Overtime rules can get complicated. The FLSA (Federal Labor Standards Act) requires employers to pay nonexempt employees one and a half times their standard hourly wage if they work over 40 hours per week. This is pretty straight forward if your employee is performing one job at your company. But what if you own two separate companies and one employee performs work for both and exceeds 40 hours per week. Are you as an employer responsible for paying overtime? The short answer is yes. But let’s examine this a little further.
The FLSA states that more than one employer may employ an individual in the same workweek, but if those employers are not completely separate and they have a joint employer relationship, both of them are responsible for compliance with the overtime provisions in the FLSA. According to 29 CFR 791.2, "(a) determination of whether the employment by the employers is to be considered joint employment or separate and distinct employment for purposes of the act depends upon all the facts in the particular case. If all the relevant facts establish that two or more employers are acting entirely independently of each other and are completely disassociated with respect to the employment of a particular employee, who during the same workweek performs work for more than one employer, each employer may disregard all work performed by the employee for the other employer (or employers) in determining his own responsibilities under the Act. On the other hand, if the facts establish that the employee is employed jointly by two or more employers, i.e., that employment by one employer is not completely disassociated from employment by the other employer(s), all of the employee's work for all of the joint employers during the workweek is considered as one employment for purposes of the Act."
So how do you know if you have a joint employer relationship? Look at some of the following circumstances:
Who owns both companies? Does one employer fully own both? Are there common owners?
Are there common directors or officers between the two employers?
Do the companies share certain operations? For example, HR responsibilities, payroll and pension systems, or insurance providers?
This is by no means an exhaustive list of the circumstances that would prove a joint employer relationship, but it is a start. If it is determined that a joint employer relationship exists, the employer(s) are required to count all hours worked for both entities when calculating overtime pay and are responsible (both individually and jointly) for complying with applicable FLSA provisions. It is then up to the joint employers to decide which company pays the overtime and keeps records of those payments in the event of an audit by the DOL.
The rules and regulations regarding joint employer status and overtime pay must be understood. Failing to do so can put the company in danger of violating wage and hour laws. The consequences of this can have you owing employees who work overtime back pay, damages, and the additional financial costs of attorney fees if needed. If you have questions regarding overtime pay and how it effects your company, contact us here at De Novo HRC and let us help you make sense of it all.