Housing as Compensation: Wage and Hour Rules and Risks

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January 8, 2018
J. Kent Pearson, Jr.
Attorney
Bullard Law

 

Do you provide housing to your employees?  Do you count all or any part of this housing subsidy toward satisfying the minimum wage?  If so, are you confident that you are in compliance with applicable wage and hour laws?  Here are some pointers to help you stay on track.

 

 

Wage and Hour Basics

 

The federal Fair Labor Standards Act (FLSA) and Oregon law impose different requirements on employers.  To add to the confusion, employers must comply with both sets of rules for covered employees.  For “non-exempt” employees, this means paying employees at least the applicable minimum wage (currently $7.25 under the FLSA and between $10.00 and $11.25 under Oregon law, depending on location).  Employers are also responsible for paying overtime to non-exempt employees for hours worked in excess of 40 hours in a week at no less than one and one half times the employee’s regular rate.

 

Fortunately, Oregon law provides a minimum wage and overtime exemption for resident mobile home park employees engaged in management and maintenance.  ORS 653.020(18).  As a consequence, mobile home park managers, assistant managers, and maintenance employees residing on the employer’s premises generally are exempt from the Oregon minimum wage and overtime requirements.  The troublesome issue for Oregon employers is that the FLSA does not provide a similar exemption.  The impact is that unless an employee qualifies as a salaried, exempt “white collar” employee under the FLSA, the employee will be entitled to the federal minimum wage and overtime.

 

Housing under the FLSA

 

Assuming an employee is non-exempt under the FLSA, is it legal for an employer to credit employer-paid housing toward satisfying an employee’s minimum wage? In other words, may an employee pay less than $7.25 an hour in cash, if it also provides free housing to the employee?  The answer is a qualified “yes.”  Under the FLSA, an employer may count as wages the reasonable cost to the employer of furnishing an employee with board, lodging, and other facilities under qualifying circumstances.  However, there are strict requirements for counting the housing costs toward the FLSA minimum wage.

 

According to the U.S. Department of Labor (DOL), in order to take credit for housing as “wages,” an employer must satisfy all of the following factors: (1) the lodging is regularly provided by the employer or similar employers; (2) the employee voluntarily accepts the lodging; (3) the lodging is furnished in compliance with applicable law; (4) the lodging is provided primarily for the benefit of the employee rather than the employer; and (5) the employer maintains accurate records of the costs incurred in furnishing the lodging. An employer counting on housing to substitute for part or all of an employee’s federal minimum wage will have the burden of establishing all of these factors, if challenged.  Satisfying the tests, particularly where an employer requires the employee to live on the employer’s premises is a challenging proposition.

 

If an employer does satisfy the DOL test, the employer may be able to count the cost of the housing toward the federal minimum wage requirement. Thus, if the employer provides housing that reasonably costs it $300 per week, and the employee works 40 hours a week, the employer has satisfied the federal minimum wage without the payment of additional cash wages:  $300 is greater than $290 (40 x $7.25 = $290) Note that “cost” of the housing is not the same as “fair market value,” and may not include any amount of employer profit.  Thus, if an employer provides an employee with a mobile home that typically rents for $1000 per month, the possible cost that the employer may count toward the minimum wage would be less than $1000 per month. 

 

Employers taking credit for housing costs and paying less than the federal minimum wage in cash wages must keep accurate and detailed records establishing the employer cost of the housing provided to employees.  Failure to do so will result in the denial of the offset and potential liability for any unpaid minimum wages, liquidated damages, and attorneys’ fees.

 

Is it Worth the Effort? 

 

As discussed above, qualifying for and establishing a minimum wage offset for housing is a rigorous ordeal.  Fortunately, there is a risk-free alternative: assuming the employee is a resident manager, assistant manager, or maintenance employee exempt under Oregon minimum wage requirements, simply pay the employee at least the federal minimum wage of $7.25 for all hours worked.  That eliminates the federal minimum wage issue, the recordkeeping requirements, and the risks of an expensive DOL audit or lawsuit. 

Kent Pearson has practiced labor and employment law for over 30 years. Kent prides himself on being a “trouble preventer” for clients by helping them understand the issues and risks before problems arise. Kent has broad experience counseling employers on wage and hour matters, employment agreements, employer personnel policies, plant closing and other labor and employment issues. 

Kent defends employers in administrative proceedings before entities including the Oregon Bureau of Labor and Industries, the Equal Employment Opportunity Commission, the National Labor Relations Board and the U.S. Department of Labor.

A North Carolina native, Kent was introduced to Portland during a summer law clerkship and fell in love with the Northwest. A big fan of the outdoors, Kent enjoys rowing, cycling, and trail running. A true weekend warrior, Kent has competed in triathlons and is an Ironman USA finisher.  Kent is also a regular on the Bullard Law Hood-to-Coast team.        

This article does not constitute legal advice.  If you’d like more information, feel free to contact me at kpearson@bullardlaw.com or (503) 248-1134.

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