Payroll Scheme to Avoid Overtime Backfires: $457K Payout
What happens when an employee works 50 hours in a week, but payroll makes it look like 25 hours for each of two companies to avoid overtime premiums? That was the setup allegedly devised by the owner of two janitorial companies in New Jersey — and it has now cost the companies $457,500, according to the New Jersey Department of Labor and Workforce Development (NJDOL).
Two janitorial companies, one owner
Affordable Quality Cleaning LLC (AQC) provides janitorial services for residential and commercial properties. NJDOL began investigating the company after receiving employee complaints that it wasn't paying overtime. The investigation revealed that AQC employees were receiving paychecks from two related companies — AQC and Affordable Quality Property Management Corp (AQPM) — both owned by the same individual.
Investigators soon learned that, beyond sharing a common owner, the two companies also shared an office, clients and dozens of employees, including management.
"A worker who put in 50 hours in a single workweek could receive one paycheck for 25 hours from AQC and a second check for the remaining 25 from AQPM."
— NJDOL investigation findingsThe paycheck-splitting scheme
According to the investigation, employees received paychecks from both companies, with hours divided between the two. The result: workers weren't paid the time-and-a-half overtime premium for working more than 40 hours in a week. Dozens of employees were affected across multiple pay periods.
NJDOL also found a second wage issue — the companies didn't pay employees for time spent traveling between job sites during the workday. The companies disputed the findings, and the case went to the New Jersey Office of Administrative Law.
Ruling for NJDOL leads to settlement
An administrative law judge ruled that NJDOL had established the two companies engaged in an unlawful paycheck-splitting scheme to avoid paying overtime, and had also failed to comply with state recordkeeping requirements. The judge further found that the companies acted as joint employers — meaning both could be held responsible for unpaid wages and overtime.
After a partial summary judgment in NJDOL's favor, the parties settled on July 6, 2026. Under the agreement, the companies must pay $357,500 to 68 affected workers for unpaid overtime and travel time, plus $100,000 in fines and penalties to NJDOL. Going forward, they must also compensate employees for qualifying travel time between job sites and maintain required time and payroll records.
"Setting up separate companies won't shield you from joint employer status — regulators can combine related payrolls regardless of how the businesses are structured."
— Payroll compliance takeawaySeparate companies won't shield you from joint employer status. Regulators can find related businesses to be joint employers when they share common control — regardless of how the entities or payroll are structured.
Paycheck-splitting between related companies is risky. Using two related payrolls to keep each check under 40 hours can be viewed as a scheme to avoid paying overtime.
Combine hours across both companies once joint employer status applies. Build systems that add up all hours so overtime is calculated on the real weekly total.
Don't forget travel time between job sites. Time spent moving between sites during the workday can be compensable and must be included in overtime calculations where state law requires it.
Weak records amplify risk. If you can't prove how hours were worked and split, you'll have a harder time defending your overtime calculations in an audit or enforcement action.