Understanding Horizontal Joint Employment Under the FLSA: What Hospitality Operators Must Know
In the hospitality industry, it’s easy to assume that separate entities mean separate employee liability. But the moment staff is shared, that assumption breaks down. The Department of Labor doesn’t care how many LLCs you have—it cares how your business actually operates.
As many hospitality operators know, it is common to structure businesses, such as hotels and restaurants, through multiple entities. Each venue gets its own LLC, its own payroll, its own management team, and often shares employees such as hostesses or wait staff. Many hospitality operators rely on these corporate structures to keep operations clean and liability controlled. However, this well-known corporate structure can actually expose operators to overtime liability when sharing staff.
On September 30, 2025, the Department of Labor (“DOL”) issued Opinion Letter FLSA 2025-05, addressing whether a hostess working at both a hotel restaurant and a member’s club was entitled to overtime. The hostess was told she would not receive overtime because the two venues were considered separate companies and therefore were separate employers. The DOL said they were wrong.
When operations share facilities, coordinate scheduling, or have overlapping management, federal law treats them as “joint employers.” All employee hours must be combined across both venues for overtime purposes. The corporate structure provides no protection.
For example, consider an employee earning $18/hour who splits her time between two related venues. If she works 30 hours at the hotel restaurant and another 15 hours at the hotel’s private club, the law treats this as one 45-hour work week. Under the FLSA, she must be paid 40 hours at her regular rate and 5 hours at time and a half – a total of $855 for the week.
If each LLC pays her separately at straight time, she receives only $810, resulting in an overtime shortfall. Those weekly gaps, multiplied across multiple employees and multiple locations, create the exact type of liability the DOL is targeting in audits.
If you’re operating multiple hospitality venues with shared staff, the exposure warrants immediate attention.
Understanding Joint Employment under the FLSA
Joint employment under the FLSA is a concept that often catches hospitality owners off guard. The law looks beyond corporate paperwork to determine whether multiple businesses are so closely connected in practice that they are effectively employing the same worker. When that happens, the employee’s hours must be combined for the week and both entities become responsible for minimum wage and overtime compliance.
The DOL typically looks at the totality of the relationship. Key questions include whether the businesses share staff, whether work is coordinated between the entities, whether management overlaps, and whether the operations function as a unified system. If the answer to any of these questions leans toward integration, joint employment becomes likely.
Horizontal joint employment, which is the category at issue in the DOL’s recent opinion letter, occurs when two related operations each employ the same worker during the same workweek. This is common in hospitality settings where employees pick up shifts across different venues in the same property or within the same ownership group. When that happens, the FLSA requires that all hours be aggregated so that overtime is calculated based on the combined total rather than each entity looking only at its own schedule. The important takeaway is that joint employment is not about how businesses define themselves. It is about how they operate. If your venues share staff, management, scheduling, or physical space, the law may treat them as one employer for overtime purposes even if you consider them completely separate companies.
In my practice, I’ve guided hospitality clients through FLSA audits where the Department quickly looked past separate LLCs and payroll systems. Once investigators see staff rotating between venues, the corporate structure becomes secondary. The most difficult client scenarios I have encountered are those where joint-employment exposure is discovered for the first time during litigation or an audit, when years of combined hours—and potential back wages—have already accumulated. At this stage, operators have little opportunity to fix the issue prospectively.
The Department Found a Joint Employer Relationship
The DOL determined that the restaurant and the members club were joint employers under the FLSA. That means all hours worked at both locations must be combined for the week. If the total hours exceed 40, overtime must be paid. It does not matter that the businesses are incorporated separately. What matters is the reality of the operations.
In this case, several facts pointed to a joint employer relationship:
- The restaurant and the club shared a kitchen, offered similar menus, and operated in the same physical space.
- Employees regularly worked at both locations in the same workweek.
- Some managers had authority in both entities, including involvement in discipline.
- The employee could be clocked in at one venue but assigned to work in the other.
- The pay rate was identical across both entities.
- The additional shifts did not conflict with the employee’s restaurant schedule, which indicated coordinated staffing.
These operational facts outweighed the formal separateness of the entities. As a result, the Department concluded that the employee was entitled to overtime once her combined hours exceeded 40 in a week. Both the restaurant and the club are jointly and severally responsible for compliance.
What This Means for Hospitality Operators
- Corporate separateness ≠ FLSA compliance. Even if you have the restaurant and club as distinct corporations — with separate payroll, time-clocks, or even management teams — that doesn’t necessarily insulate you from liability. According to the DOL, what matters is the real-world operation. Shared kitchen, overlapping staff duties, common ownership or management — all are red flags that can trigger joint-employer status under FLSA.
- All hours worked must be combined. If staff work shifts at both entities, you must total all their hours for the week. Once aggregated over 40, overtime is due and employee may collect from either employer.
- Liability is real and potentially expensive. A finding of joint employment means that both the restaurant and club (and potentially their owners) can be on the hook, not just for unpaid overtime, but also for damages and penalties down the road. The legal and financial risk isn’t trivial.
If you own or operate multiple hospitality concepts that share staff, space, or management, this opinion letter has real implications. It signals that the DOL is closely scrutinizing horizontal joint employment. Hotels with restaurants and rooftop bars, restaurants with private clubs, and multi venue hospitality groups all face potential exposure if they rotate employees across entities without accounting for combined hours.
Relying on different LLCs or payroll systems is not enough. The Department looks at what is actually happening on the floor. If your operations are integrated, you should assume the hours will be integrated too.
What Employers Should Do Now
Consider reviewing how your entities operate in practice. Look at whether employees regularly pick up shifts at more than one venue, whether schedules are coordinated, and whether management crosses over. If employees work in more than one entity in the same workweek, all hours should be totaled for overtime purposes.
You may also want to evaluate whether consolidation of timekeeping, scheduling, or payroll would reduce your risk. At a minimum, ensure there is visibility across entities so that overtime does not go unnoticed.
Final Takeaway
The hospitality industry often relies on creative concepts and layered business structures. The DOL’s latest opinion letter is a reminder that the FLSA cuts through corporate design and focuses on how work is performed to determine compliance. If your venues share staff or operations, you may be joint employers under the FLSA, and you should treat your compliance obligations accordingly.
This is a good time for hospitality owners to review their staffing practices before an audit or private lawsuit forces the issue.
Got questions? I help hospitality operators audit joint employment risk and implement compliant staffing structures. If you operate multiple venues with shared staff, schedule a risk assessment before an employee’s lawsuit or DOL audit forces the issue. #TalkToTalya
Talya Hass
Practice Partner, Labor and Employment
Kelley Kronenberg-Fort Lauderdale, FL.
(954) 370-9970
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