Pay Your Resident Managers Or Face Class Action Suit



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 that 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.


Attorneys are chomping at the bit to initiate this type of litigation because of financial incentives. That's because the prevailing plaintiff, on behalf of the other aggrieved managers, is awarded reasonable attorneys' fees for having sued for the benefit of the other managers. Those fees go not to the plaintiff, but to their counsel. 


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 their 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, 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. 


Although the trial court, in their discretion, can 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)), but don't count on that to save your bacon. If the trial court reduces the penalty, it will be incredibly rare.


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.