Pay Your Resident Managers Or Face Class Action Suit

By DANIEL BORNSTEIN, ESQ.

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Rental property owners should pay their resident managers in every time or season, but today, the consequences for not paying are more perilous than ever. 

Although we've noticed a sharp spike in lawsuits filed by residential managers for unpaid wages, there's even more ominous litigation in store for landlords who don't pay.

Enter the Private Attorneys General Act (PAGA), codified in California Labor Code Sections 2698 through 2699.5. This creature, in essence, creates a class action. That's right, a resident manager can sue their employer on behalf of all of the employer's other resident managers.

Interestingly, the purpose of the PAGA statutory scheme is to alleviate the workload of a busy California Attorney General's office. With their office spread too thin to enforce the various labor law violations, it empowers individual employees such as resident managers to act as an agent or proxy for California's labor law enforcement. The theory is that landlords will pay the piper for breaching Labor Codes.

Enterprising attorneys are all too willing to initiate these type of lawsuits because prevailing parties may be entitled to substantial attorney's fees. Given the financial incentives built into PAGA and the tenacity of the plaintiff's counsel to obtain the spoils of victory, it is vital to make sure that your agreements with resident managers are honored dutifully, and you manage this relationship properly.

The Labor Code says that once a PAGA suit has been filed, it cannot be dismissed just because there's a settlement between the resident manager and his or her employer. The Superior Court must review and approve any penalties on behalf of all other aggrieved employees. 

If there is any scintilla of good news, it is the Statute of Limitations. PAGA recovery of civil penalties on behalf of resident managers in other apartment buildings owned or managed by the same employer as the plaintiff's manager, is just one year. But do the math on a year's worth of unpaid wages, and that will put a dent in your pocketbook. 

The trial court, in its discretion, may reduce the civil penalty if the "assessment of the full penalty would result in an award that is unjust, oppressive or confiscation", according to Labor Code § 2699(e)(2)). However, the Court's clemency is likely to be a rare occurrence.

In our next post, we will offer practical recommendations and best practices to avoid PAGA causes of actions. Follow us on Facebook to stay in the know. 

As the founding attorney of Bornstein Law, Broker of Record for Bay Property Group and expert witness, Daniel Bornstein is a foremost and well-respected expert in landlord-tenant disputes and other property management issues with over 23 years of experience in handling real estate and civil litigation related disputes in and throughout the Bay Area. More than a litigator, Daniel manages rental properties, assists in completing real estate transactions and is well known for his educational seminars. He is always eager to answer questions and engage with Bay Area landlords, property owners and real estate professionals. Email him today.