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| Laurie Murphy |
Commercial tenants in California, unless the lease provides to the contrary, have no rights to offset from their rent payments, any amounts the landlord might otherwise owe the tenant for repairs for which the landlord was responsible but refused to make.
It has long been the law in this state and others that in residential tenancies, the landlord has the obligation to ensure that the premises are habitable when leased and to make any repairs that they are obligated to make to maintain the habitability of the premises. If the landlord fails to do so, the tenant may, after giving notice to the landlord make the repairs himself and then deduct from the rent owed, the costs he incurred. This is generally known as the "Repair and Deduct" rule. (Civil Code section 1942). Commercial tenants have no such rights.
So, even if the landlord has the obligation under the lease to maintain the building and make necessary repairs, if the landlord fails to do so, no matter what harm befalls the tenant as a result of the landlord's refusal to repair or maintain, the tenant must still pay its rent. If the tenant fails to do so and the landlord files an unlawful detainer action, the tenant will be evicted notwithstanding the fact that the landlord did not comply with its obligations under the lease. The tenant's only recourse is to sue the landlord for breach of lease. Unless the lease permits him to offset, he simply cannot do so without risking eviction.
Contact Laurie Murphy
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| David Krol |
The economy in California still hasn't fully recovered, and employers may be faced with the tough decision of reducing employee salaries. There are two risks associated with salary reductions, however.
First, the salary reduction cannot run afoul of minimum wage laws. Under California law, employees who are in the professional, technical, clerical, mechanical, or similar occupations and who are exempt from overtime requirements must earn at least twice the minimum wage for a 40-hour work week. Cal. Code Regs., tit. 8, § 11040(1). At the current minimum wage of $8 per hour, the minimum salary for such employees is $640 per week, or $33,280 per year.
Second, if the reduction is substantial enough, an employee will be found to have had “good cause” to leave the job so as to render the employer liable for unemployment compensation benefits. How substantial does the reduction have to be? According to a precedential decision issued by California's Unemployment Insurance Appeals Board ("CUIAB"), a reduction of over 20%, standing alone, is sufficient to constitute "good cause." http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb124.doc
If the reduction is less than 20%, other factors, such as the employee's other job prospects, will be considered to determine whether the employee’s best alternative was to stay on board at the reduced salary. In one case, an employee was notified of an impending layoff, and was unable to find work elsewhere at a comparable salary. He was then offered a downgraded position with the company, at an 11% salary reduction. The CUIAB denied the employee's claim for unemployment benefits, holding that the reduction in pay didn't constitute a compelling reason for leaving work, because the other factors existing at the time weighed in favor of continued employment at the reduced salary. http://www.cuiab.ca.gov/Board/precedentDecisions/docs/pb88.doc
The moral of the story is … before instituting any salary reductions, employers should communicate with their counsel.
Contact David Krol
