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One Worker, Two Related Employers

Allegations in a recent lawsuit against several McDonald’s franchisees in Monterey County raise an issue about application of the wage and hour laws to employees who work for more than one employer. The complaint filed on behalf of several hundred employees alleges that the franchisees used a “dual-shift” practice whereby a worker would be paid by two employers for the same pay period in an attempt to avoid paying overtime. Garcia v. Forza Management LLC, Case No. GNM 98240 (Monterey County Superior Court Apr. 13, 2009). While we do not know what the evidence in the case will show, we can examine the legal principles used to decide such cases.

The applicable U.S. Department of Labor regulation is found at 29 CFR section 791.2. The California Labor Commissioner does not have a formal regulation, but the Division of Labor Standards Enforcement Enforcement Policies and Interpretations Manual appears to follow federal principles. Under those principles, there are three possible scenarios:

1. If two or more employers act entirely independently of each other, and are completely dissociated from each other, their wage and hour obligations to an individual whom they both employ are treated separately. Assume that Ginnie works an eight-hour shift at McDonald’s, takes a nap for a couple of hours, and then works four hours selling hot dogs at Dodger Stadium. Although Ginnie worked 12 hours that day, she is not entitled to overtime pay from either employer.

2. If two or more employers act jointly with respect to an individual employed by both, they are jointly responsible for the total number of hours worked by both. Any overtime hours that the employee works must be apportioned among the employers based on the number of hours worked for each. Assume that ABC Petroleum employed Hector as a security guard eight hours a day. After a one hour break, Hector continued working as a security guard for another four hours, but transferred his attention to the facilities of XYZ Pipeline, which transported ABC’s product from the oil fields to a shipping terminal. ABC and XYZ are not related and each issues its own paycheck to Hector, but XYZ relies on ABC to hire all security guards. Hector is entitled to four hours of overtime pay, with two-thirds paid by ABC, and one-third by XYZ. See Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d 655 (10th Cir. 1942).

3. If two or more employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer, the controlling employer is responsible for all hours worked. Assume that Sammy works eight hours for Janice in her oil fields, and then four hours at other oil fields as an employee of Janice Corp., of which Janice is the sole shareholder, board member and officer. All Janice’s employees are also employees of Janice Corp. Sammy is entitled to four hours of overtime pay from Sammy. See Durkin v. Waldron, 130 F.Supp. 501 (D. La. 1955).