Two entities, one employer, and overtime
Suppose an employer owns a business that includes two entities: a restaurant and a members-only club. They’re both in the same building, but on different floors. The two share management, operations, and other resources. They both offer substantially the same food and beverages, and operate under similar trade names.
The restaurant has a host who’s paid $28 per hour. The employer offers the host some shifts at the club at the same rate of pay.
Sometimes, the host is clocked in at the restaurant while assigned to work in the club. The host usually works five dinner shifts per week at the restaurant, for 40 hours per week. One week, the employer asks the host to also work four lunch shifts at the club. As a nonexempt (hourly) employee, if these hours are combined, it would push the host into overtime.
The employer, however, thinks the two entities are separate and distinct because they have separate business structures. As such, the employer believes it doesn’t have to pay the host overtime when working 40 hours or more for both entities during the same week.
Is the employer correct?
What the DOL says
In a recent opinion letter, the U.S. Department of Labor (DOL) addressed this situation, saying that separately incorporated entities might be considered a single employer with respect to employees, for purposes of compliance with the federal Fair Labor Standards Act (FLSA). The FLSA requires employers to pay hourly (nonexempt) employees overtime for any work performed beyond 40 hours in a workweek.
When an employee works for one employer for a set of hours and another employer for a separate set of hours in the same workweek, that scenario might cause a “horizontal” joint employment relationship. Horizontal joint employment typically occurs when businesses are sufficiently connected through employees.
If horizontal joint employment exists, employers must add all an employee's hours worked for both joint employers to determine whether the employee is entitled to overtime.
Therefore, the employer in the situation was incorrect; the host is entitled to overtime pay for the time worked for the club. This is true even if the restaurant and club are separate legal entities. Such formalities don’t override the FLSA’s application.
How the DOL got its answer
The DOL looked at the physical proximity of the two entities and what they shared. That the host could be clocked in at the restaurant and then told to work in the club also showed a connection for FLSA purposes. The host was also paid the same rate at each facility, and the shifts at the two entities didn’t conflict, suggesting schedule coordination.
Key to remember: Employers with multiple entities must be aware of whether the entities function as one employer for the FLSA’s overtime requirements.
























































