DOL Finds Integrated Businesses Inside a Hotel Were Likely Joint Employers

Quick Hits

• The DOL’s Wage and Hour Division (WHD) recently published an opinion letter finding that two establishments based inside a hotel that shared employees were likely joint employers under the FLSA.
• The DOL found it significant that under the facts presented, the establishments shared facilities, managers, and operations, and that the employee was paid the same rate of pay at both establishments and would sometimes clock in at one to work for the other.
• The guidance comes as the DOL is seeking to propose a rule for determining joint employer liability under the FLSA after the rescission of the last rule in 2021.

WHD Opinion Letter FLSA2025-05 specifically addresses a situation in which a hostess at a restaurant within a hotel also worked shifts at a members-only club located on the second floor above the restaurant for the same hourly rate. When the employee asked about receiving overtime pay for the aggregate hours worked over forty in a workweek at the two establishments, the employee was told that the restaurant and members club were different companies and that the hours could not be combined.

The DOL concluded that the employee should be paid overtime when working more than forty hours in a workweek at the restaurant and the members club because the two entities’ “ownership, management, and operations, among other things, appear[ed] common,” making them joint employers under the FLSA. The DOL explained that “horizontal joint employment” can occur where “‘there is an arrangement between … employers to share an employee’s services, as, for example, to interchange employees.” “Separately incorporated entities may be considered a single employer.

Though the two entities ostensibly possessed separate business structures and used different timekeeping and payroll systems, the DOL found they could be considered joint employers. Based on the facts presented, the DOL found the establishments “appear to be operationally integrated with each other, including their physical proximity, their common kitchen, and their similar food and beverage menus.”

The DOL further noted the facts presented that managers from the restaurant sometimes participated in employee disciplinary matters at the members club, and some managers periodically supervised and managed both establishments and that both facilities “apparently [had] the same owners” and an employee could be “‘clocked in at the restaurant and then directed to work in the members club,” indicating a “sufficient association.” Finally, the DOL noted that the employee’s rate of pay at each facility was identical and that the restaurant and members club appeared to “coordinate when scheduling [the employee].”

An Evolving Federal Standard

When two businesses are joint employers, both are responsible for compliance with federal laws. The federal joint-employer standard has shifted several times during the last five years as the DOL and the National Labor Relations Board (NLRB) have issued separate rules on how to determine when two businesses are joint employers under the National Labor Relations Act (NLRA) and the FLSA, respectively, both of which are currently inactive. As a result, courts are likely to determine joint-employer status under the FLSA by considering several factors, such as the degree of control over hiring, firing, scheduling, pay, supervision, and assignment of duties.

The DOL recently announced it is considering proposed rulemaking to adopt a rule that “would guide WHD’s enforcement of FLSA joint employer liability, and help promote greater uniformity among court decisions nationwide.” Still, that effort is likely to be delayed by the federal government shutdown.

Next Steps

Employers reviewing their compliance with and potential liability under the FLSA may, at a minimum, want to keep in mind Opinion Letter FLSA2025-05 and assess “if they have related employment relationships with the same employee(s)” such that they could be deemed joint employers. Though separate legal entities, two businesses may nevertheless be held jointly and severally liable as joint employers under the FLSA when they share employees, coordinate employee shifts and schedules, and are operationally integrated, according to the DOL’s opinion letter.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Hospitality, Retail, and Wage and Hour blogs as additional information becomes available.

Charles E. McDonald, III, is co-chair of Ogletree Deakins’ Wage and Hour Practice Group, and he is a shareholder in the firm’s Greenville office.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

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