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Von Nothdurft Decision a Game Changer for California Resident Managers

Residential apartment managers in California just can’t seem to catch a break. As licensees, they are not afforded the broad legal protections of tenants living at the same property. They are required to be on call 24/7 but are only entitled to compensation for actual hours worked. And they often work far more hours than they are paid for but lack the documentation to prove it.

Until recently, Industrial Wage Order No. 5-2001 (“IWO 5-2001), which regulates the wages, hours, and working conditions of resident managers, was their one saving grace. Under Section 10(C) of the order, an employer cannot credit the value of a resident manager’s apartment “against the minimum wage without a voluntary written agreement between the employer and the employee.”

On June 26, 2014, however, the California Court of Appeal in Von Nothdurft v. Steck, ___ Cal.App.4th ___, significantly weakened this protection. Von Nothdurft is the first state court case certified for publication that addresses what language needs to be included to qualify as a “voluntary written agreement” under IWO 5-2001. The court’s ruling? Far less than previously thought and less than the plain language of the order seems to require.

In Von Nothdurft, Plaintiff Brenda Leigh Von Nothdurft (“Ms. Von Nothdurft”), an apartment manager for a property owned by Defendant John Steck (“Mr. Steck”), signed a management agreement stating her compensation would include “free rent for her apartment.” At the time of the agreement, neither Ms. Von Nothdurft nor Mr. Steck was aware of the requirements of IWO 5-2001.

Ms. Von Nothdurft argued the agreement did not satisfy the requirements of IWO 5-2001 because it did not reference the minimum wage or any apartment rent credit. This interpretation of “voluntary written agreement” was adopted by the Department of Labor Standards and Enforcement (2002 Update of the DLSE Enforcement Policies and Interpretations Manual, at § 45.4.5) and a California federal district court in Brock v. Carrion, Ltd. (E.D. Cal. 2004) 332 F.Supp.2d 1320, 1330 (2004).

The Van Nothdurft court didn’t buy it:

Wage Order 5 does not define the phrase “voluntary written agreement” as used in subdivision 10(C) or otherwise specify that any particular terms must be included in such an agreement to permit a valid lodging credit – it requires only a “voluntary written agreement between the employer and the employee” without qualification. Under its plain terms, no express reference to a credit toward minimum wage, statement that the employee is entitled to minimum wage for every hour worked, or the precise amount to be credited, need be included as long as the parties understand and agree – as they did here by entering into the management agreement – that lodging is to be credited toward the employee’s compensation. Since the wage order’s language is clear, we apply it without further interpretation.

Interestingly, the court in Brock read the same “plain” language to reach the opposite conclusion: “Consistent with the statutory language, the DLSE requires that the written agreement explicitly reference that such credits are being applied toward the minimum wage obligation of the employer.” Brock v. Carrion, Ltd. (2004) 332 F. Supp. 2d 1320, 1330.

The interpretation adopted by the DLSE and the Brock court is the far more sensible one. Under IWO 5-2001, a voluntary written agreement is a condition precedent to validly crediting the employee’s lodging against the minimum wage (“…lodging may not be credited against the minimum wage without…”). This language clearly implies that the agreement must in some way relate to the employer’s minimum wage obligation.

Under Von Nothdurft, an agreement between employer and employee having nothing to do with the employment relationship would qualify as a “voluntary written agreement” as long as it was in writing and signed by the parties. The holding defies common sense and undermines the very purpose of the wage order—to inform the resident employee of her rights under the Labor Code and to protect those rights.