California Labor Code §1182.8 provides: “No employer shall be in violation of any provision of any applicable order of the Industrial Welfare Commission relating to credit or charges for lodging for charging, pursuant to a voluntary written agreement, a resident apartment manager up to two-thirds of the fair market rental value of the apartment supplied to the manager, if no credit for the apartment is used to meet the employer’s minimum wage obligation to the manager.” Emphasis added.
Industrial Welfare Commission Order No. 5-2001 Section 10 provides: “( C) Meals or lodging may not be credited again the minimum wage without a voluntary written agreement between the employer and the employee. When credit for meals or lodging is used to meet part of the employer’s minimum wage obligation, the amount so credited may not be more than the following: Apartment – two-thirds (2/3) of the ordinary rental value, and in no event more than $423.51 (2007) and $451.89 (2008) . . . . (E) If, as a condition of employment, the employee must live at the place of employment or occupy quarters owned or under the control of the employer, then the employer may not charge rent in excess of the values listed herein.” Emphasis added.
The only case that analyzed Labor Code §1182.8 and Wage Order 5-2001 was the U.S. District Court for the Eastern District of California in Brock v. Carrion, Ltd. (2004) 332 F.Supp.2d 1320. In Brock, the defendant owned and managed several apartment buildings in Northern California. For approximately two years, plaintiff worked for defendants as a resident apartment manager of a 22 unit apartment building. Plaintiff entered into a written employment contract with defendants wherein defendants agreed to pay plaintiff $550.00 per month and plaintiff agreed to pay defendants $550.00 per month as rent for an on-site apartment. Defendants provided the apartment to plaintiff as a condition of his employment. The agreement did not specifically state that the apartment was being credited towards defendants’ minimum wage obligation to plaintiff. The parties filed cross-motions for summary adjudication seeking resolution of a single issue: whether an employer is legally entitled to claim an offset or credit, against wages potentially owed to employee, for all or part of the value of the apartment in which the employee resided during his employment as apartment manager. The District Court granted the employee’s motion for summary adjudication and denied the employers motion. The District Court held:
“Defendants credited lodging costs against plaintiff’s minimum wages. Although Wage Order No. 5 permits such credits in certain circumstances, the amount that defendants credited ($550.00 per month) exceeded the permissible value ($324.70 per month from 1999-2000, and $352.95 per month from 2000-2001). Moreover, defendants have failed to establish that plaintiff entered into an appropriate ‘voluntary written agreement.’ 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.’ [citations omitted] The sole agreement referenced by defendants is the Employment Agreement, which does not stat that rent would be credited against minimum wages. Thus defendants cannot obtain an offset against plaintiff’s potential damages under subdivision 10( C) of Wage Order No. 5. Because defendant violated Wage Order No. 5 by improperly crediting the apartment’s value against minimum wages, state law precludes defendants from claiming an offset to recoup this value from plaintiff’s potential damages.” Brock v. Carrion, Ltd., supra, 332 F.Supp.2d at 1330-1331, emphasis added.