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Department of Labor Issues Opinion Letter Clarifying “Horizontal” Joint Employment
On September 30, 2025, the U.S. Department of Labor (DOL) issued an opinion letter describing when “horizontal” joint employment will require separate legal entities to be treated as a single employer for purposes of overtime under the Fair Labor Standards Act (FLSA).
The opinion letter involved employees who worked at a restaurant and a members-only club, both of which were located in the same hotel. After reviewing the facts pertinent to the employees’ work and the relationship between the entities, the DOL concluded that even if the restaurant and club are separate legal entities, the hours worked by employees at each establishment would need to be aggregated for purposes of FLSA compliance.
The DOL explained that separately incorporated entities may be considered a single employer under the principles of “horizontal” joint employment if they are “sufficiently associated” with respect to the employees. While there is no bright-line test, horizontal joint employment may be found where there is an arrangement between the employers to share an employee’s services. For example, if two retail establishments coordinate with each other over the pay or work schedule of the same cashier, they are likely to be considered joint employers of the cashier. In that scenario, if the cashier worked 30 hours for one establishment and 20 hours for the other establishment in the same workweek, the employee would be entitled to 10 hours of overtime because they worked a combined total of 50 hours for the joint employers.
In the case of the employees at the hotel restaurant and club, the DOL opined that the restaurant and club were joint employers. While the restaurant and club may be separate legal entities, they were sufficiently associated with each other with respect to their employees. Among other considerations, the DOL found it relevant that: (a) the two facilities appeared to be operationally integrated with each other (e.g., sharing a kitchen); (b) managers periodically supervised employees at both facilities; and (c) work schedules and wage rates appeared to be coordinated between the two locations. Under the circumstances, the DOL concluded that all hours worked by an employee at the restaurant and club must be combined for purposes of FLSA compliance.
Over the years, the DOL has undertaken numerous attempts to define and shape the contours of joint employment. The DOL’s perspective on vertical joint employment—which focuses on the employee’s relationship with the alleged employer and another intermediary entity, such as a staffing agency or subcontractor—has varied widely based on which party controls the Executive Branch. During the Obama administration, for example, the DOL issued a broad Administrator’s Interpretation on joint employment. During the first Trump administration, the DOL withdrew that guidance and promulgated narrower joint employment regulations. Then, during the Biden administration, the DOL rescinded those regulations. While the DOL’s approach to vertical joint employment has shifted with the political winds, its approach to horizontal joint employment has been remarkably consistent from one administration to the next. The September 2025 opinion letter is generally consistent with the approach taken in prior administrations from both parties when faced with questions of horizontal joint employment.
The opinion letter provides an important reminder that corporate formalities do not override FLSA obligations when operational realities indicate that two entities are coordinating to share an employee’s services. Employers should proceed carefully when separate legal entities employ the same employee.
