Existing law provides that an employer is not in violation of specified orders of the Industrial Welfare Commission if he or she charges, pursuant to a voluntary written agreement, a resident apartment manager up to ²/₃ of the fair market rental value of the apartment supplied to the manager, if the rental value is not applied to satisfy the employers minimum wage obligation to the manager.

This bill would extend the exemption from those orders of the Industrial Welfare Commission to an employer who does not charge the resident apartment manager any rent and, pursuant to a voluntary written agreement, applies up to ²/₃ 12 of the fair market rental value of the apartment to meet his or her minimum wage obligations to the manager.

Existing law provides that an employer is not in violation of specified orders of the Industrial Welfare Commission if he or she charges, pursuant to a voluntary written agreement, a resident apartment manager up to ²/₃ of the fair market rental value of the apartment supplied to the manager, if the rental value is not applied to satisfy the employers minimum wage obligation to the manager.

This bill would extend the exemption from those orders of the Industrial Welfare Commission to an employer who does not charge the resident apartment manager any rent and, pursuant to a voluntary written agreement, applies up to ²/₃ of the fair market rental value of the apartment to meet his or her minimum wage obligations to the manager.

Date of Hearing: March 29, 2017

ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT

Tony Thurmond, Chair

ABPCA Bill Id:AB 543 (

Author:Chen) – As Introduced Ver:February 13, 2017

SUBJECT: Employment: resident apartment manager wages

SUMMARY: Extends the exemption from orders of the Industrial Welfare Commission, to an employer who does not charge the resident apartment manager any rent and, pursuant to a voluntary written agreement, applies up to ²/₃ of the fair market rental value, with no cap; of the apartment to meet his or her minimum wage obligations to the manager.

EXISTING LAW: Provides that an employer is not in violation of specified orders of the Industrial Welfare Commission, if he or she charges, pursuant to a voluntary written agreement, a resident apartment manager up to ²/₃ of the fair market rental value of the apartment supplied to the manager, if the rental value is not applied to satisfy the employer’s minimum wage obligation to the manager, as specified. Provides that an employer can take a credit against minimum wage obligations of 2/3 of the ordinary rental value, but in no event more than $564.81 per month ($835.49 per month for couples).

FISCAL EFFECT: Unknown

COMMENTS: The author argues that, “Existing law discourages employers of resident apartment managers from providing those employees with a free apartment… by limiting the credit the employer may take for the value of the apartment against the amount the employer would have pay for the manager’s services under the minimum wage law. While this law is intended to protect the employee, it can be very much against the employee’s interest in certain situations. This bill would permit employers and an employee to agree to increase the credit for a free apartment against wages to 2/3 the fair market value of the apartment. This would make the free rent option more attractive to the employer.”

Arguments in Support

A coalition, which includes the Apartment Association of Orange County; Apartment Association, California Southern Cities; East Bay Rental Housing Association and the

North Valley Property Owners Association argues in support for this bill stating, "Rental property owners regularly hire apartment managers to run the day-to-day operations of their apartment buildings. Due to the nature of operating an apartment building, which often requires 24/7 on-site management and services, owners sometimes prefer to hire live-in or resident managers to ensure peak performance and services, while apartment managers often seek employment with owners hiring live-in employees to ensure rental housing and employment needs are met. Often, both sides seek an agreement that allows some part of the employment compensation to be in the form of a rental unit discount or deduction. It is therefore beneficial to both sides that employment contracting and negotiations laws regulating resident apartment managers remain flexible.

They further argue, this bill will allow resident apartment manager employment contracts to remain flexible by exempting employer minimum wage obligations if certain conditions are met. Under the bill, an employer may apply up to two-thirds of the fair market rental value of an apartment unit provided to a resident apartment manager free of charge to meet the employer’s minimum wage obligation."

Arguments in Opposition

The California Employment Lawyers Association (CELA) argues in opposition, “As an organization that fights to protect the rights and wages of workers, we are concerned that this bill would significantly limit the amount of wages a worker can earn as a resident manager. It is important to note that resident managers are particularly vulnerable and in need of special legal protections because they are not considered tenants and do not have the legal rights of tenants. A terminated resident manager loses not just her job but her home as well.

Moreover, Labor Code section 1182.8 has only previously applied when two-thirds of the fair market value of the apartment…if no credit for the apartment is used to meet the employer’s minimum wage obligation to the manager.”). Under the proposed amendment, employers would now be able to reverse and pervert the Legislature’s intent: rather than give employees a break on their rent by lowering the cost of an apartment by one-third the price of the unit’s fair market value, the proposed changes would allow the employer greater flexibility to avoid having to meet its minimum wage obligations.

Proponents of the amendment argue that employees would much rather have a free apartment, than money in their pocket. The experience of our practitioners in representing resident managers in these types of cases has been quite the opposite: not only would most resident managers prefer to pay a reduced rent and receive their earned wages, most employers would prefer to not have to pay any wages at all – which includes employer obligations to the State, thereby increasing the cost to the employer beyond the wages paid to the employee – and swallow the cost of collecting rent on one apartment. This new proposed amendment effectively is an end-around decades of wage order protections and will cost the State revenues.”

The California Labor Federation echoes the same arguments against this bill as CELA.

REGISTERED SUPPORT / OPPOSITION:

Support

Apartment Association of Orange County

Apartment Association, California Southern Cities

East Bay Rental Housing Association

North Valley Property Owners Association

Opposition

California Employment Lawyers Association

California Labor Federation, AFL-CIO

California Nurses Association/National Nurses United

Analysis Prepared by: Taylor Jackson / L. & E. / 916-319-2091