset or paid) for the prior 3 years.

Other Penalties. In addition, the resident manager can sue for retaliation, age discrimination, pay stub violations, unreimbursed business expenses, interest on unpaid wages, attorneys’ fees and costs, and in some cases where the owner attempts to evict the resident manager, for retaliatory eviction.

Raising a Live In Resident Manager’s Rent in a Rent Controlled Building.

This is a minefield whether in Los Angeles, West Hollywood, or Santa Monica and too detailed to be examined in this post. For owners of Los Angeles Rent Stabilized Buildings you can contact the Los Angeles Community and Investment Development Department and ask for their publication entitled, "Resident Managers as Tenants."

Posted In: Employment Law News  Real Estate Reporter 

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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.