A crystal clear understanding of state and federal employment regulations is essential for the operation of any business, and recent guidance on overtime pay provided by the DOL gives us some additional clarity. Responding to a letter sent in by a concerned worker, the DOL clarified its interpretation of the Fair Labor Standards Act (FLSA) and how it applied to businesses that appeared separate but were “operationally integrated.” As a result, employees working for both parts of such organizations could be considered jointly employed, allowing for their overtime pay to be calculated based on the combined hours worked for both businesses.
New DOL wage-and-hour letters clarify overtime pay regulations for joint employment conditions. (Image: Pexels)
DOL Clarifies Overtime Considerations for Workers “Jointly Employed”
A restaurant hostess sent in an enquiry letter to the Department of Labor to better understand her overtime pay rights under her current employer. In this case, the worker was employed by two parts of a hotel business, which included the first-floor restaurant and the second-floor members’ club.
While the shifts she worked at both establishments at the same rate of pay often added up to less than 40 hours per week, she occasionally had to take on additional shifts at the members’ club, pushing her work hours beyond 40. On approaching the employer for overtime pay, she was informed that these businesses operated as different companies, and as a result, she did not qualify for overtime pay.
The DOL opinion letters on overtime pay, however, disagreed. Not only did it take the shared business set-up into consideration, but also other aspects like the shared kitchen, proximity, and similar food and beverage menus. With enough evidence to prove the sufficient association of joint employers, the DOL indicated that the worker would qualify for overtime pay, adding “each of the employers is jointly and severally liable for any wages owed under the FLSA.”
What Was the Overtime Guidance Provided by the DOL?
The DOL’s opinion letters on the overtime pay situation clarified that although the businesses were considered operationally separate, they were jointly responsible for paying the employee and ensuring FLSA compliance. “All the hours that you work at the restaurant and members club must be combined for purposes of calculating your hours worked each workweek, and both the restaurant and members club are jointly and severally liable for all aspects of FLSA compliance,” James R. Macy, Acting Administrator of the DOL, wrote in the letter.
Providing further clarity on overtime pay, the DOL explained that separately incorporated entities could be considered a single employer for FLSA compliance, even if, for corporate purposes, they intended to be separate. The letter also added that “even if two or more entities are considered separate employers, they can nonetheless be ‘joint employers’ under the FLSA if they have related employment relationships with the same employee(s).”
The DOL also added that in such cases where an employee worked for two employers for different sets of hours within the same workweek, it could be considered as “horizontal” joint employment. Here, the employers who were sufficiently associated with each other in terms of the employment of an employee shared joint responsibility.
Not only do the employers have the responsibility of jointly ensuring the employee is paid according to minimum wage regulations, but they also have to coordinate checking the employee’s total working hours to account for overtime pay.
Understanding Overtime Pay Regulations Is Essential for Any Business
Every organization is individually responsible for ensuring that employees are paid appropriately and in accordance with the law. However, in addition to individual responsibility, businesses that have unique business models or parallel operations running are also in charge of ensuring that employees are managed across the multiple operations with care.
Employees who fall under the purview of the FLSA qualify for overtime pay when they work more than 40 hours a week, and it is up to employers and their HR teams to track their time and pay their wages accordingly.
With the many proposed changes in the taxes on overtime pay and other adjustments to the system, it is especially important to track employee hours correctly in 2025.
With the administration considering revisiting its policies on joint employment, it is important to keep up with the latest adjustments that are being made to regulations right now. Subscribe to The HR Digest for more insights on workplace trends, layoffs, and what to expect with the advent of AI.