Joint Employment and Overtime Obligations
Generally, an employee is not entitled to overtime pay unless she/he works more than 40 hours a week for a single employer. It is not uncommon, however, for a company which has a subsidiary company to employ some staff to work for both companies. In the course of such an employment arrangement, questions often arise regarding the company’s obligation to pay overtime for the hours worked across both companies. For example, if an employee works 40 hours one week for the main company, and during that same week, also works an 8-hour shift for the subsidiary, is that employee entitled to overtime pay for the 8-hour shift worked at the subsidiary? Or since they are two separate businesses, is the employee simply entitled to pay for 8 hours at the regular hourly rate?
To answer that question, it should first be determined whether the employment arrangement is considered “joint employment.” CFR section 791.2 provides the following three criteria to determine if a joint employment relationship exists:
- The employers share the services of the employee; or
- One employer acts directly or indirectly in the interest of the other employer in relation to the employee; or
- The employers share control of the employee because one employer controls, or is controlled by, the other employer, or all of the employee’s employers are controlled by another company.
The arrangement for sharing services or control of the employee need not be formal to be considered “joint employment.” Other factors that are relevant in finding joint employment include, for example, whether there are common officers or directors of the companies; the nature of the common management support provided; whether employees have priority for vacancies at the other companies; whether there are any common insurance, pension or payroll systems; and whether there are any common hiring seniority, recordkeeping or billing systems. See Chao v. A-One Medical Services, Inc., 346 F.3d 908 (9th Cir. 2003). If the arrangement is “joint employment,” both employers are responsible, both individually and jointly, with the applicable provisions of the FLSA, including overtime pay. In that case, the overtime should be allocated between the two employers and prorated based on the employee’s regular rate of pay.
If the employment arrangement simply involves common paymasters, however, and the requirements of CFR section 791.2 are not satisfied, there is no entitlement to overtime pay. If you have any questions with regard to an employer’s obligations to pay overtime to its employees, please contact Anna E. Indahl at firstname.lastname@example.org or by calling 505.848.1800.
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