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I've got a friend (in the Nashville, TN area) who is working for someone that owned a franchise and now opened up a second one. My friend was working 45 hours a week and got overtime, but now the owner has put them on both payrolls and splits their hours between the two, and therefore, doesn't have to pay overtime.

First, is there anything illegal about this? Second, does this maybe cost the owner more than paying 5 hours of overtime? I know there are hidden cost in having employees on the payroll. Does the owner maybe pay more in workers comp or anything? Just wondering if there's any incentive for the owner to only employ them at one company and just pay them the overtime, rather than maintaining them on two separate payrolls, even if it isn't necessarily illegal.

The big question is how is the company set up. The owner may have created two different companies, 1 per franchise, or 1 company for both.

If it's two different companies then legally he has 2 jobs that have nothing to do with each other (hence no overtime).

If he got 2 part-time jobs with two different companies, he obviously wouldn't be owed overtime. His best bet is probably to talk with the owner.

Without knowing the exact jurisdiction it's hard to comment on the legality of the situation.

However in the general case if the two franchises are seperate legal entities (regardless of whether they have the same owner) then what the owner has done is the correct way to do things.

Tennessee isn't somewhere I'm super-informed on but IIRC it may well be more expensive for the owner to employ them in the two separate companies as both will have to pay unemployment insurance premiums for the individual (so they are basically going to be double paying that). Similarly with worker's comp (assuming both companies have 5 or more total employees) - they would be required to pay for it for the employee for both companies.

However therein could be the reason why your friend's employer has done this - as these are state department of labor regulations using the previous O/T method of having the your friend work for both companies could be seen by the DoL as them attempting to evade these responsibilities.

Splitting employees across the two separate companies can save them money in several ways:

• Overtime those 45 hours are now not overtime.


• Benefits. The company can limit benefits to those working close to full time. Which can be avoided be splitting those hours.

There is one complication for the company. By splitting your work across two locations, scheduling becomes more complex, and if they were truly two different companies the scheduling should be separate.

For the employee there is another concern. Taxes. In the end it will workout the same, but putting numbers into two W-4s becomes more complex. Especially if the goal is to avoid a large refund in the the spring, or even worse a large bill in the spring.