By Kari Negri, CEO, SKY Properties, Inc.
(Editor’s Note: The “Ask Kari” now offers a new monthly format of “questions and answers” by Kari Negri, CEO and founder of SKY Properties. Ms. Negri has over two decades of property management experience, is a speaker at numerous real estate industry trade shows and exhibitions, and is currently a member of the Board of Directors of the Apartment Association of Greater Los Angeles. Ms. Negri would like to answer your questions in future articles and ask that you submit your questions to: [email protected]. You can also watch SKY Properties’ online video series at www.skypropertiesinc.com
- Question: “Hi Kari, have I heard that a building owner can be sued for not keeping the proper timesheets for their building managers on site?” How can I avoid legal exposure? “
First and foremost, before I can even begin to answer your question, you must have a valid, signed contract in place with any manager on site. You can create a manager contract on-site through the Greater Los Angeles Apartments Association (or you can pay a lawyer to draft one for you). Having a valid contract in place between you and your on-site manager is not an option – it is mandatory for all on-site employees to have a contract even if you call them a ‘key holder’, ‘cleaner’, “Security” or worse yet, any “friend” or just former “tenant”. Even if the building is small and does not require a manager or employee on site, if you have someone in your building who is designated as such who provides services in exchange for rental concessions, then there absolutely must be a contract which describes his tasks and responsibilities as well as the expected days and hours of work.
You asked a great question, and while I am certainly not a lawyer and cannot offer legal advice, I am aware that some owners have been sued or turned into a labor relations board for not having kept the timesheets of people carrying out work in their building. This tension is not unique to the real estate sector. Have you ever heard those radio commercials where businesses want audit a person’s working hours for free so that they can offer to sue the employers !!! It would seem obvious that litigation lawyers are looking for employees who wish to sue employers for possible wage arrears. My company, SKY Properties in fact, learned this lesson the hard way when a time-skewed maintenance worker was working on their timesheets. (These ‘ambulance-chasing’ lawyers apparently don’t seem very picky about who their clients are.) Employer. So be sure to keep accurate records and update them regularly and in a timely manner.
After many years in the property management industry, I have unfortunately seen many sneaky managers out there who claim to have worked MANY HOURS over the past few years, and no one had counted their hours worked and paid them for that time. These characters suddenly reappear and come back to the owners through their lawyer to ask for arrears, overtime, penalties, interest, etc. and they often win if the owner has failed to keep accurate records. Can you suddenly imagine being hit with a claim for several years of late payment and penalties? The average amount of these types of settlements is around $ 60,000. Make sure you do what you can to avoid this type of legal exposure.
I understand… I know what you’re thinking in your head right now – “But, I’m just giving them a rent credit.” Yes, a rent credit credited to their wages for working hours. At a minimum you should collect a timesheet every month to make sure they don’t exceed their hours which in my calculations should not exceed 10-12 hours per week before exceeding the maximum credit amount currently allowed by California state law. . The maximum allowable rent reduction that can be credited against the minimum wage owed is $ 734.21 per month for a single manager and $ 1,086.07 per month when a couple is employed and the employer has less than 26 employees. As of January 1, 2022, the minimum wage will increase to $ 14.00 per hour, then to $ 15.00 per hour as of January 1, 2023 for employers with 25 or fewer employees. Employers with 26 or more employees can charge rent of up to $ 790.67 (single manager) and $ 1169.59 (couple). Effective January 1, 2022, the minimum wage will increase to $ 15.00 per hour for employers with 26 or more employees.
Based on California’s current minimum wage as of Jan. 1, 2021, it is $ 13.00 an hour for employers with fewer than 26 employees, and therefore, $ 734.21 equates to approximately 56 hours per month. Keep in mind that minimum wage laws vary by jurisdiction. While on January 1, 2021, the California-wide minimum wage increased to $ 13.00 per hour for employers with less than 26 employees and became $ 14.00 per hour for employers in 26 or more employees, there are about 35 cities that have a higher minimum wage, such as San Francisco, Oakland, Los Angeles, Berkeley, Santa Monica, Santa Clara, San Diego, Malibu, and Cupertino.
For the city of Los Angeles in particular, I took the monthly wage credit and divided that amount by the current minimum wage which is $ 15.00. Accordingly, I have set the maximum amount they can work per month: (i) approximately 52.5 hours for one person or 77.5 hours per couple if less than 26 employees, and (ii) 56.5 hours for one person and 83.5 hours per couple if 26 or more employees.
Any time your employees work on site beyond these maximum hours, even 15 more minutes, must be paid in the form of wages. Note: (do not pay them in cash – use a payroll company). If you don’t pay your on-site staff for the extra time worked each month, you might be able to claim a salary later. If your employee on site comes to see you and declares that you owe him five years of overtime, do you have time sheets to refute this type of claim to a judge? Otherwise, you risk being exposed to unpaid wage claims. As a rental property owner (or any type of business owner for that matter), if that risk of exposure of thousands of dollars in potential salary claims doesn’t motivate you to follow closely this law and to keep adequate records, I’m lost how to convince you.
Here are six important ‘tips’ you might want to consider:
Tip # 1: Consult your lawyer to review and better understand the law. It’s a very complicated law. Make sure you take the simplest step to better understand how you manage your rental property and find out how you can best comply with the law.
Tip # 2: In the eyes of the State of California, know that your on-site manager is your employee. Depending on the state of California, your on-site manager or other on-site personnel is your employee. Some landlords find a trustworthy tenant and simply give them rent credit to collect rents, call for maintenance, etc. obtain insurance against accidents at work, etc. Anyone who is not a licensed contractor or who does not have liability or workers’ compensation insurance can be considered an employee. Over the years, the rules for independent contractors have become much stricter and it is more likely than not that your on-site manager or other staff will be YOUR COLLABORATORS.
By the way, one of the many benefits of hiring a professional property management company like SKY Properties is that the on-site manager becomes our employee, or an employee of the management company you have hired, and therefore you have A layer of protection and the peace of mind that proper employment records are maintained.
Tip # 3: Know the maximum rent credit from your manager on site. Yes, the State of California regulates the maximum rent credit you can offer your on-site staff. Rent credits can only be granted in accordance with the order of the California Industrial Welfare Commission, which specifically prescribes the amounts of rent that can be compensated.
Tip # 4: The signed management contract is an absolute must! All on-site managers must receive a manager contract, and work hours and tasks must be clearly described in the contract, and all completed work must be supported by timesheets. The Greater Los Angeles Apartment Association offers its members free access to sample on-site management contracts. At SKY Properties, I believe best practice dictates collecting timesheets every two weeks to stay on top of what is happening at each property.
Please note that whether or not you take a rent credit, it is imperative that you always have a written contract in place. The Apartment Association of Greater Los Angeles offers on-site management (or other staff) contracts for small employers (less than 26 employees) and large employers (26 or more employees) that apply a rent credit for time worked instead. and place of salary, and an on-site manager contract form where no rent credit is offset by the salary due.
(Partial Apartment Association of Greater Los Angeles On-Site Management Form Agreement: Form L.11.2)
Tip # 5: It’s time for the timesheets! Make sure that your on-site managers, maintenance personnel and all other on-site personnel complete timesheets regularly, preferably daily, but at least once a week, so that you can pay them properly in accordance with state and federal laws. If there are no timesheets, there is a risk of exposure if an employee claims there is pay owed for overtime. If this gap spans over several years, you risk being “hooked” for a sizable amount of money.
There are many timesheet apps online that can be accessed by smartphone or computer, so timesheets don’t have to be kept manually. Go over your employees’ timesheets and make sure they match all of the notes you took to see if they make sense.
Tip # 6: Stay informed. I cannot stress enough that you consult your lawyer here. Additionally, stay informed by visiting the following California State website: http://www.dir.ca.gov/dlse/faq_paydays.htm.
Kari Negri is the CEO of Sky Property Management and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles. Do you have a question for me? Please send your questions and comments to me at [email protected].