Q&A: Homeowners associations are not exempt from minimum-wage law

QUESTION: Our homeowners association is located in Los Angeles. We have eight employees: two office workers, two groundskeepers, two maintenance personnel and two security guards. No one has complained about their hourly pay, which has been the bare minimum. Instead, they seem pleased that they have had their jobs for a long time giving them job stability. Recently, a homeowner said that we have to give all employees an hourly raise in pay because it is the law. We are not a wealthy association and we want to keep the monthly dues low. If this is true, we will have to raise the association’s monthly assessments to pay this new wage increase. If we do not increase the monthly assessment, we may need to decrease our number of employees. If the employees say they don’t want a raise do we still have to pay them the higher hourly rate?

ANSWER: It is understandable that the board wants to keep monthly dues low, but complying with the law is a priority.

Unless your association wants to reduce services through layoffs or reduced hours for certain employees, the board has a duty and a mandate to fund operations through assessments. Without a vote of the owners, the board can impose a 20% regular assessment increase that is not greater than the regular assessment for the association’s preceding fiscal year. The board can also unilaterally impose special assessments, which in the aggregate do not exceed 5% of the budgeted gross expenses of the association for that fiscal year. These board powers are intended to be used for increases in the cost of operation resulting from changes in the law, such as minimum wage increases.

The argument that employees don’t want the increase is simply not credible. Most employment laws are mandatory and are applied to business whether or not an individual employee requests enforcement. The rationale is that employees are unlikely to risk upsetting their employers by asking for raises, sick days, or even safer working conditions. If an employee is encouraged to forgo the statutory minimum wage increase in exchange for keeping their job, that is a violation of labor laws. Any remedial legislation written for the protection of employees, such as minimum wage laws, may not be violated by agreement between the employer and employee, according to Civil Code sections 1668 and 3513.

As an employer in Los Angeles your association is subject to both federal and California state employment laws, as well as Los Angeles County and city specific provisions.

As of July 1, Los Angeles employers with at least 26 employees are required to pay employees the new minimum wage of $10.50 an hour. The wage increases annually for four more years until it reaches $15 on July 1, 2020. The new wage schedule and its series of annual increases kicks in July 1, 2017, for employers such as your association, which have fewer workers or are nonprofits that apply for a deferral with the Franchise Tax Board. In addition to these increases, employers in Los Angeles will be required to increase the number of paid sick days provided to employees.

Employers that fail to pay the minimum wage may be subject to a claim for the difference between all wages paid and the amount due under the law. Failure to give employees required sick leave could result in a penalty of either three times the value of the paid sick leave withheld from an employee or $250, whichever is greater, up to a total of $4,000. Lawsuits by employees against their employers also frequently result in a reimbursement of fees and costs.

To find out more, call the Minimum Wage Hotline at (844) 924-3752.

Zachary Levine, a partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O. Box 10490, Marina del Rey, CA 90295 or[email protected]

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