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Two Entities, One Employer: The DOL’s Latest Joint Employer Warning

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Ever wonder whether two connected businesses, like a restaurant and private club sharing a kitchen and managers, can dodge overtime by claiming they’re separate companies? The U.S. Department of Labor just answered that question loud and clear.

TL;DR: When two entities share ownership, management, operations, and other common elements, and jointly employ the same worker in the same workweek, they are “joint employers” under the Fair Labor Standards Act (FLSA). Their employees’ hours must be combined for overtime purposes, and both entities are jointly and severally liable for full FLSA compliance.
🔗 Read the opinion letter (FLSA 2025-05)

A Restaurant, a Club, and a Shared Worker Walk Into a Wage Problem

The Wage and Hour Division issued this guidance after receiving a request from a worker who wanted clarity about overtime pay. She worked as a hostess at a restaurant on the first floor of a hotel and was asked to pick up extra shifts at a members-only club located directly upstairs.

Both businesses shared a kitchen, offered similar food and drink, operated under related trade names, and appeared to have overlapping ownership and management. Managers from the restaurant sometimes supervised her shifts at the club, and employees often worked in both places during the same week.

Although she clocked in separately for each business, her pay rate was the same, and her combined schedule exceeded 40 hours a week. When she asked whether she would receive overtime, she was told no, because the restaurant and club were “different companies.” She asked the DOL to weigh in.

The Legal Test: Horizontal Joint Employment

Under the Fair Labor Standards Act (FLSA), an “employ” means “to suffer or permit to work” (see 29 U.S.C. § 203(g)). Even if two companies are separate legal entities, they can be joint employers when they share control over an employee’s work. This type of relationship, called horizontal joint employment, typically arises when:

  • The employers are operationally integrated (for example, shared facilities or equipment)

  • There is common ownership or management

  • They coordinate scheduling, pay, or supervision

  • Employees work for both entities in the same workweek

If those factors exist, the Department says the employee’s total hours across both jobs must be combined to determine overtime eligibility.

The Result: Shared Responsibility

In the DOL’s view, the restaurant and club were joint employers because they were sufficiently associated in operations, ownership, and management. That meant:

  • The employee’s hours at both entities must be added together each week

  • Any hours over 40 require overtime pay

  • Both employers are jointly and severally liable for full FLSA compliance, including wages, damages, and penalties

Corporate formalities alone cannot defeat the statute’s broad definitions of “employer” and “employ.”

What Employers Should Take Away

1. Substance Over Form Controls.
Having separate legal entities or payroll systems will not shield you if operations are integrated. The DOL and courts will look at the practical realities of the employment relationship.

2. Combine Hours When in Doubt.
If an employee performs work for more than one entity you control or manage, assume you must combine hours to calculate overtime.

3. Train Managers on Scheduling and Timekeeping.
Coordination between affiliated businesses can create joint employment, especially when employees are “loaned” across locations or clock in at one location to work at another.

4. Document Ownership and Operational Relationships.
If you want to maintain separate compliance obligations, ensure that ownership, management, and operations are truly distinct.

5. Audit Affiliated Entities.
If your company structure includes related entities such as restaurants, franchises, or clubs, review how employees are assigned, paid, and supervised. Proactive compliance may prevent wage-and-hour exposure.

6. Check State Wage-and-Hour Laws Too.
State laws may define joint employment more broadly or impose stricter overtime and recordkeeping rules. Two entities that aren’t joint employers under the FLSA may still share liability under state law. Multi-state employers should confirm compliance in each jurisdiction.

The Bottom Line

If it looks, acts, and operates like a single business, the DOL will likely treat it that way under the FLSA. Separate tax IDs will not save you from overtime liability.