Quick answer: Yes, employees working at multiple locations may still be entitled to overtime. If the businesses are considered joint employers under federal or state law, employers must combine all hours worked during the same workweek when calculating overtime pay, even if each location has its own tax ID or legal entity. We will break it down for you.
Question: I have multiple locations, and some employees bounce between offices. Sometimes employees end up working more than 40 hours, but not all at one location, so I track the hours per location. Now these employees are saying they should be paid overtime even though they are working less than 40 hours at each location. These are separate businesses with their own tax IDs, and the employees chose to work this schedule. Should I be combining hours across all locations?
The legal side: One of the most asked questions from our multi-practice members: If employees work at multiple locations or separate business entities during the same workweek, do you have to combine their hours when calculating overtime? Many employers assume that if each location has its own EIN or tax ID, overtime can be calculated separately. In many cases, that assumption is incorrect.
We talk to a lot of business owners, and joint employment is one of the most common topics of discussion. Many employers assume that if multiple locations operate under different legal entities and EIN numbers, everything about the locations is separate. Employment laws, however, don’t work that way.
Federal wage and hour laws focus on the employment relationship rather than how businesses are organized for tax purposes. 99.9% of the time, you are a joint employer. This means that you may have “legally separate” businesses, but those businesses jointly employ your team. Meaning, as far as the employment laws are concerned, you’re operating as a single employer.
Under the federal Fair Labor Standards Act (FLSA), overtime is based on the total hours a nonexempt employee works during a single workweek, not the hours worked at each individual location. Having separate tax IDs, LLCs, or payroll accounts does not automatically mean overtime can be calculated separately.
Factors that can influence this analysis include common ownership, shared management, centralized payroll or HR functions, common control over hiring and firing, and whether employees regularly move between locations. The more connected the businesses are, the more likely it is that you’re a joint employer, which means hours should be combined.
The employee’s choice to work at both locations doesn’t impact the analysis. Employees cannot waive their right to overtime, even if they volunteered for the extra shifts.
We’ve run the analysis hundreds of times and can help you make a determination based on your state and federal rules. CEDR members should always reach out to the Solution Center for help on things like this; it is what sets us apart. Our team knows what questions to ask and has the tools to help you conduct a proper analysis.
The human side: We are going to be straight here; the answer to your question is based solely on what the rules say, so there isn’t much of a human-side component.
If this is giving you anxiety, the mistake likely lies in tracking employees’ hours across multiple locations and is common and easily fixed going forward. The one thing that we always tell folks when we are helping you on this issue is this: It may seem a little daunting, and no one likes to admit there is a mistake, but this is easily cleaned up, and now that you know, the next step is to follow the rules going forward and to correct past errors in pay.
Yes. If the businesses are considered joint employers, employees’ hours generally must be combined when determining overtime eligibility.
No. Separate tax IDs alone do not determine whether overtime must be paid.
No. Employees generally cannot waive their legal right to overtime pay under federal law.
Often no. If the businesses are joint employers, overtime is generally based on the employee’s total hours worked during the workweek.
Other questions in this edition of CEDR’s HR Basecamp Roundup™:
Friendly Disclaimer: This information is general in nature and is not intended to provide legal advice or replace individual guidance about a specific issue with an attorney or HR expert. The information on this page is general human resources guidance based on applicable local, state, and/or federal U.S. employment law that is believed to be current as of the date of publication. Note that CEDR is not a law firm, and as the law is always changing, you should consult with a qualified attorney or HR expert who is familiar with all of the facts of your situation before making a decision about any human resources or employment law matter.
A Blog Written by CEDR, written by HR Experts to help you run your practice.
Did overtime become tax-free? No. The law created a federal income tax deduction for the premium portion of qualifying overtime...
Employers have always needed to be vigilant about complying with immigration laws, most especially with federal I-9 forms and E-Verify...
You can generally require that an employee use their paid vacation time toward any time off they take.
