“I heard a building owner can be sued for not keeping proper timesheets for their on-site building managers? How can a lawsuit be avoided?”

This is a simple answer on the face but ignored by many owners. Although I’m certainly not an attorney and cannot offer legal advice, I am aware of owners being sued or turned into the labor board for not keeping proper timesheets of people performing work at their building. This tension is not unique to the real estate industry. Have you heard of those radio commercials where companies want to audit a person’s hours worked for free so they can offer to sue their employer!? Litigators are hunting for employees who want to sue their employers for potential backpay.

What I’ve witnessed in the property management industry is that if, for example, an on-site manager claims they worked over 40 hours, evenings, weekends, for the last several years, and no one had accounted for and paid them for that time, the employee can come back with their attorney and pursue the owner for years of back pay, overtime, penalties, interest, etc. and win. Imagine multiple years of back pay and penalties accounting to thousands of dollars.

If your on-site manager came to you and said you owe them five years of overtime, do you have timesheet records to prove otherwise to a judge? If not, you are at risk. As a building owner (or any type of business owner for that matter), if this doesn’t motivate you to closely follow this law, it should.

Here are 6 tips to consider:

Tip 1: A Management contract is a necessity

All on-site managers must have a signed manager contract in place, and the hours defined in the contract should be supported by time sheets. AAGLA members are offered access to sample contracts to review.

Tip 2: Timesheets are mandatory at a minimum of every 2 weeks

Make sure your managers, maintenance personnel, and all other employees are filling out weekly timesheets, so that you have a record of paying them properly according to state and federal laws. If no timesheets exist, there is a risk of exposure if an employee claims there are wages owed for overtime. If this discrepancy spans over multiple years, you may be on the hook for quite a large sum.

Recordkeeping Requirements:

Employers must keep accurate records of employee’s Manager Contract and hours as well as payroll data for at least three years. Failure to maintain proper records can result in civil penalties and exposure to lawsuits.

Tip 3: Consult with your attorney to review the law if you do not understand it and possibly even if you do

You want to be in compliance with the law. Make sure you use an attorney who understands the law because many don’t and then take the extra step to be sure your contract is rock solid.

Tip 4: In the eyes of the state, understand that your on-site manager is your employee

According to the state of California, your on-site manager is your employee. Some owners find a trustworthy tenant and simply give them a rent credit to collect rents, call in maintenance, etc. If you are doing this, you are directing an employee to perform work and must pay them minimum wage, payroll taxes, and SSDI. Also, anyone who is not a licensed contractor or does not carry liability insurance or worker’s comp could be considered an employee. By the way, these are some of the benefits of hiring a professional management firm. The manager becomes an employee of the management company, thereby providing you with a layer of protection and peace of mind that proper records are being kept.

Expanded Compliance Mandates (2026 legislative cycle):

New laws emphasize employer accountability, tenant protections, and wage adjustments. Property owners should expect heightened scrutiny from the Division of Labor Standards Enforcement and ensure contracts, timesheets, and payroll practices are fully compliant.

Tip 5: Know your on-site manager rent credit maximum!

Yes, the state regulates the maximum rent credit you may offer. Rent credit can only be given in accordance with the IWC, Industrial Welfare Commission Order, which specifically prescribes amounts of rent that can be offset. See IWC Order #5: http://www.dir.ca.gov/IWC/IWCArticle5.pdf IWC Wage Order No. 5‑2001 regulates wages, hours, and working conditions for employees in California’s public housekeeping industry. It is enforced by the California Department of Industrial Relations (DIR) and incorporates later legislative updates (including minimum wage changes). [dir.ca.gov]

Updated Wage Order Amounts (effective January 2026):

The minimum rent offset for resident managers has increased. For an individual manager, the maximum offset is $954.43/month, and for a two-person management team, it is $1,411.85/month. Owners must ensure compliance with these updated figures when structuring rent credits.

Tip 6: Stay informed and up to date.

Read Apartment Management Magazine for changes or updates to the laws or employ someone who will keep up on them.

Written by Kari Negri

Kari Negri is the Chief Executive Officer of Sky Property Management and is a member of the Board of Directors of the Apartment Association of Greater Los Angeles. For questions, you can reach Kari at Kari@SKYprop.LA.