By Jeffery J. Greenberger

Just when I thought it was safe to go back in the water, I find self-storage wage and hour issues still lurk in the shallows. The last time I addressed this topic in an article was in 2002 when there were class-action lawsuits pending against several large self-storage operators for violations of the Fair Labor Standards Act. There now seems to be a new round of these claims being made in the self-storage world.

Many self-storage owners operate under the misconception that if an employee carries the title manager, its enough to exempt the employee from being paid overtime. You think you can simply pay the manager a salary, regardless of the hours worked or job duties performed. While its not impossible for a facility manager to be exempt, there are benchmarks that must be met.

Fixed Wage

To begin, an exempt employee should receive a fixed salary even if he doesnt work 40 hours in a week. If you consider your manager to be exempt but dock hours for personal appointments, late reporting times, etc., he does not fit the definition.

You cant have it both ways. If you want your employee to be exempt, his wage must be fixed, no matter what. If he fails to show up on time, work full days or do the job as required, discipline or discharge are your remedies.

Professional, Executive or Administrative

Exempt status is reserved for employees who are considered professional, executive or administrative. Ill exclude discussion of the professional classification from this article because that category is generally reserved for professions such as doctor, accountant, attorney, etc.

An executive employee must manage at least two other employees and exercise a significant amount of discretion and independent judgment in doing his job. While your manager may manage two other staff members, the test really looks to the latter half of that definition. For example, if a manager has the power to waive late fees for tenants but must otherwise follow the owners policies and procedures to a T, he is not exercising a significant amount of independent judgment and discretion.

An administrative employee must exercise a substantial amount of independent discretion in the position, be empowered to make important decisions that directly relate to the companys management policies, and operate with only general supervision. A good example of an exempt administrative employee is a project manager. Its difficult to find a self-storage manager who fits into this category.

Further, in an executive or administrative position, the managers work must significantly relate to the success or failure of the business. Examples might include but are not limited to setting rental rates, determining marketing sources, purchasing hardware and software, and negotiating vendor contracts for services. If your manager doesnt do any of these things, he may not fit into the executive or administrative categories.

Finally, if your employee makes a salary of less than $455 per week, there is  no way he can be exempt from overtime, even if he meets the rest of the criteria listed above. This is important because many of you offset salary with an apartment, and a manager's actual monetary compensation may be less than $455 per week. In such cases, your employee is entitled to overtime regardless of whether he meets the test of the administrative or executive categories.

Industry-Specific Challenges

Assuming you still have questions about whether your employee is exempt, lets discuss the problems inherent to self-storage:

1. Some days are just very busy, for example, the day rents get posted, particularly if they all come due on the first of the month. Many managers may work more than 40 hours during the week rent is posted, and you cannot give compensatory off time in another week to make up for the excess hours of a previous week. The make-up time must be within the same week or the employee is entitled to overtime.

2. Office hours for self-storage facilities almost always exceed 40 hours per week. This is problematic if youre running the facility with one manager or a manager and a relief employee.

3. Managers are often expected to field phone calls after office hours. Any form of work is considered time calculatable toward overtime. If the office phones forward to a managers phone after office hours, those calls are subject to overtime if the employee is not exempt.

4. Onsite managers may be expected to perform additional services after office hours. For example, they may be required to walk the property, open or close the manual gate, assist customers who experience trouble with the gate, and perform facility maintenance. If your manager is not exempt, all of these duties are subject to an overtime claim.

5. In self-storage, couples often work together. The manager may work 40 hours in a week, but his or her spouse may work an additional 20 or 30 hours to assist with phones, sweeping out units or any number of tasks. If the spouse is assisting outside his or her regular work hours, that person is on duty and wracking up overtime.

Recording Hours Worked

One of the biggest problems is facility owners do not keep track of employees work hours because they believe their managers are exempt or that each manager is really only working 40 hours per week. If the relationship between the manager and the business ends, a disgruntled manager may go back to owner with a record of all the hours he worked, and the owner will be hard-pressed to prove differently.

As a matter of fact, some owners have probably encouraged employees to turn in time sheets that do not show overtime, even if they believe their managers to be exempt, because they think time sheets will protect them from a wage an hour claim later. Unfortunately, this isnt true, and it has been the subject of multiple class-action lawsuits.

Lets face it: A manager who is no longer enthralled with his position or who has been discharged can make a wage and hour claim, insisting he worked all kinds of extra hours for any number of reasons. If you have no record of whether this additional work was actually performed, you will be at the mercy of the employees estimates or records. As the employer, you are required to maintain accurate records of all hours worked by your non-exempt employees.

The Consequences

The look-back period for a wage and hour claim is two or three years, depending on whether the violation is willful. If the employees case proceeds successfully, youre looking at repayment of the wages at the rate of time and a half, plus penalties, interest and attorneys fees.

The good news is your employee may be exempt, or you may be able to create a job category to make him exempt going forward. Consult with a local attorney who knows wage and hour law to ensure youre handling the matter correctly. If you determine your employee is not exempt and wish to fix the situation, you can reach a settlement with the employee with a release of claim for wage and hour violations. This will prevent the possibility of future claims should you and the employee become disenchanted with one another.

Essentially, you can buy yourself a release of that claim now for probably a substantially lower sum simply because you and the employee did not understand that he was not exempt. You want to address and fix this problem as quickly as possible to stop the clock running on the look-back period. You also want to resolve the situation in a manner that is fair to you and your employees and avoid the risk of an expensive claim down the road.

As always, and certainly in a wage and hour situation, the best place to start is with your local attorney. Review job descriptions, job requirements, job duties, performance hours and other tasks the employee may be expected to perform to determine if you have risk or exposure to risk. If you are at risk, work with your attorney to refine job characteristics and responsibilities, attempting to make the employee exempt. If that is not possible, resolve the claim with the employee and begin paying overtime wages when overtime hours are worked.

This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.

Jeffrey J. Greenberger is a partner with the law firm of Katz Greenberger & Norton LLP in Cincinnati and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; e-mail [email protected] ; visit www.selfstoragelegal.com .