Wage and Hour Laws as Applied to Resident Managers
Topics: Wage & Hour Issues
Like all California employers, the hotel industry is required to pay employees in accordance with both federal law, in the form of the Fair Labor Standards Act ("FLSA"), and state law, namely the California Labor Code and wage orders promulgated by the California Department of Industrial Relations ("DIR"), and enforced by the Department of Labor and Standards Enforcement ("DLSE"). Employees are generally presumed to be hourly employees, and therefore entitled to overtime and meal and rest breaks, unless one of a few narrow exemptions applies. This article provides some insight into determining whether or not a resident manager in the hospitality industry is exempt from the protections of California's wage and hour laws, and provides guidance on application of the lodging credit.(Note that neither federal nor state law provides a statutory definition of "resident manager." However, both use and inquiry to the DLSE provide the informal, and common sense, definition that a resident manager is an employee provided with full-time lodging at the hotel or apartment dwelling where he or she works.)
California assumes that all employees are protected by the state's wage and hour obligations to, among other things, keep records, pay overtime and minimum wage, and provide required rest and meal breaks. However, there are exemptions from these protections for "white collar" employees, i.e., those who are executive, administrative or professional employees. The state provides an exemption test, under which an employee will only be considered exempt under the executive or administrative categories if he or she (1) spends more than 50% of the work day (2) on tasks that are intellectual, managerial or creative, (3) which require the exercise of discretion and independent judgment and (4) for which the monthly pay is at least twice the minimum wage for one month of full time work. At the current minimum wage rate of $6.75/hour, the monthly salary requirement is $2,340, or $28,080/year. (The professional exemption applies to specific jobs, such as doctors, engineers or lawyers.)
The first question to ask is whether or not your resident manager is an exempt employee. The law takes the view that, unless an employer can show to the contrary, all employees are subject to the wage and hour law protections. Calling an employee a manager and paying a sufficiently high salary are not sufficient to find that an employee is exempt. Rather, the employee must spend more than 50% of his or her work time engaged exclusively in exempt duties to qualify for the exemption. "Exclusively" means that if the employee is performing a non-exempt task and an exempt task concurrently, that time counts as non-exempt time. Careful analysis of the duties performed by that employee is critical. For example, if the manager is giving directions to the hotel on the telephone while providing managerial oversight to other employees, this will be considered time spent on non-exempt work.
If the manager satisfies the requirements to be treated as an exempt employee, the employer receives no particular credit or benefit for providing free or discounted accommodations to the employee. However, if the manager does not satisfy the requirements to be treated as an exempt employee, a portion of the value of the accommodations can be credited against the employer's minimum wage obligations.
Specifically, federal regulations provide that an employer may credit the cost of lodging toward the minimum wage requirement if the lodging is furnished for the benefit of the employee, is accepted voluntarily and without coercion by the employee, and is customarily furnished by other employers in the same industry. California provides additional guidance to hotel employers providing lodging to an employee. First, the lodging provided must be actually received, must be part of the employee's compensation, and the employee must enter into a voluntary written agreement to credit the lodging toward the minimum wage requirement. Second, the lodging must be available to the employee for full-time occupancy, and it must be adequate, decent and sanitary according to the usual and customary standards of the industry. A good rule of thumb would be to provide your resident employee with the same caliber of lodging provided to your guests (although you cannot require employees to share a bed). Finally, the following rates are then creditable toward the employer's minimum wage obligation.
The following list provides the rate credited toward minimum wage based on the type of lodging:
Room Occupied Alone: $31.75/week; Room Shared: $26.20/week; Apartment: 2/3 of the ordinary rental value, up to $381.20/month; Where a couple is employed by an employer: 2/3 of the ordinary rental value, up to $563.90/month.
Determination of whether an employee qualifies as exempt is both critical and complex. Liability for mistakenly classifying a non-exempt employee as exempt can be significant. Employers who wish to treat their resident managers as exempt should consider seeking advice from their employment counsel regarding application of these laws in the hospitality industry.